[Susie Seibert]

hey there,

i was speaking with another appraiser on the phone today and he said that he received an email from an online appraisal magazine yesterday and there was an article about fannie mae and not using foreclosure sales for comps. he said he deleted it after reading it and couldn't remember the name.

does anyone know what mag or service he's talking about and do you have a link for it?

thanks!

[fritzvogel]

Nope, noda, not here. That would be missleading the reader of the report, if in fact REO properties impact your market.

[VegasWayne]

Working RE magazine was the source of the e-mail. The author seems to believe that foreclosure sales only occur at auctions held on the courthouse steps. The article makes no mention of REO sales and suggests that lenders prefer short sales to foreclosures as comps.

[leelansford]

There may in fact be neighborhoods where REO sales ARE the market...but, I have yet to find a neighborhood (and, there are some in the "Chicago-land" are that in dire straits!) where "normal" transactions were not to be found.

[Susie Seibert]

so...being in an area where foreclosures are starting to overtake the market and I have choices of sales 90 days or newer that are foreclosures or sales that are over 90 days and normal...which route would you go? i've been doing time adjustments to reflect the decline in market price...

[VegasWayne]

Originally Posted by leelansford

There may in fact be neighborhoods where REO sales ARE the market...but, I have yet to find a neighborhood (and, there are some in the "Chicago-land" are that in dire straits!) where "normal" transactions were not to be found.

Come to Las Vegas, you will find it here. I recently did an appraisal where all comparable sales within 2.5 miles in the past year were REO's. My choices are:
1. use REO sales as comparables
2. use sales over one year old
3. find comparables in Utah that aren't REO's.

I've been using choice one.

[Howard Klahr]

Originally Posted by Susie Seibert

so...being in an area where foreclosures are starting to overtake the market and I have choices of sales 90 days or newer that are foreclosures or sales that are over 90 days and normal...which route would you go? i've been doing time adjustments to reflect the decline in market price...

Your appraisal is based upon the definition of market value noted within your report. Therefore, you must evaluate the transactions you select as being comparable and identify appropriate characteristics warranting adjustment. One of those items is conditions of sale.

As I am not in your market nor have access to the data in which you are referring, I am unable to conclude if a condition of sale adjustment applies. However, REO transactions do generally have issues that you may not be able to identify/confirm with regard to seller motivation, such as contractual provisions related to the pooling and servicing agreement, what reserve requirements apply to that asset, how close to the monthly, quarterly, annual reporting cycle was this asset targeted for sale, etc.

This is not to say to not use REO transactions, just become more familiar with the issues that influence the conditions of sale.