As most astute Sacramentans know, the comparable sales in many neighborhoods consist of short sales and foreclosures. Almost 75% of our closed sales in Sacramento these days are foreclosures and short sales. But let's look beyond that phenomenon and think about what happens when these homes are resold, and how value will be determined.
Some experts are predicting that Sacramento will hit the bottom of the market this summer. I believe in some neighborhoods it happened a while back, and we've been scrounging around the bottom for some time now, like chickens pecking for grain. Because we have little inventory.
As the foreclosure signs vanish and investors move in, homes are being remodeled and getting ready for the next market. The problem is the comparable sales. Comparable sales mean just that -- homes of similar size, configuration, upgrades and location. The key is the upgrades. When there are no remodeled homes for sale in a certain area, the first seller to put such a home on the market faces a dilemma when it comes to the appraisal.
How does an appraiser determine the comparable sales when few exist?
One appraiser I know goes to adjacent neighborhoods. Say, for example, a home is located on the edge of a more desirable neighborhood. An appraiser might say that because there are no comps in that neighborhood, he will look in another, but he won't pull remodeled home comps because there are none. In that event, he will look to homes in a desirable neighborhood that are located in a less-than-desirable location. But even those aren't truly comps if they aren't remodeled.
And a home won't appraise for a new home buyer if there aren't comparable sales. Getting the first few off the ground will be interesting. Those pioneers will pave the way . . .
The Short Sale Savior, by Elizabeth Weintraub, coming in June 2009.
Photo: Elizabeth Weintraub, homes in Land Park.
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Elizabeth Weintraub is an author, home buying columnist for The New York Times-owned About.com, a Land Park resident, and a Land Park real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown and East Sacramento. Weintraub is also a Sacramento Short Sale agent who lists and successfully sells short sales throughout Sacramento. Call Elizabeth Weintraub at 916.233.6759. Put 35 years of real estate experience to work for you. DRE License # 00697006.
The Short Sale Savior, by Elizabeth Weintraub, available through bookstores everywhere and at Amazon.com.
Photo: Unless otherwise noted in this blog, the photo is copyrighted by Big Stock Photo and used with permission.
The views expressed herein are Weintraub's personal views and do not reflect the views of Lyon Real Estate.
