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Can a foreclosure home be used as a comp for a VA appraiser?

We had a VA appraiser appraise the house we are buying. One of the comps he used was a forclosure bank sale home which drove the appraisal price down. Can they use a forclosure home as one of the comps. This drove the price down about $18,000 from the agreed upon price and $30,000 difference from there appraisal done in August.

Public Comments

1. Absolutely, the appraiser can use a REO as a comp. If the house sold, it doesn't matter if I owned it or a bank owned the property, it is still a comparable for appraisal purposes.
2. Technically, it can be used but the factors that influenced the purchase price must have been considered by the appraiser. If your story is accurate, the sale may have been below market value and if so, should have been adjusted accordingly. The specific category of adjustment is called "Conditions of Sale". This adjustment category reflects non-market motivations of buyers and/or sellers. Conditions of sale are considered to be at market levels when properties are properly exposed to the market for a reasonable period of time, when the transactions are arm's-length in nature, and when there are no unusual circumstances or extraordinary motivations. If the foreclosed property was not properly exposed to the market (short marketing time, bank sold "to get it off their books" rather than at a market price, etc.), then it may have not been a good sale to use or at least should have been adjusted accordingly. If the bank had owned the property for awhile, had been marketing it and still was unable to sell it, then the new price that helped indicate a market value of $18,000 lower could very well have been at market. This should have been discovered by the appraiser through the confirmation process (contact with the listing broker for the bank). A simple call to the appraiser might clear up this fact if it is not included in the comments section of the report. Keep in mind that the appraiser is not legally allowed/required to speak to you regarding the appraisal (their client is the bank) but many residential appraisers may do so in order to smooth things over (be nice when you call).