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  #41  
Old 04-25-2012, 12:32 PM
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sandpiperapp sandpiperapp is offline
 
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Originally Posted by Lobo Fan View Post
It is not my concern. I am here to determine the most probable price not some fantasy number. If REOs dominate the market, then that is the market. IMHO.
REO's may dominate the market, but if my subject is not an REO, shouldn't it be treated as a "micro market". I have used Transaction Type as a micro market and used comps that best reflect that micro market. Short sales to short sales, REO's to REO's, and arms's length to arm's length.
I had an order for a purchase of a home that had sold at forclosure to an investor, fully renovated into like new condition and then was resold. I was doing the purchase after it was renovated. Knowing the area, my initial reaction was the purchase price was high. Once I started to do my research I found several similar style homes with similar gla's and similar amenities with the same history. Foreclosure, renovation, re-sale. There were different buyers and sellers and after talking with the brokers I was convinced they were all arm's length transactions. Selling prices the second time around were pretty tightly bunched also. A micro market had emerged from the foreclosures and REO"s and justified the sales price of my subject.
I was taught to compare apples to apples and I have learned to refine it to compare fresh apples to fresh apples or rotten apples to rotten apples.
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  #42  
Old 04-25-2012, 01:35 PM
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residentialguy residentialguy is offline
 
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Originally Posted by Lobo Fan View Post
Just trying to get my head wrapped around this thing. I have a neighborhood with 100 closed sales in the past year, and 50 in the past 6 months. Of these, 80% are REO-short with a median sales price of $180,000. The remaining 20% have a median sales price of $200,000. All are similar enough to be included at the top of page 2. Overall the median sales price is $185,000. So rather than accept the $180,000 as the predominant MV, I am supposed to adjust any REO-short up to $200,000? Sounds like a misleading report to me.
That's a good question, Lobo. The answer would be "maybe". 10% difference is a fairly large amount, but still might be close enough to be considered comparable. If 80% of the homes had a sq ft variance that had a reaction of 10% value variance, would you include those? Maybe.

I don't see a problem of including them in your 1004MC as long as you are explaining that they were included, and how they may have skewed the analysis. Then I would include the grid on the additional comments showing the 1004MC without SS/REOs and a grid showing only the distressed sales. Now you can talk about how the distressed sales are affecting the non-distressed sales and show how a combined picture may be mis-leading as to a sale selling with the conditions set forth in the definition of MV.

btw, I do this for all sales in the neighborhood on top of doing it for the similar types (comps) of the subject.

There are no cookie cutters any more.
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  #43  
Old 04-25-2012, 01:39 PM
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Lawrence R. Lawrence R. is offline
 
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Default Question?

When we discuss a typical buyer and seller, how market/submarket specific should we be?

I mean, my gut reaction says that the typical buyer of a Single Family Dwelling is a Single Family, no?

How precise do we make our market(ie small) to say that the typical buyer and seller of Single family homes are banks and investors?

Also, didn't all those properties that are 20% higher in price sell while the other comps were on the market as well? I mean, all the bank sales didn't sell first, and then the Owner occupied homes sell, did they?

In other words, what was going through the mind of (IMO), a typical home buyer when he chose the 200K house over the glut of 180K houses that were likely to be available at the time?

Were this buyer and seller acting rationally? If so, could it be that there are 2 markets present, or perhaps one could call it a segmented or bifurcated market? One in which banks and investors and a few more daring single family owners are involved, and another with owner occupiers selling move in ready houses with some implied or expressed warranty of condition?

Must we say that every house that sells in "the market" belongs to the same market?

Furthermore, what does the client want? They typical buyer and seller? Even with the downturn...owner occupiers and future owner occupiers are still the bulk of the market...at least for now.

What say you? How broadly or narrowly do we define the market, and who are the "typical" players in that market?


Please don't mistake any of my questions as veiled rhetoric...I would really like to hear what you think of this. I should probably post this as its own thread.
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  #44  
Old 04-25-2012, 01:57 PM
Randolph Kinney Randolph Kinney is offline
 
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Quote:
Originally Posted by Lobo Fan View Post
Just trying to get my head wrapped around this thing. I have a neighborhood with 100 closed sales in the past year, and 50 in the past 6 months. Of these, 80% are REO-short with a median sales price of $180,000. The remaining 20% have a median sales price of $200,000. All are similar enough to be included at the top of page 2. Overall the median sales price is $185,000. So rather than accept the $180,000 as the predominant MV, I am supposed to adjust any REO-short up to $200,000? Sounds like a misleading report to me.
Why not analyze the three groups separately for comparison. First, the trend for closed sales over the last 12 months for non-distressed, REO and short sale using $/sf versus off market date (open of escrow) using linear regression. Are the rates of decline similar? Or are the non-distressed sales declining at a faster rate?

How about the failure rates? How many non-distressed listings fail to close; expired, canceled or withdrawn? Same analysis for REO and short sale.

How about absorption rates for each group?
  #45  
Old 04-25-2012, 03:54 PM
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DMZwerg DMZwerg is offline
 
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Quote:
Originally Posted by Lobo Fan View Post
Just trying to get my head wrapped around this thing. I have a neighborhood with 100 closed sales in the past year, and 50 in the past 6 months. Of these, 80% are REO-short with a median sales price of $180,000. The remaining 20% have a median sales price of $200,000. All are similar enough to be included at the top of page 2. Overall the median sales price is $185,000. So rather than accept the $180,000 as the predominant MV, I am supposed to adjust any REO-short up to $200,000? Sounds like a misleading report to me.
It depends.
One might think ResGuy and I actually have a similar answer in his "maybe" and my "it depends" but after I quote some of his post I will get into where I think he is mistaken.

Quote:
Originally Posted by residentialguy View Post
That's a good question, Lobo. The answer would be "maybe". 10% difference is a fairly large amount, but still might be close enough to be considered comparable. If 80% of the homes had a sq ft variance that had a reaction of 10% value variance, would you include those? Maybe.
I don't agree that the price difference has anything to do with why "it depends" because it depends on what value you are appraising and under what definition. If using the FIRREA definition that it is clear that the sellers of REOs and non-REOs are not both identically motivated (by definition) and that the buyers may also not be identically motivated (by analysis, this is part of "it depends" on what you notice), and the 10% difference is what I would likely state is fairly significant evidence of these differences. If you are appraising a different value then it may actually be misleading to include the non-REOs. Therefore "it depends" and there is no cut and dried answer without further data. Therefore I disagree with ResGuy's statement about the difference equating just to price and with a 10% difference in GLA (which would not run them afoul the definition of value used in the appraisal).

Quote:
Originally Posted by residentialguy View Post
I don't see a problem of including them in your 1004MC as long as you are explaining that they were included, and how they may have skewed the analysis. Then I would include the grid on the additional comments showing the 1004MC without SS/REOs and a grid showing only the distressed sales. Now you can talk about how the distressed sales are affecting the non-distressed sales and show how a combined picture may be mis-leading as to a sale selling with the conditions set forth in the definition of MV.
That, on the other hand, I see no argument with.



Quote:
Originally Posted by Randolph Kinney View Post
Why not analyze the three groups separately for comparison. First, the trend for closed sales over the last 12 months for non-distressed, REO and short sale using $/sf versus off market date (open of escrow) using linear regression. Are the rates of decline similar? Or are the non-distressed sales declining at a faster rate?

How about the failure rates? How many non-distressed listings fail to close; expired, canceled or withdrawn? Same analysis for REO and short sale.

How about absorption rates for each group?
It depends ... are showing such really necessary for all report (including say a FNMA 1004 summary). Not saying such extra effort should or shouldn't be done, just pointing out it may be unnecessary if the appraiser feels the data is already showing a clear difference that he may feel is intuitively obvious and does not warrant the extra effort. It really depends on scope of work, client, intended user(s), and the appraiser.

(you did phrase it in the form of a question, aka "Why not...?" thus I am replying to your question)
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  #46  
Old 04-25-2012, 11:15 PM
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Webbed Feet Webbed Feet is offline
 
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Quote:
Originally Posted by Lobo Fan View Post
Just trying to get my head wrapped around this thing. I have a neighborhood with 100 closed sales in the past year, and 50 in the past 6 months. Of these, 80% are REO-short with a median sales price of $180,000. The remaining 20% have a median sales price of $200,000. All are similar enough to be included at the top of page 2. Overall the median sales price is $185,000. So rather than accept the $180,000 as the predominant MV, I am supposed to adjust any REO-short up to $200,000? Sounds like a misleading report to me.
No Lobo, assuming you've made a good use of statistics then your above is a misleading analysis as you've failed to look hard at the definitions of the terms you should be using, and how they would be or should be used by your peers. Or, perhaps used in a court of law, sometimes looking at this later case can clear up what our peers cannot seem to "get."

I have turned to red font, bolded,and underlined your "MV" above as I take it you meant "Market Value." The error in your statement, and analysis, is instead of "Market Value" your sentence should have used "Price." The error part of the analysis is the distressed sale prices, unadjusted, are not reflecting market value for any specific subject property. The reason is the definition of market value used for most appraisal assignments. Your own short analysis above proves a stratified market wherein non-distress sales, if this were a classic CE test question, show a market extracted adjustment of a positive $20,000 (not "up to $200,000") should be used upon any distressed "comparable" sale in a sales comparison grid.

If you recall, the sections of the forms you infer refer to price, not value. With your market area, and that kind of market data, it would be very important to quite demand an underwriter read an addendum wherein you carefully explain how the "Prices" from an array of sales that include distressed sales may skew predominate price on a Fannie form, but that the mission is to credibly reflect Market Value for the subject, not a mathematician style arrived at statistic.

Fannie's forms are ill equipped for dealing with the kind of real estate markets that exist today. Even worse, the newest additions to those forms meant to clarify difficult market analysis have only succeeded in making "Form Think" the fashion of the day instead of the "Market Think" our trade should be striving for.

Appraisers that continue to focus on the forms instead of on the markets, right along with underwriters, are only perpetuating a lack of real intellectual growth this trade very much needs. Some days I think form reporting should be banned for a few years, just to force appraisers and lenders both to stop allowing forms to drive the analysis of appraisers. I am seeing many appraisers so wrapped up in forms and "guidelines" that they completely forget to bother to get the SoW correct before they make a grand mess of their assignments. Unfortunately, it appears that many appraisers think that "Forms" drive SoW above all else, and most of them only know one form.
  #47  
Old 04-26-2012, 07:33 AM
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residentialguy residentialguy is offline
 
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Quote:
Originally Posted by DMZwerg View Post
One might think ResGuy and I actually have a similar answer in his "maybe" and my "it depends" but after I quote some of his post I will get into where I think he is mistaken.

I don't agree that the price difference has anything to do with why "it depends" because it depends on what value you are appraising and under what definition. If using the FIRREA definition that it is clear that the sellers of REOs and non-REOs are not both identically motivated (by definition) and that the buyers may also not be identically motivated (by analysis, this is part of "it depends" on what you notice), and the 10% difference is what I would likely state is fairly significant evidence of these differences. If you are appraising a different value then it may actually be misleading to include the non-REOs. Therefore "it depends" and there is no cut and dried answer without further data. Therefore I disagree with ResGuy's statement about the difference equating just to price and with a 10% difference in GLA (which would not run them afoul the definition of value used in the appraisal).
Phew...that's a relief. I'll tell you why in a second.
While I do agree that the REO sets itself out of being "Market Value", by definition...as DMZ has shown, I disagree that this would make it a dis-qualifier. By that same argument, I would also have to disqualify any sale that had sales concessions or special financing affecting the price, but I would bet that DMZ still uses them. Obviously, if given the choice of sales equal in every other way, you would choose the the sales that don't have those differences, but these days, that scenario would probably only be available only in our dreams. Regarding DMZ's view, I see it as a relief. I always thought of him as a god...but now I know he's human.
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  #48  
Old 04-26-2012, 08:07 AM
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J Grant J Grant is offline
 
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A VA loan can only be for properties that clear section 1 and 2 of the termite inspection. That seems to limit me when looking at short sales and foreclosures

Did your RE agent tell you this? (that a short or REO sale won't pass termite inspection)

Why not look at average/good conditon REO or short sales that would pass termite inspeciton?

Esp with a short sale, why would it not pass a termite inspection any more or less than a non short sale? Short sales are for the most part, owner occupied. And not all REO sales have termites ! ( I don't know your specific area, but why are you assuming they all do?
  #49  
Old 04-26-2012, 11:48 PM
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Flygirl 152 Flygirl 152 is offline
 
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Originally Posted by ctapraser View Post
May I suggest to Laurie Norman and Lobo fan to just run away....I am begining to see why there are a handfull of posters with like 5,000 posts and almost none with under 100. Seemed like a great site at first and then I see people trying to help get slammed over and over (by the same person it seems),... looks like fun... take some of my time, try and help and then get bashed by some google expert pretending to be all knowing.
The problem with any online community is that what a person may post, is not necessarily what they mean. And what they mean to say, is not always what comes across in text. The brain often thinks faster than what the fingers can type. And what you would say in a post, is not necessarily what they would say to you face to face.

For example, my 17 year old son is a senior in high school and an app/indie game developer for Nook, Kindle, iPhone, Android etc... Someone sent him an email which said, “your games are gay”. My son responded professionally that he always appreciates feedback, and if there is a way in which he can improve his product, he always welcomes commentary and ideas from his users. The young mans father must have intercepted the email, because he responded to my son, and apologized for his child calling my sons game gay….he stated that his son is autistic, and doesn’t always know the right way to communicate. Ironically, my son was recently engaged by a professor at Stanford University to assist in developing an online app/book for autistic individuals.

Unfortunately, in any online community, you are going to find those that have social problems such as autism, or that feel empowered by insulting others as a way to enhance their own self esteem. You will also find others that think their insults are totally justified because the “other person” is at fault by not being more specific. There is nothing you can do to prevent this type of cyber bullying because it is all speculative and you do not know the person on the other end of the message.

I just had this conversation with my kids at the dinner table. When I grew up and went to the movies, there were 4 ushers that stood there the entire movie moderating the crowd. If someone talked, the usher shined their light in their face and told them to be quiet. We have become a society in which you can say and do as you please without any repercussions whatsoever. You can insult and abuse people on many online forums/games, and not be accountable for you actions. The internet has spawned a whole different generation of rules….many of us are not accustomed too.
  #50  
Old 04-27-2012, 07:36 PM
David Mescon David Mescon is offline
 
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What some consider undue stimulus, others consider typical motivation.
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