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  #1  
Old 10-12-2010, 05:10 PM
Peter LeQuire's Avatar
Peter LeQuire Peter LeQuire is offline
 
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Location: A long way from Nutbush
State: Tennessee
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Default Not so subtle nudge

In response to an REO appraisal I'd done, the bank wrote back telling me to reduce my estimate/opinion of buyer/entreprenurial incentive. I was curious why I would be prodded in that direction, thinking that the bank would want as realistic a set of numbers (as is and as repaired) as it could get. I can only guess that my "as is" number took the loan underwater and is giving some loan officer or compliance person a bit if indigestion.

What is baffling is that this is not coming from a production area, and the criticism is that my opinion of incentives is "too high," not that it isn't supported or realistic.

Thoughts?
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  #2  
Old 10-12-2010, 05:22 PM
Mountain Man Mountain Man is offline
 
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As an investors, what we expect for entrepreneurial profit depends on how much remodeling work is required. If it's not much, we might be happy with a $10,000 profit on a $100,000 house. But if it needs major repairs, we expect a dollar for dollar return with so much work and risk. That's why we just bid $45,000 on one to make it a nice $100,000 home again.
  #3  
Old 10-12-2010, 05:26 PM
Mike Kennedy's Avatar
Mike Kennedy Mike Kennedy is offline
 
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Quote:
Originally Posted by Peter LeQuire, IFA View Post
In response to an REO appraisal I'd done, the bank wrote back telling me to reduce my estimate/opinion of buyer/entreprenurial incentive. I was curious why I would be prodded in that direction, thinking that the bank would want as realistic a set of numbers (as is and as repaired) as it could get. I can only guess that my "as is" number took the loan underwater and is giving some loan officer or compliance person a bit if indigestion.

What is baffling is that this is not coming from a production area, and the criticism is that my opinion of incentives is "too high," not that it isn't supported or realistic.

Thoughts?
Dearest "Bank",

Kindly provide written support for your "too high" assertion (suggesting a Correction to a purported Error is required) within 8 hours for review and consideration. The Results of same could be: a decrease, no change, or an increase in the OPV.


DODD-FRANK FINREG Eff. 7/21/2010

SEC. 1472. APPRAISAL INDEPENDENCE REQUIREMENTS.
(a) I
N GENERAL.—Chapter 2 of the Truth in Lending Act (15
U.S.C. 1631 et seq.) is amended by inserting after section 129D
(as added by section 1461(a)) the following new section:

‘‘§ 129E. Appraisal independence requirements
‘‘(a) I
N GENERAL.—It shall be unlawful, in extending credit
or in providing any services for a consumer credit transaction
secured by the principal dwelling of the consumer, to engage in
any act or practice that violates appraisal independence as described
in or pursuant to regulations prescribed under this section.
‘‘(b) A
PPRAISAL INDEPENDENCE.—For purposes of subsection (a),
acts or practices that violate appraisal independence shall include—
‘‘(1) any appraisal of a property offered as security for
repayment of the consumer credit transaction that is conducted
in connection with such transaction in which a person with
an interest in the underlying transaction compensates, coerces,
extorts, colludes, instructs, induces, bribes, or intimidates a
person, appraisal management company, firm, or other entity
conducting or involved in an appraisal, or attempts, to compensate,
coerce, extort, collude, instruct, induce, bribe, or intimidate
such a person, for the purpose of causing the appraised
value assigned, under the appraisal, to the property to be
based on any factor other than the independent judgment of
the appraiser;
‘‘(2) mischaracterizing, or suborning any
mischaracterization of, the appraised value of the property
securing the extension of the credit;
‘‘(3) seeking to influence an appraiser or otherwise to
encourage a targeted value in order to facilitate the making
or pricing of the transaction; and
H. R. 4173—813
‘‘(4) withholding or threatening to withhold timely payment
for an appraisal report or for appraisal services rendered when
the appraisal report or services are provided for in accordance
with the contract between the parties.
‘‘(c) E
XCEPTIONS.—The requirements of subsection (b) shall not
be construed as prohibiting a mortgage lender, mortgage broker,
mortgage banker, real estate broker, appraisal management company,
employee of an appraisal management company, consumer,
or any other person with an interest in a real estate transaction
from asking an appraiser to undertake 1 or more of the following:
‘‘(1) Consider additional, appropriate property information,
including the consideration of additional comparable properties
to make or support an appraisal.
‘‘(2) Provide further detail, substantiation, or explanation
for the appraiser’s value conclusion.

‘‘(3) Correct errors in the appraisal report.
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Last edited by Mike Kennedy : 10-12-2010 at 05:38 PM.
  #4  
Old 10-12-2010, 05:35 PM
Peter LeQuire's Avatar
Peter LeQuire Peter LeQuire is offline
 
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What I have heard from a couple of operative builders who do that sort of thing with houses bought out of estates and out of foreclosure and at least one "flipper" of same, is pretty consistent: that is, somewhere around 30% of the total SP of the house, after the work is done, is necessary to pay for repairs, holding costs, marketing, (generally) closing costs for the buyer and risk reward incentive. The bank's suggestion was that more than 10% of the costs of repairs was excessive, which, IMO, is totally unrealistic.
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  #5  
Old 10-12-2010, 05:46 PM
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CANative CANative is online now
 
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Default

EP or EI % can be applied in different ways. To the total costs, to the hard costs, to the finished product, etc. It varies. Maybe they don't want to see too much for certain types of costs. Some banks don't like to see EI at all because they are worried that the borrower doesn't have enough skin in the game.
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  #6  
Old 10-12-2010, 05:50 PM
Mike Kennedy's Avatar
Mike Kennedy Mike Kennedy is offline
 
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"The bank's suggestion was that more than 10% of the costs of repairs was excessive, which, IMO, is totally unrealistic."

Which was anticipated and, IMO, the "Bank's" DEMAND should be replied to as above.

Further, IMO, a demand to arbitrarily revise a Value Opinion absent CONCRETE proof of

a. additional information that is RELEVANT or
b. proof that an ERROR was made.... is what it is. Coercion.

Complying with same demonstrates Advocacy and represents intentional Collusion.
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  #7  
Old 10-12-2010, 06:12 PM
Mountain Man Mountain Man is offline
 
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Are you putting in a flat 30% and calling it profit, or are you breaking it down like: 10% marketing & holding, 5% interest carry cost, 5% maintenance, 10% profit? That may be what they are looking for, more detail as to what investors are doing in your area.
  #8  
Old 10-12-2010, 06:18 PM
Mike Kennedy's Avatar
Mike Kennedy Mike Kennedy is offline
 
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Location: Southern Hudson Valley
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Default

OP: "the bank wrote back telling me to reduce my estimate/opinion of buyer/entreprenurial incentive."

IMO, as posted the Bank's directive was not a request for further explanation or a breakdown.
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Kill the Contract Review Bull$eye - Now.
  #9  
Old 10-13-2010, 09:29 AM
Peter LeQuire's Avatar
Peter LeQuire Peter LeQuire is offline
 
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Location: A long way from Nutbush
State: Tennessee
Professional Status: Certified Residential Appraiser
Posts: 6,011
Default

CANative - what I've been getting from the folks I mentioned is 30% of the sales price after remodeling/renovation. I understand this to be a rough guide - not necessarily an arbitrary absolute requirement - and very much related to the market segment in which the victim property competes. (Upper end houses are much less attractive than are houses that would appeal to a first time buyer, for example.)

MM - I simply called it buyer and entreprenurial incentive: my inference from the e-mail is that the "as is" value is too low, regardless of how it was achieved. No criticism was made of how I presented the information.

MK - "IMO, as posted the Bank's directive was not a request for further explanation or a breakdown." I took it as a demand, and believed/believe it was an attempt to influence the appraisal.

What I find curious is that this "request" was not coming from someone on the lending side, but from the appraisal management area of the bank (not an AMC). I called the manager of that area late yesterday, and, short version, told him that absent better information or error, I wasn't changing the report.

I can only assume that the "as is" value gives the bank some sort of asset category or regulatory problem. Which is not my problem.
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  #10  
Old 10-13-2010, 10:19 AM
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Terrel L. Shields Terrel L. Shields is offline
 
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Default

Kennedy is correct. It is coercion, a solicitation of a crime.

You have certified that the opinions are your OWN...not the clients. So don't even consider changing your opinion.
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