With all the alternatives to selling Real Estate, Companies like Open Door, Offer Pad, Knock.com, etc. have entered our market. So what does this mean FOR the market and appraisals?
One could argue they are creating a NEW market. This is BAD news for other sellers because we all know that they purchase homes at below market values to make a profit on resale. But what if they infiltrate our market and Appraisers have no other sales to use when they are appraising other properties? This could be a problem. Hopefully when they resell the home they do so quickly and at market value and not still under market because they made such a great buy. They typically freshen up the homes with new paint, carpet, maybe appliances, if needed, but not always.
You can relate to this back when we had more foreclosures than true arms length sales after the market crashed. When that happened, foreclosures dominated the market and Appraisers did use these as comparable sales because that was the reality of the current market at that time.
So what is an Appraiser to do? What is a Realtor to do? Make sure that the Appraiser does not miss the fact that there was a sale in your listing's neighborhood which sold via Open Door or Offer Pad and go further to show proof it was indeed a below market sale, compared to other sales in the area. Appraisers should not be using below market sales when there are other sales that prove current market value is higher.
Appraisers should catch the fact that a sale involved Offer Pad or Open Door, because we are supposed to review both the current and prior sales in the past year for the comparables and the 3 year history of any sales for the Subject. The name of the owner should be apparent in courthouse records, but as a Realtor or Seller you need to point this out to the Appraiser whenever possible.
I wanted to make sure I was speaking from experience on these below market sales, so I actually had Offer Pad and Open door provide me with an offer on our home. Open Door was 10% below conservative value of our home. Offer Pad was a whopping 30% below! I filled out their forms and sent photos of my home. I sent fewer photos to Offer Pad, but that should not have made that much of a difference.
We also have local Realtors like Mark Spain who by his own commercial says..."Bypass the market and sell your home to him" Not a good idea to bypass the market, when that is the VERY thing Appraiser's are trying to analyze to determine market value for lenders, sellers and buyers!
Sellers who use these companies may be impacting the market for their neighbors. I know they may not care, but they should be informed.
Both of these companies charged MORE service fees than Realtors do with their commissions. Plus they hit you with repair items that could get costly. Your NET may be far less than you think as a seller. I get it, some people under certain circumstances need to sell now or don't want to go through the showing process and negotiations, etc. Other than that, why people use these companies is beyond me.
Bottom line is: Appraisers SHOULD steer clear of these below market sales in a flourishing market like we have now. They should have other sales that they can use, which are truly market value sales. If they have no option but to use a sale such as this, they need to make appropriate market based adjustments for this below market sale. If they can prove for example that it is 10% below market, then they can make that upward adjustment for that sale. But until these types of sales dominate our market, then there should not be a huge issue here.
REALTORS: You need to work hard to prove why sellers should NOT use these companies. They need your expertise and local knowledge and the protection that you provide to the Sellers and Buyers out there. Otherwise these companies will continue to increase in numbers and run you out of business!
Zillow, Redfin.....the list goes on and on....
Good luck out there and find the things in your business that set you apartand you should be successful. Be a specialist for your Sellers & Buyers.
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