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Bank owned sales

Discussion in 'Fannie Mae, Freddie Mac, USPAP' started by bosco8373, Feb 10, 2009.

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  1. bosco8373

    bosco8373 New Member

    0
    Jun 30, 2008
    Professional Status:
    Certified Residential Appraiser
    State:
    Florida
    Has anyone started using bank owned sales in their appraisals? i know they are not qualified but I have a few homes I'm appraising in a new development. There are three qualified within the past six months that were contracted much earlier and I feel that value is not near that. The homes I am appraising are listed for much lower than the value i am coming up with using these three sales. I want to use the bank owned sales I have in the neighborhood because realistically that is the value in the nbd.

    Let me know what you think!!

    BTW - How can I change the professional status on my profile?
     
  2. JSmith43

    JSmith43 Elite Member

    22
    May 5, 2003
    Professional Status:
    Certified General Appraiser
    State:
    California
    In this era of short sale games, list price doesn't as reliably bracket the upper end of value for comparable properties due to the strategy of short sale specialists listing low enough to get a quick offer. Sometimes it takes an offer in hand to get a serious discussion going with loss mitigation-you need to get to the top of the pile, is the theory.

    REO sales? I wouldn't walk past non-REO sales if you are doing a MV appraisal. Disclose the motivation (REO liquidation sale) if you put an REO in the grid. Also, be thoughtful of the comments in the reconciliation if giving the REO any weight in the analysis.

    Is quick sale value the same as MV? Maybe, but only because of chance and circumstances. It is always better to use sales with a typical set of motivations & that may be (for example) quiet enjoyment of the property for an Owner-occupant. The quick sale crowd might be motivated to perform a quick flip or be interested in cash flow potential, for example.
     
  3. Metamorphic

    Metamorphic Senior Member
    Gold Supporting Member

    59
    Mar 15, 2008
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    I use them all the time. I think the proper inclusion of them lends credibility to the report. However, when I use them I analyze the market to see if they're being discounted and include that as an adjustment if there's a margin between REO's and resales.
     
  4. JSmith43

    JSmith43 Elite Member

    22
    May 5, 2003
    Professional Status:
    Certified General Appraiser
    State:
    California
    If there is consistent data, I would approve of disclosure of the REO status and the basis for the applied adjustment. But, I sure would rather use a non-REO, adjusted for, say, +/-100 SF than use an REO using an REO adjustment factor, at least locally.
     
  5. leelansford

    leelansford Elite Member

    45
    Mar 29, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    Illinois
    Every neighborhood and each situation is unique. That said, in the areas in which I regularly appraise, I find a distinction in prices paid for REO and non-REO properties.

    Be careful.
     
  6. Em Tee

    Em Tee Senior Member

    0
    Jan 14, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    I have some areas where 99% of the sales are REO sales. Of course I use them!!!

    So your answer is..... it depends on your market.
     
  7. bosco8373

    bosco8373 New Member

    0
    Jun 30, 2008
    Professional Status:
    Certified Residential Appraiser
    State:
    Florida
    Thank you for all your comments. It helps out a lot!! I just assumed you could not use bank owned sales because they are technically unqualified sales.
     
  8. Metamorphic

    Metamorphic Senior Member
    Gold Supporting Member

    59
    Mar 15, 2008
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    I've only been playing with these adjustments for the last couple months, so I'm still kind of fine tuning my sense of it, but it seems like in markets where REO's are more than a quarter or so of the sales they effectively run the market; the resales have to price in line with the reo's plus or minus a little condition adjustment for deferred maintenance. In markets below that level it seems like the banks are discounting 5-15% below MV to move their properties a little faster.
     
  9. Metamorphic

    Metamorphic Senior Member
    Gold Supporting Member

    59
    Mar 15, 2008
    Professional Status:
    Certified Residential Appraiser
    State:
    California

    You have to be a little careful. Make sure you're using the sales from a bank to a private party. The transfer from the foreclosure company to the bank or holding company are NOT sales you can use.
     
  10. bosco8373

    bosco8373 New Member

    0
    Jun 30, 2008
    Professional Status:
    Certified Residential Appraiser
    State:
    Florida
    Yes most of the sales in this new development are sold to private parties from banks. This area I am appraising is swamped with bank owned sales. There is only 1 or 2 person to person sales within two miles!! It should be a great time to buy in the next 4-5 months!!

    Thanks for the help.
     
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