4 states consider limits on ‘distressed’ home-sales data

Illinois, Maryland, Missouri and Nevada are considering legislation that would prohibit or restrict the use of "distressed sales," including foreclosures and short sales, as comparable sales as a part of a residential real estate appraisal, the Appraisal Institute reports.

Homebuilders and real estate sales agents say the prevalence of distressed sales, and their subsequent use as comparables, is resulting in the appraised value of residential properties not matching the contract sales price, or in the case of new construction, the cost to build.

In the current housing industry downturn, distressed sales account for about one-third of all existing-home transactions in a typical month, the National Association of Realtors reports. In high-foreclosure states such as Nevada, the percentage exceeds 70 percent in a typical month.    -Alan J. Heavens