The Domino Effect

Its no suprise that  in Colorado Springs we are getting hit hard by foreclosures and short sales. As a matter of fact the whole country is getting hit hard. Can we as realtors keep up the the sales prices of homes that are not in this situation. 

Recently I found it very hard to give a comparison to my clients on a home that they are looking at purchasing in the Woodmen Hills Area.  If I based it on the past sales with foreclosures and shortsales I got one low price.  If I based  on comps without these in mind I ended up with another price. 

I also ran into this situation as I sold a condo off of Airport and Academy.  The transaction was going smooth until we went into the appraisal.  The appraisal came in low.  I asked the appraiser how he got his comps..he stated that he had to use the recent activity in the area.  I then spoke to my appraiser friend and he stated the if the comps can support the sale then yes he has to use these comps.  More than 80% of the condos in this area are sold either as a short sale and or foreclosure.  So I asked about the domino effect.  

Here is the Domino Effect....House A sold 4 months ago and it was a short sale so it sold for less money than the condo was worth.  House B sold 2 months ago and it was a regular sale but since House A sold recently, the appraiser used House A as a comp, which in turn also lowered House B's appraised value.  Now House C sold and so the domino effect appears because the appraiser is going to look at House B as a comp not realizing that it was based on a the short sale comp of House A, making House C's appraisal come in low.  Can you see how this is going to affect the market and the vaules of homes if we keep using the Domino Effect.

It is a tight shift out their for appraisers.  What they do not understand is that by using the Domino Effect, they are double dipping and in turn are ruining our market by bringing down the price of homes, that are not in any type of trouble.  I understand that we are in a market that homes are going down anyway...but if we keep on this route homes in the Colorado Springs area will plumit.