Should residential appraisals use distress sales as comparables? It’s a thorny question that some states are weighing.
In a recent Realty Times article, the author notes that in a normal market using distress sales as comparables is often viewed as inappropriate because such sales are unusual and do not represent the standard market.
However, nowadays in many markets, distress sales may comprise 30 percent to 40 percent of current sales activity and may be impossible to ignore.
Four states are considering laws that would affect how appraisers should consider the sale of distressed properties. Here’s a breakdown of legislation those states are considering:
Real Estate News
Distress Sales Used as Comps: Right or Wrong?
- Tuesday, 05 April 2011 13:34
Urban Areas See Jump in Young Buyers
- Tuesday, 05 April 2011 12:41
Living downtown is becoming increasingly appealing to college-educated 20- and 30-somethings.
In two-thirds of the country's 51 largest cities, the college-educated population in the past decade has grown twice as fast within 3 miles of urban centers when compared to the rest of the metro area, the USA Today reports. That is a jump of 26 percent, on average, compared with 13 percent in other parts.
Young adults with higher education, in particular, seem to be showing a preference for urban living. Young adults with a four-year degree are about 94 percent more likely to live near urban neighborhoods than less-educated young professionals. (In 2000, that number was about 61 percent.)
Even floundering downtowns are attracting more young people. For example, Detroit, which has faced a 25 percent drop in its population since 2000, has added 59 percent (or 2,000) young and educated residents during that time, according to Impresa Inc., an economic consulting firm.
Where Did All the First-time Buyers Go?
- Thursday, 31 March 2011 07:32
In January, first-time home buyers made up 29 percent of the market, the lowest since the National Association of REALTORS® started tracking first-time buyers on a monthly basis in 2008.
In a healthy market, first-time buyers generally make up 40 percent to 45 percent of all purchasers. So with low interest rates and falling housing prices, why are first-time home buyers sitting on the sidelines?
A USA Today article highlighted some of the factors that have first-time home buyers skittish about the market:
Tougher lending standards: Some first-timer buyers can't meet credit or employment history requirements, Guy Cecala, publisher of Inside Mortgage Finance, told USA Today. Lenders also are requiring higher credit scores and some want higher down payments that are shutting out more first-timers. The best loan terms usually require 20 percent down payment or more, says Greg McBride, senior analyst at Bankrate.com.
NAR Opposes High Down Payment Requirement
- Wednesday, 30 March 2011 09:49
High down payment requirements being proposed by federal regulatory agencies as part of the upcoming rule-making under the Dodd-Frank Wall Street Reform and Consumer Protection Act will unnecessarily burden home buyers and significantly impede the economic and housing recovery, according to the National Association of REALTORS®.
Six agencies (including the Department of Housing and Urban Development, Federal Deposit Insurance Corp., Federal Housing Finance Agency, Federal Reserve, Office of the Comptroller of the Currency, and the U.S. Securities and Exchange Commission) are developing a proposed risk retention regulation under the Dodd-Frank Act that requires lenders that securitize mortgage loans to retain 5 percent of the credit risk unless the mortgage is a qualified residential mortgage (QRM); FHA and VA mortgages would also be exempted. The purpose is to create strong incentives for responsible lending and borrowing.
February Pending Home Sales Rise
- Monday, 28 March 2011 13:53
Pending home sales increased in February but with notable regional variations, according to the National Association of REALTORS®.
The Pending Home Sales Index, a forward-looking indicator, rose 2.1 percent to 90.8, based on contracts signed in February, from 88.9 in January. The index is 8.2 percent below 98.9 recorded in February 2010. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.
Lawrence Yun, NAR chief economist, says it’s important to look at the broader trend. “Month-to-month movements can be instructive, but in this uneven recovery it’s important to look at the longer term performance,” he said. “Pending home sales have trended up very nicely since bottoming out last June, even with periodic monthly declines. Contract activity is now 20 percent above the low point immediately following expiration of the home buyer tax credit.”
