Bill would let appraisers 'round up' home values

[J Grant]

That still does not meet the tests made under the fannie mae "market value" definition. And as Diana Orlick reported only this week, on average, the REO sells for 35% LESS than market value and that applies in every region of the country although in some regions it was as low as 15%....it is still REO = BELO MV

Two problems at work...how do we not know that the REO's are selling at MV and the non REO's are selling 35% above MV? Just because news reporters report something, they are reporting it from their view point. That aside , which is a question each market has to answer, these huge generalizations of value differences for various regions of the country are much more narrow when we focus on the subject and what sales are competitive to the subject.

For example, we might be appraising a 2000 sf house built in 1990 in good condition, and most of the sales are non REO so it is no problem, even though half a mile away, there are REO's built in 1950 in poor condition. It doesn't matter if they are selling for 35% less, we are not going to use them as comps. If our subject is built in 1950 and in poor condition we will use them as comps. If the comps for our 1950 subject are a mix of REO and non REO, chances are the price diff between them is much narrower then the huge regional 35% differences he newscasters reoport, which comes from lumping all kinds of disparate property types, with the only thing they have in common being REO's, vs a bunch of othe disparate property types that are non REO's.

 

[PropertyEconomics]

Two problems at work...how do we not know that the REO's are selling at MV and the non REO's are selling 35% above MV? Just because news reporters report something, they are reporting it from their view point. That aside , which is a question each market has to answer, these huge generalizations of value differences for various regions of the country are much more narrow when we focus on the subject and what sales are competitive to the subject.

JGrant .. that is your job as an appraiser. I have consistently stated that the analysis must be done to see IF an adjustment for conditions of sale are warranted.

Im amazed that appraisers seem to find this concept so foreign ... its what you are suppose to be doing every single day you appraise. Conditions of sale include more than just simply concessions. Everyone understands they adjust for concessions (even if they dont understand the correct way to adjust for them) they get that concept. This is no different ... it is a condition of sale and adjustments, IF warranted should be made based upon market evidence.

 

[SANDY]

Property has excellent point as some reos may or may not have conditions of sale adjustments that may be warranted. I think that Mentor was saying the same thing except he failed to point out that not all reos have title or condition problems so they do not automatically rise to the "stigma" level. We have done many reos that were in better condition than so called market sales and there were no conditions of sale problems either. In my opinion describing all reos as stigmitized is way too strong of a term and a broad based generalism.
Also we are to assume as part of the mv definition-knowledgable buyers and sellers.

Finally what a shock to have Rex kind of sort of(dare I say it) on my side. Mr. Hatch the voice of reason as always!

 

[JSmith43]

Mentor was saying the same thing except he failed to point out that not all reos have title or condition problems so they do not automatically rise to the "stigma" level.

That is a misstatement or a major comprehension malfunction on your part.

I said that REOs need to be checked for market reaction to physical differences and other differences. Fannie Mae chose to use the word, stigma, to stand for other differences. Sometimes I use the word, stigma, referencing the Fannie Mae guideline. Examples of conditions of sale differences that are present in virtually all REO transactions were described (Limited Warranty Deed & "as is"/null disclosure). The market data may or may not be sufficient to determine a market reaction. I posted the Fannie Mae and Freddie Mac guidelines with respect to using REO comps.

Sandy, you are softening your position. That's nice. But you should probably wait at least a couple weeks before misrepresenting what I said

 

[SANDY]

Nah not softening my position I just realize that you won't ever admit that your original statements were misleading. It's ok if you want to call conditions of sale and condition adjustments(when and if they are warranted) stigmas. There have been enough counter points in this thread to thwart your efforts to label reos as stigmatized. Appraisers will as always have to base their opinions on their knowledge of their own markets and not any one individuals' interpretation of fannie. You interpret fannie your way but you will not influence those that think for themselves. I understand your agenda but just know you can peddle it to some but not all.

It's all about the commission baby! Sales people make me laugh.

 

[Terrel L. Shields]

i think mentor and i agree that REO is NEVER going to meet MV definition EVEN in those rare instances where the sale PRICE is much the same as it would be in an arm's length transaction...because I firmly believe that NO REO is "arm's length" by its very definition. Banks never intend to be in the RE business, obtained the property unwillingly, and dispose of it with the utmost haste they can while not losing sight of their fiducial duty to exercise "due dilgence" in the sale to avoid stockholder lawsuits and FDIC scrutiny.

Again.. when the nationwide trend is for the REO to be well below market, then I cast a wary eye towards an isolated sale or two in a distressed subdivision and declare that a MV transaction on the basis of proximity alone.

 

[George Hatch]

That is a misstatement or a major comprehension malfunction on your part.

I said that REOs need to be checked for market reaction to physical differences and other differences. Fannie Mae chose to use the word, stigma, to stand for other differences. Sometimes I use the word, stigma, referencing the Fannie Mae guideline. Examples of conditions of sale differences that are present in virtually all REO transactions were described (Limited Warranty Deed & "as is"/null disclosure). The market data may or may not be sufficient to determine a market reaction. I posted the Fannie Mae and Freddie Mac guidelines with respect to using REO comps.

Sandy, you are softening your position. That's nice. But you should probably wait at least a couple weeks before misrepresenting what I said

... ALL SALES need to be checked for market reaction to physical differences and other differences.

Fixed it for 'ya.

 

[Kali the Boston Terrier]

Statement we used to say a lot in my economics program...

"Good economics is bad politics, good politics is bad economics". Somethings change, but many things remain the same.

 

[SANDY]

Differences in condition and conditions of sale are not stigmas. Appraisers always need to be careful about following along with others' interpretation of official policies especially interpretations with a specific purpose/slant to them that are designed to support the interpreter's purpose.

 

[J Grant]

I wonder if Fannie used the word "Stigma" in response to appraisers writing in asking about the "Stigma" of REO's, since the advisory by Fannie seems to be in response to questions to clarify their position...their response is basically to reiterate the standards by which all comps are analyized and adjusted for.