REO's as comparables to non-REO

[J Grant]

You guys want a short Cliff Notes version?

You gotta pay me for that lol!

 

[residentialguy]

In other words, THE SOW DEFINES THE PUPROSE, NOT THE INDIVUDAL OWNER/SELLER AND THEIR NEEDS OR WHAT YOU ASSUME ARE THIER NEEDS

Never said it was the seller. Why are you saying this? I said very specifically that "the SOW work can change per instructions of the client."


To respond, this is how I was taught and I beleive that USPAP sees it. UNLESS a client asks for liquidation value (very rare in res appraising), and you identify on the report that you are appraising for liquidation value, then that is what you are appraising for.

Good, now we're getting somewhere. What is the client asking for...that is needed for SOW.


It doesn't matter if the owner wants a quick sale, the value you are signing your name to on the report is to find the MV for the subject, then that is what you are trying to find (the SOW, to find market value for the subject, does not change, just because the owner says he wants a quick sale, or the owner is a bank and you assume they want liquidation value ... In other words, the SOW to find market value for the subject, "erases" the motivatioon of an individual owner, including a bank, and replaces it with the theoretical motivation , per the defintion of MV of a "typical" seller.

Agreed...I never said otherwise. Why are you going here? It is the client's needs that you are looking for. If they are looking for FNMA MV, it matters if comp sold for a quick sale...anything that deviates from MV and gives a different mv, you must adjust. You need to adjust for any variance that condition of sale may have in the market to a fair sale.

Sounds like you mis-read my post.

 

[DMZwerg]

Why would the comps change just because 12 Orange Street is owned by a bank and not a person? THE SOW IS THE SAME FOR ALL THE APPRAISALS, FIND MARKT VALUE AS IF THE SUBJEC WERE SOLD NOT UNDER DURESS ETC.

The comps would not change (except those additional used to determine "sale within 90 days" or such) AS LONG AS ALL FOUR ARE APPRAISED UNDER THE SAME DEFINITION OF MARKET VALUE. USPAP clearly states this does not have to be the case you know, and that you can appraise under different values. Therefore when doing a 1004 with REO addendum the value under the main report would not be REO value, liquidation value, or quick sale value.

On the other hand the other three values on the REO addendum section may well be under different definitions as "undue stimulus" may well be assumed in determining the 90 day (+/-) sale value, otherwise there would likely only be two different numbers in the report.

So, what's the problem?

That takes precedence, as it were, over the "real" seller and their inidvidual needs, whether the real seller is a bank or not, for appraisal puproses, the seller is assumed to have typical motivation.

But in determining market value under the conditions requisite to a fair sale if the COMPARABLES were not sold under the conditions requisite to a fair sale then by what standard do you claim that their selling price is in any way, shape or form related to a fair sale? Since it isn't you would be comparing apples to oranges, or maybe better explained as Red Delicious to Macintosh which, though relative prices may be related, are clearly not the same thing. A more traditional viewpoint would probably be likening it to using oats to try and determine the current wheat prices. We call them different things because they are point blank not identical, but rather different and need to be treated so. Since they are different they need to be analyzed, adjusted and commented on (adjustment could be zero).

 

[J Grant]

Getting closer in agreement on some principles, the first page of posts adderssing the seller's question make a lot of sense and the post could have stopped on the first page!

 

[residentialguy]

The only principle I see that we disagree is the static definition (traditional, no pressure sale) vs the moving definition (majority of market at the time.

While it may become more of a challenge to the appraiser with a static definition due to lack of traditional sales, the moving definition creates too many problems and it not supported by logic.

 

[Mr Rex]

A static definition of "market" value defies logic.

 

[residentialguy]

A static definition of "market" value defies logic.

LOL. That was easy to say.

Thanks for posting

 

[J Grant]

A static definition of "market" value defies logic

Thank you.

I see some here inventing their own caveats to MV, such as it represents a "static " definition. Good luck trying to defend an appraisal based on that. The word "static" or "static defintion of MV ", or any variation thereof, occurs nowhere in USPAP, Fannie, or in any credible appariasal guidelines. And nowhere do the standards even imply that, you made it up and it sounds important/ professional, but it is in fact based on an assumption that is in direct opposition to developing a market value per appraisal guidelines.

 

[J Grant]

While it may become more of a challenge to the appraiser with a static definition due to lack of traditional sales, the moving definition creates too many problems and it not supported by logic.[/quote]

The opposite if true, using a static definition is easy, just ignore any REO or short sales or anything else you want based on that.

There is no such thing as a "moving" defintion of market value.

A market value means you base the value for subject by analyzing market activity, and yes, the market changes, moves in different directions over time.

If markets did not change and impact value, appraisals would not be needed, and lenders and other users could rely on a BlueBook value, much the way autos are valued, so much $ per sf, so much $ for X amount of land, and deduct X% a year for deppreciation.

Static apprisaing is formulaic appraising, the exact opposite of what we are supposed to be doing.

 

[J Grant]

There is no such thing as a "moving value", and developing a MV that is not "static" is not supposed to be supported by "logic", it is supposed to be supported by applying the appraisal guidelines. (none of which instruct an appraiser to develop a "static" value.

"Developing a "moving" value creats too many problems", maybe you meant creates too much work for the appraiser.