REO's as comparables to non-REO

[residentialguy]

I did an FHA SFR last month in a micromarket of entry level homes. In the prior 6 months, 7 sales, all REO. Inventory is in balance. Average Exposure period 153 days.

There is no question what the market is, in this case. The market. And we know what it is comprised of, precisely.

So how much difference in value, if any, was the market value as a non REO? Or did you just throw your hands up and say no non-distressed sales available, therefore the market no longer has an aversion to REO sales from traditional type sales?

 

[residentialguy]

I treat REO subject and non REO subjects the same

Depends on the SOW. What is the bank requesting?

If they want to know the most probable price the property would sell for as a REO, then I would use only REOs.

Do they want to know MV as defined on the 1004? Then I would treat the REO subject and non REO subjects the same...because the bank is asking the same question. They don't want to know the most probable price the property would sell for as a REO.

 

[Verne Hebert]

It doesn't matter who the owner is.

Average exposure over 5 months. They are exposed adequately. There is no undue duress. Inventory is in balance with 11 listings;typical.

If you want to sell your house.......call yourself Jones, B of A, or undisclosed--you are going to get market.

It is all market.

 

[J Grant]

Every REO I have done, (going on close to 500 now, lost count), the lender wants market value. And that's what I look for the market value, same as any other property. If the most competitive comps are REO or short sales, I use them. If the competition is non REO owner sales, I use them. (or a combination)

Re, market value SOW, I treat REO and non REO subjects and the assignments as the same. The only difference in REO appraisals is an REO addendum, asking for 3 listings, an as repaired value, (if it needs repairs), and a second value if sold in a 60-90 day marketing time. ( and if 60-90 days is typical in area, the value might be the same and not discounted from value on sales comparison page)

 

[residentialguy]

It doesn't matter who the owner is.

Average exposure over 5 months. They are exposed adequately. There is no undue duress. Inventory is in balance with 11 listings;typical.

If you want to sell your house.......call yourself Jones, B of A, or undisclosed--you are going to get market.

It is all market.

Cool, I'll like the price of the sale of the similar house that Joe bought from his Dad.

 

[J Grant]

Joe bought from his Dad.

Dad and Joe are related, specifically one of the examples when a transaction is not arms length. The REO lender and buyer are not related which is one of the standards for arms length.

 

[Elliott]

How about this as a thought rule:

If 30% of sales are REOs, one or two of your comps should probably be a REO.
If 60% of sales are REO's, most of your comps should be REOs.
If 30% of sales are shorts, one or two of your comps should probably be Short Sales.
If 60% of sales are REO's and Shorts, most of your comps should be Shorts and REOs.

 

[residentialguy]

Every REO I have done, (going on close to 500 now, lost count), the lender wants market value. And that's what I look for the market value, same as any other property. If the most competitive comps are REO or short sales, I use them. If the competition is non REO owner sales, I use them. (or a combination)

Re, market value SOW, I treat REO and non REO subjects and the assignments as the same. The only difference in REO appraisals is an REO addendum, asking for 3 listings, an as repaired value, (if it needs repairs), and a second value if sold in a 60-90 day marketing time. ( and if 60-90 days is typical in area, the value might be the same and not discounted from value on sales comparison page)

Ok...let go to a stable neighborhood. Traditional sales are predominant. Lender comes to you and wants the most probable price the subject would sell for with the undue stimulus and motivation of a REO. You have 4 similar REO sales selling at $250-275k and 25 traditional sales that sold between $300-350k. What comps would you use (all comps being similar in every other way)?

 

[residentialguy]

How about this as a thought rule:

If 30% of sales are REOs, one or two of your comps should probably be a REO.
If 60% of sales are REO's, most of your comps should be REOs.
If 30% of sales are shorts, one or two of your comps should probably be Short Sales.
If 60% of sales are REO's and Shorts, most of your comps should be Shorts and REOs.

If you want a misleading report, that would be a good rule to follow, imo. (given that everything else was equal with the comps)

 

[residentialguy]

Joe bought from his Dad.

Dad and Joe are related, specifically one of the examples when a transaction is not arms length. The REO lender and buyer are not related which is one of the standards for arms length.

Come on, doesn't matter who the seller is. :icon_wink:

Like the father/son, the sale price of the REO may vary because of the buyer seller motivations.