Fsbo

It depends. Simply because a property sells does not make it a comparable.

Often a duress sale doesn’t accurately reflect true market conditions, such as a foreclosure, short sale, estate settlement, tax sale, divorce, condemnation or other involuntary sale conditions. Professional appraisers use a standard called “arm’s length.” To qualify, the buyer or seller must not be related to each other or have common interests – they have each other at “arm’s length” – that establish a fair market value. In a “non-arm’s length” transaction, the relation-ship between the parties may cause one or the other to accept less than they are entitled to or pay more than fair market value. Foreclosures are often considered “non-arm’s length” transactions by appraisers and may not be considered a true comparable.

On the other hand, foreclosures do impact pricing. Some researchers report as much as a 10% discount in a property’s value if a foreclosure is on the market within 250 yards. Although not a true comparable, foreclosures must be factored into establishing the right price for a property in the real world.

This entry was posted on Tuesday, April 8th, 2008 at 8:52 am and is filed under RE Questions. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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