How Do I Determine a Foreclosure Home’s Fair Market Value?

This is the fifth and final post covering questions asked by attendees to the Foreclosure Buying 101 Webinar and RealtyTrac website demo.

View the most recent recording of the webinar.

In the first post we covered the topic of avoiding foreclosure, in the second post we covered the topic of buying at the foreclosure auction, and in the third and fourth posts we covered the topic of buying bank-owned homes.

In this post we’ll answer three questions posed by webinar attendees regarding how to determine fair market value of a foreclosure property.

1. Why such a large variance on the range for estimated value for a house?

RealtyTrac provides an estimated market value for the majority of foreclosure homes listed on the website. This estimated market value is at the end of the day a guesstimate of the home’s value based on what’s called an Automated Valuation Model (AVM) that takes into account comparable sales (recently sold properties in the vicinity) as well as some property characteristics such as square footage and number of bedrooms and bathrooms.

Also displayed on each foreclosure property details page is an estimated market value range, which provides a broader spectrum of where the property’s estimated market value could land based on variables not taken into account by the AVM. These factors include condition of the property and location within the neighborhood (i.e. close to a busy street, on a cul de sac, etc.).

The range can be quite broad, often in the tens of thousands of dollars, particularly if there is a high variance in types and sizes of homes in the neighborhood. A broad range is less likely if the property is in a planned development where the property sizes and layouts are very similar to each other.

Ultimately the estimated market value is a starting place, not an end point for prospective buyers and investors interested in the foreclosure property. To dig deeper, buyers and investors can look at the individual comparable sales and listings, which gets us to our next question.

2.  Can you view individual comps to more accurately evaluate the market value of a property?

Yes. On RealtyTrac these comparable sales as well as comparable listings (other properties in the area listed for sale) can be found under the “Comp Sales & Listings” tab on the property details page for foreclosure listings as well as for regular re-sale listings.

These comparable sales and listings are displayed on a map and also in list format in order of their proximity to the original property. On each comp, you’ll see the number of beds, baths, square footage, lot size and year built, so you can compare that to the original property and focus in on comps that are most similar with the original property.

The comp listings let you know what nearby homeowners are hoping to sell their properties for, while the comp sales show you what nearby homeowners are actually selling their properties for. In a declining market, the average comp listing price will typically be above the average comp sales price, but in a hot market the average comp sales price might actually be above the average comp listing price.

For both the comp sales and listings, you can click the “view details” link to see if the property was in the foreclosure process or bank-owned when it sold (in the case of comp sales) or if it is now in foreclosure (for comp listings).

3. What is the assessed total?

The assessed total is another metric provided to help you evaluate the value of the property. This is the county assessor’s most recent valuation of the foreclosure home, and this amount is used to calculate the amount the homeowner pays in property taxes.

Various tax formulas and state laws impacting how taxes are calculated often mean that the assessed total is not a true representation of the property’s fair market value. Visit the local tax assessor’s website to see how they calculate the assessed total, and also to estimate the annual property taxes for the home.

The video below provides more information on finding the best foreclosure bargains on RealtyTrac.

Sign up for a RealtyTrac free trial for full access to pre-foreclosure, auction and bank-owned homes nationwide.

Related News
How Do Homeowners Avoid Foreclosure?
What Happens At and After a Foreclosure Auction?
How Do I Pursue and Purchase Both Unlisted and Listed REOs?

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