Are foreclosures used as comps for your home? A CMA question

Now that it is early January it is the perfect time to find out what your house is worth. Real estate agents are not as busy as they will be in the spring. If you tell your realtor that you are thinking about selling in the spring, you may be able to get a free market analysis. On the other hand you may not want to know what it says. Are foreclosures used as comparative pricing for your home?

A CMA is a comparative market analysis. If you are buying a house you want one. If you are thinking of selling your home you won’t want to sell it for anything less than fair market value. On the other hand, by setting a selling price that is too high could be a mistake that results in a home that doesn’t sell. If you just want to know that current value of your home you should work the middle of the equation.

More foreclosures used as comps

Today it may surprise you to know that foreclosures, often once avoided as comps, are being used for comparative market analysis. If there are too many foreclosures it may be unavoidable. As late as last summer foreclosures were avoided as anomalies in determining the market value of your home.

Now, as home prices are dropping in many parts of the country, homeowners want to know how they have been effected. Tax notices may have been recently paid, but do not reflect the actual value of the home. For instance, some parts of the country a 30 percent drop in home prices, but property taxes did not go down. The only true way to determine the value of your home is to get a comparative market analysis.

Recently listed homes and recently sold

By going to sold property records, the real estate professional selects recently sold properties that are similar to the subject property and in the same area. By comparing these properties, and adjusting for feature differences, an estimate of value is made for the subject property.

In smaller towns realtors often sold the homes themselves, or split the commission with other realtors known to them. No matter how it is accomplished, the realtor knows what the homes sold for. You must ask specific questions. Was a foreclosure dumped on the market? Was it livable, or stripped of electrical wires and plumbing?

Now you see why foreclosures might effect the value of your home. You can see how including foreclosures in the comparative market analysis might be unavoidable.