BPO and Appraisal

[J Grant]

I agree on the last one! And the OP could have used REO sales too but higher priced ones than on the BPO?

 

[DMZwerg]

From what I understand of this post, the lender asked for market value of an REO property, usually that means a 1004 with an REO addendum

Not necessarily.
Status of a property is irrelevant in an appraisal assignment using a 1004 unless the SOW specifically addresses that point. Since the 1004 clearly states in the Scope of Work "... including the following definition of market value ..." then three paragraphs down give the FIRREA Def of MV then THAT is the SOW the appraiser is under. The REO addendum is additional and needs to be requested in addition to the ordinary report.

As further proof that 1004 is NOT indicating limited exposure time the top value line on the REO Addendum (Form REO2) is:

"AS-IS" estimate of market value based on a reasonable market exposure time rendered in the attached appraisal report
​

Therefore if an REO addendum was not requested in SOW and was not done then the value should NOT be any sort of "REO value".

YOUR clients may be expecting an attached REO addendum, or it may be standard in your area, but if it is not in the SOW and it was not made clear before the SOW was agreed upon that it was to be required then the appraiser is correct in not developing it unless he feels it is necessary to produce a competent report.

I would say that it is common enough that I ask as soon as I realize the subject may be an REO so that SOW is clear between me and my clients, but that does not make it "usually" by a long shot. There are reasons to want both the FIRREA and other market values.

and then a BPO was done which came in lower, and the client asked the appraiser if they could change their value to "meet in the middle" with the BPO value...this request of the client is not appropriate, the client is now directing the value and telling the appraiser what value they want, which as you know we are not supposed to appraise to a predtermined value.

There I think we agree

 

[RSW]

[/B]

I am not sure what you mean by this...I suppose you mean the OP should verify with the lender what kind of value they are looking for. IF they tell the OP they want a value other than market value, then the OP better disclose that on the report. From what I understand of this post, the lender asked for market value of an REO property, usually that means a 1004 with an REO addendum, and then a BPO was done which came in lower, and the client asked the appraiser if they could change their value to "meet in the middle" with the BPO value...this request of the client is not appropriate, the client is now directing the value and telling the appraiser what value they want, which as you know we are not supposed to appraise to a predtermined value.

IF the OP reads the BPO and finds there were better comps used and wants to put new comps in and make a new value, that should be up to the appraiser, and not at the direction of the client.

I have often been handed BPO's to comment on, some are lower than my values and some higher. So what, that is their opinion of value, I made mine. I rarely if ever found the BPO value that differed substantially from mine was well supported, but that is my experience with them.

This is where I have to agree with Resguy. The SOW is not clearly defined. Even in your comment highlighted in red it is not clearly defined. You used the phrase "usually that means a 1004 with an REO addendum". I would say that on 99% of the REOs that I have done the lender has specificly asked for the REO addendum. I have contacted the lender to see if they wanted the REO addendum if it was not requested in the letter of engagement.

 

[J Grant]

This is where I have to agree with Resguy. The SOW is not clearly defined. Even in your comment highlighted in red it is not clearly defined. You used the phrase "usually that means a 1004 with an REO addendum". I would say that on 99% of the REOs that I have done the lender has specificly asked for the REO addendum. I have contacted the lender to see if they wanted the REO addendum if it was not requested in the letter of engagement.

How can you agree with Res Guy that the SOW was not clearly defined, when the poster never told us what the SOW was? The poster never told us if an REO addendum was ordered or not, we don't know. And if an REO addendum was not ordered, and the client asked for a report on the usual 1004 form, then the SOW was for MV. A MV SOW does not mean REO comps can't be used, and it also does not mean we "have to adjust" for a difference between an REO and non REO sale...that is up to the market data and appraiser's opinion of whether or not to apply such an adjustment.

In my area, 100% of the time the lender asks for an REO addendum. I wrote USUALLY, because I don't know if this is true for the posters reading . So next time I'll write my experience and not allow for others, they can chime in it it's diferent. In any event, the OP never confirmed whether or not it was ordered. In reports where the REO addendum is asked for , the SOW on the 1004 is the same , asking for an OMV. In the past 3 months, lenders have requesting at least one REO sale be included in the sold comps on report.

 

[RSW]

I would say that a lot of lenders/clients don't know what they want or need when ordering an appraisal. The only form they are familiar with ith the 1004 URAR and they think that is what is supposed to be used. They don't realize that there are other forms that should be used when ordering a REO appraisal. The GP form would be a good start. We cannot assume that the lender/client wants MV just because they ordered a 1004 URAR. You know what happens when you assume something don't you?

 

[J Grant]

I would say that a lot of lenders/clients don't know what they want or need when ordering an appraisal. The only form they are familiar with ith the 1004 URAR and they think that is what is supposed to be used. They don't realize that there are other forms that should be used when ordering a REO appraisal. The GP form would be a good start. We cannot assume that the lender/client wants MV just because they ordered a 1004 URAR. You know what happens when you assume something don't you?

???
It is not about us ASSUMING what a lender wants, it is about us giving an opinion of value consistent with what the stated purpose of the appraisal is, as written on the form, ( or that an appraiser writes if it is a narrative). On a 1004 form, the stated purpose of the apprasial is to provide an opinion of market value.

If you want to call client after they order an appraisal on a 1004 form, and confirm that they want an OMV, please go ahead and do so. However, the form states that the purpose of appraisal is to provide an opinion of market value, then you have to provide an opinion of market value, otherwise you have produced a misleading report. IF the lender tells you they want a different kind of market value, either you need to change forms or state clearly in the report what kind of value opinion you are giving. The attachment of an REO addendum and second opinion of value on the addendum, does not change the fact that the opinion of value on the 1004 form is market value, if the purpose of the appraisal is so stated (which it is on 104 form)

If I choose to use REO's as comps I am still providing an opinion of market value if that is what the purpose of the appraisal states and that is what I sign that I have provided. The comps you use does not change the purpose of the appraisal .

 

[J Grant]

I would say that a lot of lenders/clients don't know what they want or need when ordering an appraisal. The only form they are familiar with ith the 1004 URAR and they think that is what is supposed to be used. They don't realize that there are other forms that should be used when ordering a REO appraisal.

I disagree, lenders are very familiar with report requirements and value types. The specific forms and type of values ordered are decided by bank policy and following federal regs as well as from input by the chief appraiser at the bank...individual loan officers don't get to "decide" what kind of value they want. These lenders know it is market value when they assign on a 1004 form, and if they want an REO addendum attached, they know why they want that as well.

I think the confusion is among appraisers, they think that providing an opinion of market value means using the highest price non REO sales as a bench mark....this has been argued many times on the board, so won't repeat it here...:mellow:

 

[residentialguy]

Do you guys live in LALA land??? It is not about us ASSUMING what a lender wants, it is about us giving an opinion of value consistent with what is on the form ( or what we write as the purpose of appraisal if it is a narrative).

The problem is that the lender doesn't like the discrepancy between the BPO and the appraisal. All I am doing is figuring out the possible scenarios of why so that OP is prepared to go to the lender and talk about them. One of those possible scenarios is that the lender wants to know what they (the lender) would most likely sell the property for and doesn't realize that by ordering an appraisal on the 1004, that value will probably be higher, due to the condition of the sale having a different market reaction. You just want to fight this with your "If they order the 1004 - this is the value ordered!". We understand this...the lender may not though. Find out, because there is a problem. If this happens to you, feel free to stand on your pedestal and watch your lender go away thinking you're an idiot.

 

[Mike Kennedy]

Therefore if an REO addendum was not requested in SOW and was not done then the value should NOT be any sort of "REO value".

YOUR clients may be expecting an attached REO addendum, or it may be standard in your area, but if it is not in the SOW and it was not made clear before the SOW was agreed upon that it was to be required then the appraiser is correct in not developing it unless he feels it is necessary to produce a competent report.

I would say that it is common enough that I ask as soon as I realize the subject may be an REO so that SOW is clear between me and my clients, but that does not make it "usually" by a long shot. There are reasons to want both the FIRREA and other market values.

Exactly correct. Communication and crystalizing Intended Use and applicable Def. of Value with a client, in writing, is essential.

 

[RSW]

I would say that a lot of lenders/clients don't know what they want or need when ordering an appraisal. The only form they are familiar with ith the 1004 URAR and they think that is what is supposed to be used. They don't realize that there are other forms that should be used when ordering a REO appraisal.

I disagree, lenders are very familiar with report requirements and value types. The specific forms and type of values ordered are decided by bank policy and following federal regs as well as from input by the chief appraiser at the bank...individual loan officers don't get to "decide" what kind of value they want. These lenders know it is market value when they assign on a 1004 form, and if they want an REO addendum attached, they know why they want that as well.

I think the confusion is among appraisers, they think that providing an opinion of market value means using the highest price non REO sales as a bench mark....this has been argued many times on the board, so won't repeat it here...:mellow:

I guess we have to agree to disagree. Because, I don't believe they know what they want or need. They way want one thing but they need something else. IMO I don't believe that the 1004 URAR should be used for an REO appraisal per the intended use stated in the form itself.