Sent in by an anonymous flipper. Fifteen percent of this year’s NSDCC sales have been round-tripped:
Typically it’s never a problem getting 5 – 10% more than a distressed sale as most good appraisers understand the nature of the discounted distressed pricing.
Recently however we’ve been dinged on three sales because the appraisers didn’t give us consideration for the fact ours is an equity sale vs. the distressed sale comps. Prior to this we hadn’t been knocked down on price as a result of an appraisal for over a year. Either we’re in the midst of an unlucky streak with incompetent appraisers, or maybe there’s a shift taking place in the appraisal community. Too early to tell I suppose.
There was a nicely-upgraded, 3,576sf house in Chula Vista that we got outbid on today. The opening bid was $440,920.
There are only two recent closed “comps” in the whole neighborhood. The first closed for $510,000 on 1/26/12 as a short sale. The group that bought it is a competitor of ours and the listing agent who was also the selling agent in this transaction handles all of their listings. So he listed it low and pocketed the listing by not accepting other offers. He even stated in the confidential remarks “No showings at this time, an all cash offer has been presented to lienholders for consideration.” He double ended the deal and sold it to his buddies.
Three days after they closed escrow on this house for $510,000, they relisted it for $639,000!
They obviously couldn’t have done much in the way of improvements in 3 days, nor would they have needed to as it was the former model home. And I’m sure you can guess who got the new listing. The weird thing is they just withdrew it from the market today. Probably because at 27 days on market it’s getting a little stale so they’ll likely relist in the next couple of days.
The other “comp” is the same exact situation, but different agent. Put it in pending status immediately after inputting the listing so it shows 0 days on market. Don’t think this one’s a flip though….likely an end user. But once again the agent double ended the deal and sold it to someone they obviously know. The sale price on that one was $525,000.
The homes in this neighborhood are worth over $600k (highest sale on street was $1,425,000 in 2005).
The winning bid on this house today was $512,100. The guy who bought it is one of the old timers at the trustee sales…..he’s been doing it a long time. The true market value of this house is likely in the $600k – $625k range. He’ll have no problem finding buyers but will he get his appraisal based on the fraudulent comps? Obviously he doesn’t think it’ll be a problem.
In the meantime, this is just one more additional unknown we have to consider (among the many unknowns) that makes this business more and more of a gamble every day. If this is, in fact, the start of a new trend we’ll have to make the decision going forward whether we hold firm – or fold. If we don’t hold firm and accept distressed sale pricing as market value, then that will drag values down even further. The short sale agents will have to come in lower than our comp to tempt future buyers, and we in turn will be faced with lower distressed sales prices that could affect our appraisals. Could become a vicious never-ending cycle.