Bank Owned Comps.

[hglenbetts]

Last I checked, REOs are foreclosed or dead in lieu dwellings owned by a financial institution.

They can be marketed however the financial institution decides, lists are available to the public upon request. They are marketed with/without exposure to the public via MLS or auction. It is not unusual for REOs to be listed and sold via MLS locally.

Different strokes for different States...
Here in Michigan, once a property has been forclosed on, the property owner has up to a year (usually 6 months) to continue to occupy and redeem the property. During this time they still have an equitable interest in the property, and the bank can not sell it from under them.

So, here, the property would not be considered an REO until the defaulted owner's redemption period has expired, or they forefit that period through "keys for cash" or abandonment of the property.

 

[Howard Klahr]

For those that are interested, here is a link for another thread where this issue was disscussed.

Short Sale/Foreclosure is the market

 

[23Degrees]

My take on this has been similar to what has been expressed in this thread and the other recent thread. If REO sales marketed via MLS are prevalent or dominant they become an important part of the report. One can use judgment as to the extent of inclusion for this type of data.

What I ran into recently took me aback somewhat as I received an order with an assignment instruction that specified that no REO sales were to be used as comparables removing any judgment call from the appraiser who took the assignment. In some neighborhoods this would not have any effect but in the neighborhood of interest there is just no way you could put together a credible report without including REO data. A very significant number of sales similar to and proximate to the subject were REO sales marketed via MLS. I informed the client that if this assignment instruction was not removed from the engagement letter I would need to decline the assignment as this instruction and a credible report were mutually exclusive due to the reason cited above. They would not agree to the removal of this instruction. The appraisal was re-assigned.

The bank that had this condition in place was one of the largest sellers of loans to FNMA. While this was disappointing due to the lost work during a very slow time it was a bit more disturbing to me as a taxpayer getting ready to watch the GSEs get bailed out/nationalized or given some level of ample support from Uncle Sam.

Have any of you run across this recently? This seemed to be beyond the pale compared to other assignment "instructions" or conditions I have seen that often accompany engagement letters - or am I overreacting.

 

[Flygirl 152]

My take on this has been similar to what has been expressed in this thread and the other recent thread. If REO sales marketed via MLS are prevalent or dominant they become an important part of the report. One can use judgment as to the extent of inclusion for this type of data.

What I ran into recently took me aback somewhat as I received an order with an assignment instruction that specified that no REO sales were to be used as comparables removing any judgment call from the appraiser who took the assignment. In some neighborhoods this would not have any effect but in the neighborhood of interest there is just no way you could put together a credible report without including REO data. A very significant number of sales similar to and proximate to the subject were REO sales marketed via MLS. I informed the client that if this assignment instruction was not removed from the engagement letter I would need to decline the assignment as this instruction and a credible report were mutually exclusive due to the reason cited above. They would not agree to the removal of this instruction. The appraisal was re-assigned.

The bank that had this condition in place was one of the largest sellers of loans to FNMA. While this was disappointing due to the lost work during a very slow time it was a bit more disturbing to me as a taxpayer getting ready to watch the GSEs get bailed out/nationalized or given some level of ample support from Uncle Sam.

Have any of you run across this recently? This seemed to be beyond the pale compared to other assignment "instructions" or conditions I have seen that often accompany engagement letters - or am I overreacting.

From what I see here in Northern CA, I don't think you are overreacting at all. I would be very suspicious if someone asked me in a REO driven neighborhood to not use REO's! Quite frankly there are several neighborhood here that come to mind where you can't even find a typical sale, they are all REO's. If it's any consolation, I would done the same thing.

 

[jay trotta]

Smokin Bear.......ditto

Banks/Lenders that sell off Foreclosure product, are non typical sales influenced by
"Undue Pressure" / Stimulus to meet other than typical standards of Sale.

Review the "Market Value" portion of your booklets; these are "No Recourse" sales and not typical of a Market. Your Market Trends are being influenced by a "pressure market".

hygb.......I believe thats typical around the country, but I also believe the "Time Clork" begins ticking when you miss your 3rd pymnt. your 90 days in arears plus - and once Judgement is complete, your out. You can walk into Court with all your money @ the 11th hour and still redeem your property - but then again, ya may wanna peek at the market around you.

 

[23Degrees]

Thanks Deb

I find it hard to believe that the GSE's would look fondly upon knowing that these types of assignment conditions were being applied within loan packages that they buy. For the area in question it is a no-brainer that ignoring REO's would be hazardous, but shouldn't this be under the judgement of the appraiser in any area? Clearly following this guideline could heavily influence the results of the report or at the very least inhibit supplying any users with important information. They had no problem finding someone to take the assignment under these conditions.

This was a big bank known to be one of the biggest sellers of loans to FNMA. No one else has run into this? Is there any reasonable explanation as to why a bank would mandate that potentially very important comparable sales data be excluded?

 

[Mike Garrett RAA]

The market is...what the market is.

 

[23Degrees]

The market is what the market is. I tried to tell them that. They told me the market is what the market is without using REO sales as comparables - period.

For banks to put in unacceptable conditions that make it impossible to clearly report what the actual market is, and then use reports that are not credible from appraisers who cave to those conditions in order to get paid or get future assignments as part of the package to sell to Fannie is a disgrace.

I'm not sure what's more screwed up, the MB's that would not give me an assignment without supplying a "comp check" first, or a bank that won't give me the assignment because I fail to agree to an assignment condition that would result in a misleading report.

If Fannie is not ramping up their review process with credible analysis I guess this one will end up part of this bailout or the next one.

 

[Workshop]

I recently completed a report using one bank approved sale. I made a percentage adjustment for the discounted sale. My market is not showing foreclosure, distressed, bank owned, etc sales as a trend. I based my percentage on the comparable sales value vs. the more common sales trend for the area. I did not however have a lot of recent sales and this was the cause of relying on a discounted comp in the first place. I disclosed my method in the report and did the best I could in providing the client with the most fair and reasonable conclusion as possible. There's only so much you can do.