Appraising occupied REO for Re-Sale

[J Grant]

There can be a legal wrinkle to some residential foreclosures. If the occupants are renters and they have a lease the Bank/lender can not just evict them just because the title changed hands. We had a similar situation in NC. Lender tried to terminate the Tenants lease. When the lender went to court to force an eviction the Judge spanked the Banks Attorney. So the title can change hands with tenants. Will this effect resale? Possibly. Can you extract that from the market? I think it would be ver difficult at best.

Evictions and Foreclosures

raleighnc.gov

Why are you assuming title changes hands with hostile tenants in place? (though it can happen)

It is more likely in an REO for the bank to offer a sum of $ to get the tenants to leave, or wait till end of lease and then market the property when it is vacant. And even if a title might change hands with tenants in place in a lease, if it is market value as purpose of assignment, then the appraisal still develops the MV opinion AS IF no tenants or other occupancy terms impacts the title or price.

A clerk of court sale with the tenants lease in place can happen, but an appraisal for MV is another thing.

 

[Carnivore]

Why are you assuming title changes hands with hostile tenants in place? (though it can happen)

It is more likely in an REO for the bank to offer a sum of $ to get the tenants to leave, or wait till end of lease and then market the property when it is vacant. And even if a title might change hands with tenants in place in a lease, if it is market value as purpose of assignment, then the appraisal still develops the MV opinion AS IF no tenants or other occupancy terms impacts the title or price.

A clerk of court sale with the tenants lease in place can happen, but an appraisal for MV is another thing.

FNMA has a Cash for Keys program just for these situations. Where did I say its hostile tenants? Maybe you think that tenants with a enforceable lease are hostile in a legal sense or just stubborn.

If we think about it a moment State Laws prevail so it can vary. FTR I have appraised well over a thousand REO's for FNMA and some lenders.

This is just a discussion

Chill a little bit J

 

[Zoe]

Be very polite. These people know they are on verge of eviction. You know, they know. Your on same page.

You can say whatever you want as long as you realize they are on verge of eviction. They already know that.

 

[Zoe]

Just do it like any other appraisal on an arm's length transaction. If the lender does their due diligence, they will market like an arm's length transaction.

 

[Tom D]

if the sheriff didn't evict them after foreclosure, they could live in that house for several years. sometimes the bank doesn't want a vacant property, or they could even be seeing a profit no matter how it is sold. but a squatter is a significant cost, so there is a big negative marketing factor. and we don't mention it? i would normally make an assumption that the house would be vacant at settlement, and just explain the the time frame for eviction, and the damage the angry squatter might cause could/would affect the buyer's perception of value. eventually, on all foreclosures the bank drops the price at certain marketing time frames to get rid of it.

 

[J Grant]

Be very polite. These people know they are on verge of eviction. You know, they know. Your on same page.

You can say whatever you want as long as you realize they are on verge of eviction. They already know that.

There were only two times I knocked on door and the occupants in pre foreclosure let me in for inspection. They were very nice and I was very polite to them (while hoping they wouldn't shoot me because people on verge of eviction/losing their home are under tremendous stress)

Most times either they were not home or ignored my knock ( which both they and I were relieved about ). We were asked by the bank to try to make contact to get in, and if not let the bank know there was no access so proceed with ext only appraisal. That said, after awhile I stopped accepting these assignments because I did not feel safe even knocking on the door of a house with owner/occupants facing eviction/foreclosure .

Even vacant recently occupied homes were a problem. A local RE agent got seriously hurt in a vacant house whose owner had booby trapped it knowing someone would come in. I went inside a few homes with nasty graffiti on the walls and one with scary messages scrawled in lipstick filled with curse words at whoever the bank sends over ). Just not worth it. Now they send clean out crews before appraiser comes over to remove the worst of it but still, a former owner can let themselves in and do weird stuff or a squatter be inside. I insist now a RE agent meet me at any vacant REO or most vacant properties now, or I don't go in.

 

[Zoe]

There were only two times I knocked on door and the occupants in pre foreclosure let me in for inspection. They were very nice and I was very polite to them (while hoping they wouldn't shoot me because people on verge of eviction/losing their home are under tremendous stress)

Most times either they were not home or ignored my knock ( which both they and I were relieved about ). We were asked by the bank to try to make contact to get in, and if not let the bank know there was no access so proceed with ext only appraisal. That said, after awhile I stopped accepting these assignments because I did not feel safe even knocking on the door of a house with owner/occupants facing eviction/foreclosure .

Even vacant recently occupied homes were a problem. A local RE agent got seriously hurt in a vacant house whose owner had booby trapped it knowing someone would come in. I went inside a few homes with nasty graffiti on the walls and one with scary messages scrawled in lipstick filled with curse words at whoever the bank sends over ). Just not worth it. Now they send clean out crews before appraiser comes over to remove the worst of it but still, a former owner can let themselves in and do weird stuff or a squatter be inside. I insist now a RE agent meet me at any vacant REO or most vacant properties now, or I don't go in.

Okay, the process lasts a long time. So by the time you get there the shock is over.

Remember that. Your like last straw that broke the camel's back.

Protect your client. Do it like any other arm's length transaction. REO transactions are fine. Do it right.

 

[Carnivore]

if the sheriff didn't evict them after foreclosure, they could live in that house for several years. sometimes the bank doesn't want a vacant property, or they could even be seeing a profit no matter how it is sold. but a squatter is a significant cost, so there is a big negative marketing factor. and we don't mention it? i would normally make an assumption that the house would be vacant at settlement, and just explain the the time frame for eviction, and the damage the angry squatter might cause could/would affect the buyer's perception of value. eventually, on all foreclosures the bank drops the price at certain marketing time frames to get rid of it.

Yep...Squatters are a problem. I imagine potential buyers would be very reluctant to even make an offer let alone buy it with it occupied.

Banks like to get non-performing assets of their books fairly quickly.


In my State the County Sheriff's are the Law. With a Court Order they do indeed forcibly remove Squatters.

 

[J Grant]

I also removed two at risk pets left behind at vacant REO houses. One was a cat I took back with me and re homed ( after it tried to kill my cats lol) and one, a young pit bull, I risked my safety to free because it was choking tied to a fence in the backyard. 10 minutes later the owner came back to collect their dog and I told them what happened and they were very grateful. This and the other reasons made me dread accepting these assignments and i just stopped. I imagine the clean out crews see some real nasty stuff and have to deal with a lot of abandoned pets left behind.

 

[J Grant]

Then there was the time I almost fell down through a hole that opened up when I just tapped my foot on it (I learned to walk very carefully, "testing" the floors", of a second story rotting wood floor. of a vacant house Now I am being flooded with PTSD memories from the years I spent doing REO work-ugh.