REO's as comparables to non-REO

[residentialguy]

When you can provide some logic to FNMA designing the living, breathing interpretation, I'd love to hear it.

 

[Mr Rex]

When you can provide some logic to FNMA designing the living, breathing interpretation, I'd love to hear it.

WhoTF ever mentions Fannie and logic in the same breath? When you support your interpretation of Fannies definition of market value with quotes from Fannie in writing, I will respond in kind.

 

[VegasWayne]

In the new UAD requirements they require that the type of sale be disclosed on the grid line for financing concessions. They have abbreviations for shorts, REO's and arms length sales so apparently all of these types of sales are acceptable on their forms.

 

[residentialguy]

When you can provide some logic to FNMA designing the living, breathing interpretation, I'd love to hear it.

WhoTF ever mentions Fannie and logic in the same breath?

I'm glad to see you admit that interpretation has no logic. :new_all_coholic:

 

[J Grant]

It doesn't fit fat Fannie's (say that fast 3 times) definition of MV, though

Above, you should state, "According to my view, it doesn't fit Fannie's definition of MV. Not "It doesn't fit Fannie;s defnition of MV. " Because unless you are the chief appraiser/head compliance officer for Fannie Mae, your interpretation of whether an REO sale meets the definition of MV is just your intrepration.

A very seasoned Appraisal instructor, who is on the state board in FL and sits in on discplinary hearings, is an SRA and a cert general and has appriased for 30 years, stated in her class that the reason Fannie and USPAP left the verbiage about market value broad, with words such as typical and undue stimulus not narrowed further, is they wanted the definition to be able to apply to changing market activity. I'd trust her take on this matter as well as my 19 years experience.

Also, nobody said that those of us who sometimes use REO sales don't comment or adjust for them, ( adjust as needed, that is). Anyway, I'll take a break from commenting as I have commented at length and maybe re read some replies , good thread though.

 

[CANative]

For the last freaking time: The definition of value pertains to the value of the subject. Not the comparable sales transactions. You use these transactions to develop an opinion of value for the subject property predicated on the definition.

 

[Mr Rex]

I'm glad to see you admit that interpretation has no logic. :new_all_coholic:

That's what every body keeps telling you, your interpretaion isn't logical.

 

[DMZwerg]

At some point REO's and short sales become the market.

Which market?
In saying they they become the market then they would still be the market even if traditional sales start showing up again and thus "are the market" for ever more???
OR are they just the best data you have available to REPRESENT or APPROXIMATE fair market value on the market?

REO are not traditional sales, do not meet the definition of market value per FNMA, and thus can never "BE" the fair (traditional sale) market. If they are the only sales present then they are much like a SFR market where no SFR sales exist at all, except you happen to have some related market to draw an opinion from, like vacant land.

Liquidation Value <> Fair Market Value
It just don't work without analysis, adjustment & comment.

Your statements in the post I quoted would be comment and would hint that you at least did some surface analysis, which IMHO is 10x more than most posters who claim "they are the market" have indicated.

 

[DMZwerg]

If there is no disparity between the sales price of REO's and standard sales, this may indicate that REO's are driving the market, in which case they would best represent Market Value.

I wouldn't go that far. They don't represent the market in regards to fair market value, but they could be the best indicators of where fair market value may be. Very slight difference in the way one looks at it and how one can justify using them (aka, context, including a summary of analysis and comment as to why the appear to be the best indicators available). Even so they still represent a value that differs from the definition used on the 1004 and other FNMA forms.

Now if there is a significant disparity between the sales prices of distressed and standard sales, you may need to analyze deeper to uncover any causes outside of liquidation that may be at play.....REO's- liquidation value(limited market exposure at sale price).

If there is a significant disparity then either you would be using the "standard" sales in the neighborhood or, by analysis, would be able to show why standard sales in proximate competing neighborhood markets would be better indicators.

 

[DMZwerg]

The appraisal is not for a FNMA loan and I'm not using their form.

Then you just have to make certain you define what value you are appraising and make certain the client and you agree (part of SOW). Absolutely no problem unless you try to claim that the value is fair market value.


But the OP WAS talking about appraising using the FNMA definition, and many of the posters seem not to comprehend the significance.

I am wondering what opinions are about using REO properties when appraising a non-REO property for a refinance.