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Short sales and bank owned properties are skewing CMA's

By
Real Estate Agent with RE/MAX Properties, Inc., ABR, GRI, SRES

 I have been working with a buyer and prior to submitting an offer, I presented her with a detailed market analysis for each of the homes on the top of her list. Many of the sold comps for the homes she was interested in were bank owned and short sale properties that sold for less than the market value for homes in the neighborhood. 

These properties can really skew the comparative market analysis (CMA) you complete for buyers or sellers.  This is especially a problem when most of the homes in an area that sold over the past 3-6 months are bank owned and short sale properties.  Appraisers focus on the past 6 months of sold homes in an area and recently many appraisers will only go back 3 months depending on the lender. 

If my CMA's are skewed, I imagine the appraisals don't look too good either.  This can be a big problem when pricing our listings correctly.  Buyers may think the homes are overpriced since the bank owned property and short sale down the street sold for much less.  Many sellers may receive extremely low offers as a result.

From what I understand, these properties cannot be excluded from an appraisal.  Of course, the fact a property was bank owned and in bad condition has to be taken into consideration when comparing it to other homes in the area but these foreclosures can end up decreasing the market values in different areas of Colorado Springs or cause appraisals to come in too low. 















For further information on available Homes in Colorado Springs contact your Colorado Springs Realtor, Patricia Beck.

Comments (5)

Brian Schulman
Coldwell Banker Residential Brokerage, Lancaster PA - Lancaster, PA
Lancaster County PA RealEstate Expert 717-951-5552

Patricia, the short sales are really an integral part of the CMA.  I know what you mean by "skewing" - they certainly have a depressing effect on the market - but that, indeed, is precisely the present state of the market.

Any home presently for sale has all the foreclosures to compete against.  Those homes not priced competitively will have to wait for all the cheaper homes to sell first.

Apr 22, 2008 05:31 AM
Renae Fulton
First National Realty - Southaven, MS
GRI

You do have to stay on top of what is going in your market area.....it can change while the listing is still on the market. The low offers can many time force the seller into a short sale. 

Apr 22, 2008 05:37 AM
Patricia Beck
RE/MAX Properties, Inc., ABR, GRI, SRES - Colorado Springs, CO
Colorado Springs Realty

Brian- Thanks for your comment, you're right, it is definitely the present state of the market.  Unfortunately, homes do have to compete against the listings that are priced to sell.

Renae- Good point, I have seen many listings where the agent remarks state the property may end up being a short sale depending on the offers that come in.

Apr 22, 2008 05:49 AM
Gary Woltal
Keller Williams Realty - Flower Mound, TX
Assoc. Broker Realtor SFR Dallas Ft. Worth
Patricia you are so right about CMAs getting skewed. This can happen due to REOs, foreclosures, very small niche neighborhoods, run down condition homes mixed with excellent homes, homes that people overbuild amenities into, and a heterogenous mix of builders. CMAs, BPOs, and appraisals all can be difficult at times.
Apr 22, 2008 02:36 PM
Kathy Torline
ERA Herman Group Real Estate - Colorado Springs, CO
Colorado Springs Real Estate Blog 719-287-1049
Patricia:   Short sales and foreclosures definitely have an affect on CMA's -- It makes it hard to value properties correctly; as some neighborhoods are being hit hard with foreclosures and short sales
Apr 22, 2008 11:45 PM