Assessments are almost never lowered due to sales of foreclosed homes. Foreclosed properties are being marketed by lenders who have seized them for non-payment and under pressure to dispose of the property as soon as possible to meet Federal restrictions on Banks owning real estate. This “duress” frequently results in heavy discounts and short marketing times.
While there have been more foreclosure-related sales since 2008 than any time during the past 20 years, foreclosure sales have always been part of the market. In this downturn, Wisconsin has fared better than most states as real estate values adjust to the economic climate.
Just as foreclosure-related sales are frequently not an indicator of market value when values are rising, they are not necessarily an indicator of value in a declining market and are not normally considered by the assessor when determining the market value of property in a community. However, if many discounted properties are available to buyers in a given market, all other properties must reduce their prices to compete. In this way market sales prices are negatively influenced by the presence of discount properties in a market.
In fact, Wisconsin law, appraisal standards, and Wisconsin courts, require very specific criteria for a sale to be considered as a reliable indicator of market value.
Two of the most important of these criteria are whether the sale occurred under duress (such as a forced sale) and whether the property had adequate market exposure. For example, a property that sells two weeks after it is listed may have sold quickly because it was under-priced. This may be an indication of a duress situation, requiring closer review by the assessor, to verify whether it was an arm’s length transaction. In most cases, looking at non-foreclosure sales is the most reliable way to gauge what is actually happening with neighborhood values.
There are times when the majority of homes that are selling in your neighborhood tend to be around the same price as foreclosure-related sales. In this case, they may represent a reasonable picture of market value