All Sales Comps Are Distressed Sales

[Long1]

When is it appropriate to use ONLY Distressed Sales as Comps for a Stable
Marketing Area Single Family Detached Owner Occupied home and Subdivision that had < 38% Distressed Sales during the last 12 months?..The homeowner
is trying to cash-out refinance his home. The AMC and Lender want to use
Only Distressed Sales as Comps.

Please Advise.

 

[Meandering]

You must decline the assignment, if, they are directing you in which comparable to use. This is a USPAP requirement. They can not restrict you, you must decline.

They are in violation of the Truth in Lending Act, the inter=agency guide lines and Frank Dodd.

What AMC and what lender?

You could turn this into the state banking commission, the state appraisal board, the CFPB.

I'm not saying they'll do anything about it, depending on the lender, but we don't get a lot of options.

Oh there is that new IVPI hotline, maybe someone has the phone number. I haven't called it yet, but if you wind up on hold and they are playing Sitar music, just hang up and forget it.



.

 

[Terraform]

They probably suggested rather, these guys are sneaky.... Just complete the order as you would any other and get paid.

 

[J Grant]

Is this post a joke? Why would you let a client tell you what comps to use on a market value appraisal?

 

[Lee Lansford]

...The AMC and Lender want to use
Only Distressed Sales as Comps.

Please Advise.

Can we say "Unacceptable assignment condition"? Yes, this is an unacceptable assignment condition. Period.

Opining to Market Value, day-in and day-out, I would generally (i.e., assuming that the subject is of a physical condition that appeals to the 'traditional' market) NOT include a 'distress' property.

Now...IF the definition of 'value' is something other than Market Value, then the story changes. I suppose that the lender and AMC may want a value opinion other than MV but, not knowing what they are doing (IMHO; because it frequently occurs), they try to twist the definition of MV to fit whatever (e.g., Liquidation, Disposition) 'value' they want.

Finally (actually, this should be among the very first): What's the intended use of the appraisal?

 

[Lee Lansford]

Alrighty then...I re-read the OP and now understand the intended use of the appraisal.

That stated, I neglected to add that in situations similar to the OPs, I am certain to include a statement (to the effect) that if a definition of 'value' other (i.e., liquidation, disposition) than MV were utilized, my choice of comps might be other than non-distress properties.

 

[Terrel L. Shields]

When is it appropriate to use ONLY Distressed Sales as Comps for a Stable

never...that's my story and I'm sticking to it.

 

[Mike Garrett RAA]

I would decline the assignment too. There are times when using only REO sales are appropriate but for a refinance transaction I say no.

IN MY MARKET, as an example, I would use REO sales for liquidation purposes. We often see properties sold to investors (REOs) then renovated and returned to the market. These sales would be the best comparables for other renovated properties. It is typical in this market for properties to be sold as REOs to investors for, say, 80~90 thousand, renovated, and then sold for 150 to 160 thousand.

This properties are superior in condition and usually in features. REO sales, in those cases, would not be comparable. Traditional sales also might not be comparable in condition and features. So, the only real comparables are properties that were REOs, sold to investors, renovated, and returned to the market as legal "fix and flips".

It's our job, as an appraiser, to adequately explain our reasoning in the selection of comparables. When the client demands the use of specific types of sales it becomes an unacceptable assignment condition. I also agree a client could ask for a value determination that is other than market value.

 

[J Grant]

For a market value appraisal, it doesn't matter if it's a refi or a purchase...why would an appraiser use different comps if it were a refi or there is a sales contract on a subject?

For a market value purpose independent value opinion report, the appraiser is the one who chooses the comps not the client,... whether that be to include REO and short sales, or to exclude them.

If an appraiser lets a client dictate comp choice (Use only REO sales, don't use only REO sales), then it is not a market value, third party appraisal any longer. The assignment would change to a specific purpose: (as per client, a value arrived at only using REO sales is purpose of appraisal). It would not be done on a UARAR form with pre printed MV definitions and client directive would have to be disclosed.

In declining or REO saturated areas, market value can turn out to be equivalent to disposition sale value, but that is another issue. It's up to the appraiser to analyze the market and choose which comps to exclude or include.