Always spot on and interesting. Thanks for keeping us all informed.
This is why banks stopped allowing people to by their REO’s at huge discounts in L.A. back in the mid 1990’s. These discounted sales became comps which de-valued the entire neighborhood!
To understand the concept of driving home values down via appraisals, just go back to 2009 and President Obama’s administration climbing into bed with then New York Attorney General Andrew Coumo. They created the Home Value Code of Conduct (HVCC) that decimated 70 years of professional appraisers that built their reputations on knowing the market prior to doing an appraisal.
The HVCC forced appraisals to go through an AMC’s with a blind pull regardless of the appraiser having a proven knowledge of the market. As well, it did not allow appraisers to talk with Realtors about comps and why it may have sold at a discount or premium. This is a key point for an appraiser to be professional. As all they have on the comps are multi-list tickets that are marketing pieces. Never have I seen a mls ticket that said this house is a piece of crab or list the issues with the home.
Combine this lack of information by appraisers no longer reaching out to Realtors for facts and being told you will never be held accountable for low-balling an appraisal, the appraisers began using the foreclosure sales as comps with no adjustments for the physical issues with most foreclosures let alone the distress discount. This lead to the home values being pushed down in a spiral fashion. It was the record amount of cash buyers that did not need an appraisal to determine the purchase price that put a floor to the Obama Administrations’ polices that created the hyper decline in home values.
The Zillow and other discounting buyers will have a repeat of the heightened foreclosures if they are successful in buying homes.
So, I’m refinancing or helping a buyer and house is in GREAT condition, house bought by Zillow at below market is in need of repairs, remember a Comp is a COMPARABLE property, if there are multiple “comps” other than the house in need of repairs Zillow bought, in theory that ONE house is not bringing down ALL values. IF Zillow is buying MULTIPLE homes in your neighborhood at a discount, then said neighborhood has bigger issues then Zillow! If you as an LO cannot properly help “comp” a home to assist your buyer or person in need of refinance, then shame on you. I highly doubt the reason banks stopped selling homes at huge discounts because discounted sales depressed values, I’m quite certain they sold at discounts because once upon a time it actually mattered to unload non performing loans (houses) to get said loans off their books. Plus, it was probably the only realistic way to sell back then. Do you honestly think the banks thought, hmmm, let’s not sell these vacant homes so said neighborhood stop losing value? Um, OK. Maybe at that time selling at large discounts was the ONLY way to sell these REO’s! One or two low sales of homes in need of repair will certainly not bring the value of a neighborhood down if you do your job and provide real “comps” if your your house is in vastly superior condition, appraisers are not that clueless to recognize that fact. If they are, it’s your job to do a proper rebuttal.
Oh, You didn’t find the next housing meltdown, you made a headline that is a Wee bit over the top.
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