BPO and Appraisal

[Sharon Dossett]

It is supposed to mean that, but it doesn't necessarily mean they know that. Did you ask?

Yes the client knows the difference. They just do not want to pay for the REO addendum to be added I think. So their way of getting around this is to request a comment to be included for a 30 day sale.

 

[residentialguy]

Whether they want the 30 day value written on a REO addendum or on a napkin, the results are the same and so are the fees for that separate appraisal assignment.

 

[J Grant]

Sharon, so if I understand this correctly, the subject is bank owned, the client is the lender?? And they asked for 1004 form with no REO addendum, then the client asked for a BPO, the BPO came in lower, they asked you to lower your value to meet in the middle of the BPO, and now they are asking for a sep 30 day value? I am not sure of when they asked for a 30 day value, before or after the BPO came in?

If you feel your OMV is well supported, don't change it, in this case I'd give them a 30 day value on an addendum, whether or not to ask for a fee is up to you, I would probably do it as a freebie to get rid of the assignment. But next time this client asks you for an appraisal for an REO property, tell them you feel to properly complete the assignment you need to do either an REO addendum or sep addendum with a reduced marketing time value, and charge an additional fee...if they won't assign it under conditions where you can properly do the report then I would decline future work from them.

Imo, and I am not sure what the heck these banks do with these reports, but I suspect they ,want the OMV on the 1004, and then a 30 day value (usually lower), on the addendum....so that they can see the difference. Maybe they use the difference (let's say it is 15k) for some kind of accounting loss purposes, and/or for decision making, how much less do they want to accept for the property if they get an offer below 30 days. Maybe some banks decide they don't want to accept less and try to market it for longer. I really don't know what they do once they have our reports.

 

[residentialguy]

I have a feeling that they have some appraisers doing these appraisals on the bank's REO properties that figure: a lender owns it, therefore you choose all lender owned comps to come up with value - in other words, how much would that property sell for if the bank were to put it on the market. Now OP comes in and actually appraises it correctly to MV as defined on the 1004 (a sale where buyer/seller are typically motivated, there is NO undue stimulus, adequate market exposure, etc...ie traditional sale) and they're having a hissy fit because there is a value difference. Maybe their pet agent's butt is on the line because of it.

I have the same questions as JP Grant has....what exactly are they using this for?

 

[J Grant]

I have a feeling that they have some appraisers doing these appraisals on the bank's REO properties that figure: a lender owns it, therefore you choose all lender owned comps to come up with value - in other words, how much would that property sell for if the bank were to put it on the market. Now OP comes in and actually appraises it correctly to MV as defined on the 1004 (a sale where buyer/seller are typically motivated, there is NO undue stimulus, adequate market exposure, etc...ie traditional sale) and they're having a hissy fit because there is a value difference. Maybe their pet agent's butt is on the line because of it.

I have the same questions as JP Grant has....what exactly are they using this for?

ResGuy, I agree with your post, except that where you talk about valuing it "correctly", where you infer that using only traditional sales, or adjusting REO's up to traditional sales is THE correct approach to MV... imo an appraiser can use REO sales or a mix of REO sales and still arrive at MV...but we have differed on this before...when I do a 1004 for an REO, I do not automatically just stick in all REO comps. I have done the 1004 on an REO where I included no REO comps, when the market indicates that. However, often REO comps are the best comps on these properties, at least in my market.

Very recently, I have seen lenders ask specifically for at least one REO comp to be used in the 1004. I suppose if nothing else, they want to see what they are selling for in case an appraiser chooses not to use them.

I agree with you in that if they want an appraiser to come in "lower" on the 1004 form, they should just state that, and then we can ammend the purpose of the report, in writing on the appraisal, so it is clear. They have made things difficult for appraisers and created confusion as we see by the posts.

 

[J Grant]

I have a feeling that they have some appraisers doing these appraisals on the bank's REO properties that figure: a lender owns it, therefore you choose all lender owned comps to come up with value - in other words, how much would that property sell for if the bank were to put it on the market. Now OP comes in and actually appraises it correctly to MV as defined on the 1004 (a sale where buyer/seller are typically motivated, there is NO undue stimulus, adequate market exposure, etc...ie traditional sale) and they're having a hissy fit because there is a value difference. Maybe their pet agent's butt is on the line because of it.

I have the same questions as JP Grant has....what exactly are they using this for?

I agree with you that automatically sticking in all lender owned comps is not correct either...as bad as autmatically excluding them. If all REO's are the best comps use them, if not, not, even on a lender owned property when they are asking for MV.

Whatever the lenders use our apprasials for, and for all I know they throw them in the trash and rely on the BPO...whatever they use them for, we have to appraise to the purpose of the report as stated and then any other stated value on the addendum.

 

[J Grant]

By the way, maybe nobody is intersted but for clarification, I use same method of comp selection on a 1004 MV report for an REO owned property as a non REO owned property. If an REO comp is appropriate, I use it, if not, then it is not used.

The latest trend of lenders asking specifically for at least one REO sale is kind of troubling, even for me who does use them at times in reports due to market conditions here. I have one lender now who states a preference for REO comps when they are appropriate on their bank owned properties. That can start to become problematical...imo...??

 

[DMZwerg]

Yes the client knows the difference. They just do not want to pay for the REO addendum to be added I think. So their way of getting around this is to request a comment to be included for a 30 day sale.

Whether they want the 30 day value written on a REO addendum or on a napkin, the results are the same and so are the fees for that separate appraisal assignment.

I have to go with ResGuy ... this is a new assignment.

When it comes to reported value ... (from H. R. 4173— pages 812-813)

‘‘(b) APPRAISAL INDEPENDENCE.—For purposes of subsection (a), acts or practices that violate appraisal independence shall include—
‘‘(1) any appraisal of a property offered as security for repayment of the consumer credit transaction that is conducted in connection with such transaction in which a person with an interest in the underlying transaction compensates, coerces, extorts, colludes, instructs, induces, bribes, or intimidates a person, appraisal management company, firm, or other entity conducting or involved in an appraisal, or attempts, to compensate, coerce, extort, collude, instruct, induce, bribe, or intimidate such a person, for the purpose of causing the appraised value assigned, under the appraisal, to the property to be based on any factor other than the independent judgment of the appraiser;
‘‘(2) mischaracterizing, or suborning any mischaracterization of, the appraised value of the property securing the extension of the credit;
‘‘(3) seeking to influence an appraiser or otherwise to encourage a targeted value in order to facilitate the making or pricing of the transaction; and
‘‘(4) withholding or threatening to withhold timely payment for an appraisal report or for appraisal services rendered when the appraisal report or services are provided for in accordance with the contract between the parties.
‘‘(c) EXCEPTIONS.—The requirements of subsection (b) shall not be construed as prohibiting a mortgage lender, mortgage broker, mortgage banker, real estate broker, appraisal management company, employee of an appraisal management company, consumer, or any other person with an interest in a real estate transaction from asking an appraiser to undertake 1 or more of the following:

‘‘(1) Consider additional, appropriate property information, including the consideration of additional comparable properties to make or support an appraisal.
‘‘(2) Provide further detail, substantiation, or explanation for the appraiser’s value conclusion.
‘‘(3) Correct errors in the appraisal report.
​

In the first case they were asking you to review another's work (review appraisal) and reconcile the two (either another appraisal or a violation of Dodd-Frank above).
In the revised request they are asking for another appraisal for free.

Working for free is never profitable. (I don't consider donating time to a charity as the same as working for free as you may be able to write the latter off on your taxes)

 

[residentialguy]

By the way, maybe nobody is intersted but for clarification, I use same method of comp selection on a 1004 MV report for an REO owned property as a non REO owned property.

Same method Zillow uses :icon_mrgreen:

 

[DMZwerg]

If all REO's are the best comps use them, if not, not, even on a lender owned property when they are asking for MV.

Time to get out the chalk and write on the blackboard 100 times "REOs are not comps (under FIRREA), they are proxies at best!"

Even if they are the ONLY sales in the market and have been for the last 5 years STILL does not make them comparables under the FIRREA definition.

Further, Fannie stating they can be INCLUDED does not change the definition. If you are able to write your own definition (non-lending) or where different definitions are implied (REO addendum) THEN they could be comparables in those instances just like non-REOs could suddenly become NOT comparable (aka, proxies only).