Listing price - ARV vs REOs

[Vikram C.]

I just bought my third property in the Phoenix area and my agent and I are having a debate on how to value it. I would appreciate any help / advice from the experienced investors on BP.

The property in question is a small property in a less-expensive subdivision in a nice suburb of Phoenix. All the other active listings on the MLS in the neighborhood are for short-sales or REOs. All these properties are pre-repair - they need some work or the other to make them really nice. In the past year, the majority of completed transactions have also been short-sales or REOs.

There was one normal sale (not REO or short-sale) in December and it was priced about 10% higher than the REO pricing. The previous normal sale was in April of last year so it is too far out to consider. That was also priced well above the REO price.

My agent feels that we are competing with REOs and therefore the price we can expect is going to be similar to REO prices. I feel that there is a market for homes that are properly finished with new carpet, paint, etc. and such homes cannot sell for the same price as a home that requires some work.

What do you guys think?

And even if I am right in thinking that the property is worth about 10% more than an REO, would it appraise for such a value when most of the comps are for REOs and short-sales? Do appraisers adequately account for the difference between an after-repair property and a before-repair property?