How should short sales and bank sales be treated in appraising multi-family properties for refinance?

should a conditions of sale adjustment be applied to these sales to account for the seller's motivations to move these properties quickly? There are at least some market sales to consider, even though the majority of sales in this market are distress sales.
In Market Conditions - Asked by David B. - Apr 3, 2012
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Monica M.
Valencia, CA

Whenever dealing with multi-family cash flow investment properties, appraisals are not solely based on land/building value as they are with traditional residential sales. Rather there is cash flow to take into account. If you are dealing with a multi-family property sale that has a 0% occupancy then, unfortunately, the sale will be based solely on recent "comps" of sales of like properties in the immediate area within the past 90 days, then out to 6 months if there are no comparables to pull from. I hope this helps.

Apr 5, 2012
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John C C.
Victorville, CA

The "easy/quick" answer to this is yes - assuming you are dealing with a property that you are trying to get appraised that is NOT a short sale or bank owned. The definition of market value we appraisers must use says that the property is not subject to any undue influance
Generally, if the property you are trying to get appraised is not a short sale or REO, Any appraiser should not use short sale or REO comps. Unless however, this is the only kind of property that has sold in the last 12 to 18 months.
If, as you state, there are some "standard" sales in an area, these should be the comps used, assuming the property you have is not an REO/short sale. If an appraiser does us a short sale or REO, it should be adjusted upward for the fact it is a short sale or REO.
As Monica M. said in her posting, if your property is a short sale or REO, in less than average condition, then the most reasonable comps are other short sale or REO's in similar condition.
John C, Carlson
CA Certified General Real Estate Appraiser

Apr 6, 2012
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Glen W.
Lender/Mortgage Broker
Atlanta, GA

Yes. I am a private lender and would factor these sales in when determining the current market value. If most sales in the area are distressed sales, then that typically is not a good indication to me that the area is the greatest (ie: this is an area that possibly has declining values). Along with the distressed sales, one will also need to evaluate the property on the income approach with reasonable assumptions for vacancy, management, cap rate, etc...

Apr 16, 2012
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