Appraising a Forclosure Sale

[Betty H Church]

Don't forget the REO addendum with cost to cure and 3 listings.

An REO addendum is required for the purchase of a bank-owned (REO) home? Am I confused or is someone trying to confuse me?:Eyecrazy:

 

[Russ Kitzberger]

Are you performing the appraisal for purpose of establishing the market value for a purchase money mortgage?

or

For the purpose of aiding the bank in their asset valuation of property they presently own (REO)?

It is not clear what the purpose is.


Russell Kitzberger
Pointer Appraisal Services LLC
Northeast Ohio Real Estate Appraisal
www.PointerAppraisal.com

 

[Betty H Church]

I know maybe I have led a sheltered appraisal career -- or not! Today I cgot a call from one of my better clients and he asked me about appraising a sale of a bank owned property. My gut reaction was ---- yeahhhhhh. Then I realized I had done a lot of diferent appraisals but this would be the first, and I am sure not the last, purchase of a bank owned property. My question, are there any special considerations I need to be aware of? Those of you that have done them before have any heads up on what to look for? What can I expect from the Bank?

Sure sounds like the purchase/sale of a bank-owned property. But, I have been wrong before.

 

[Russ Kitzberger]

I also at first thought it was a purchase appraisal of a property that happened to be owned by a lender.

But the forum is advising on the REO addenda and other items related to what is normally in the course of a REO appraisal for a lender taking back a property after foreclosure. These may not be necessary for the client's or lender's needs for a purchase of a bank owned property.

Therefore, I would like some clarity before advising.

Ted, please describe what the purpose of the assignment is exactly and who will be utilizing the appraisal.

 

[nauthead]

Expect to see a few things you don't see on a daily basis. And bring lots of wasp spray.

 

[Ted Markow]

Before I read the rest of the replies I will try to clear up some confusion. This is a REO aka bank owned proeprty that is listed on MLS by a Realtor. It has been exposed to the market more than a sufficient amount of time (185 days). There is or will be a purchase and sales in place by the time I am ready to inspect. Utilities are shut off and property is winterized at present. The bank is selling the property as is Other than the winterization it sure smells like an arms length transaction even though it is being sold at a very big discount. I hope that clears up the questions about the purpose.

 

[Ted Markow]

Would have gotten back to you folks sooner but Comcast my ISP crashed about 11:00 am EST on Saturday morning and it did not come back til late. Oh thanks for all the input so far too.

 

[EVAUSA]

Some banks want REO comps, others want you to avoid them. Ask your client for guidelines from the lender, it will help tremendously. You say this is for an REO Sale, so I take it the bank has a buyer. If it is a purchase, they dont usually want the REO addenda, it's just like any other purchase, except the seller is a bank. You dont have to complete the REO addenda, that was already completed when they appraised it for the listing (assuming it was appraised), or they may have just had a BPO, which includes a repair addenda from the agent. Just in case, it never hurts to get some written guidelines from the client.

 

[Ted Markow]

NO no no !!!!!! There is a buyer and he is applying to a bank for financing. A typical loan application at that point other than being a property that happens to be owned by a bank. I know the intent of everyone is to offer the best help but because of the tenor of some threads and their replies, there is a tendency to over think the original questons. Hey no problemo!!! I can clarify the question.

 

[David Sawyer]

You should consider yourself lucky that this is your first REO sale. In my market, 75% of the contract sales (appraisals) I do are REO sales as many of our sub-markets, the REO sale is the market! With a market drop in some areas of up to 55% since market highs in Dec, 2005, I will have minimum of 2/3 of the comps as REO and the 3rd as a "short sale". My 4th "sale" as a pending and my 5th as an active are also REO.

In your sales history, where you are reporting the 3 yr sales history of the subject, typically there are 2 unqualified sales where the bank has had the property deeded in their name and then deeded to another bank/ REO seller and then on the comps it likewise are numerous unqualified sales. I always make comments in this area of the report as to type of transaction, i.e. REO/ bank owned prop. sale.

I completed a ERC assignment last month in an area that the REO market was the market as over 75% of the relevant comparable sales were either REO or "short sales" . I went into great detail in my narrative on the foreclosure rate and the trend of the monthly increases and the declining market rate. I received an email from the ERC consultant requesting that I exam 4 of the comparables that the other appraiser used. Subject was a non-pool home and other appraiser used the highest of 9 non-pool sales as one of the comps. It was a normal arms-length transaction. The other 3 comps were pool homes and of the 20 "relavant comparables" (pool homes) sales, the comps represented the 16th, the 19th, and the 20th highest pool sales. Again, all were sales from Mr. & Mrs. Smith to Mr. & Mrs. Jones, all qualified sales. According to the ERC consultant, the spread of 34% between my appraisal and the other was the highest she had ever seen as a 3rd appraisal was ordered. My reply was that since the REO sale has become the market and that there are not two different markets, the REO sale was weighted heavier since all the closed sales in the report and the three actives that were pending were all REO that the REO was the market based on the trend and the 120 day forecasting. I have not performed a follow up on the 3rd appraisal or if the subject has been listed yet.