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Definition: Market Value REO

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Deuce of Spades

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Nov 7, 2005
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Certified Residential Appraiser
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Florida
We all have text book definition of what Market Value is under normal guidelines and a normal market. What do you use for the definition of market value for an REO?
 

Richard Carlsen

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Jan 15, 2002
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Licensed Appraiser
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Michigan
You use the definition of Market Value contained in the assignment from the client.

If you are doing a "standard" REO that is or was assigned to FNMA, the definition of Market Value is the FNMA definition, the same as in any other appraisal done for FNMA. This is an "as is" definition as set forth in the FNMA reporting forms.

The difference in an REO appraisal is that the appraiser must make judgments based on the HC that the property is repaired and that the market time is specified. In other words, the appraiser must estimate how the present market will react to a property in order to have for example 120 day market time or a 90 day market time. The definition of Market Value remains the same. In an REO, the appraiser just comes up with estimated values based on different scenarios (repaired/not repaired or 30 days/90 days/120 days or whatever) for the sale defined in the definition of Market Value.

The definition of Market Value does not change in an REO appraisal. The only thing that changes is the HC made on the subject and the use of a specified marketing time.
 

Kevin Keck

Junior Member
Joined
Jun 2, 2006
Professional Status
Certified Residential Appraiser
State
Ohio
I didn't think the definition of market value changed based on ownership of the property. Maybe you really want to know what value definition we use when we value a property with client restricted marketing time.
 

Kali the Boston Terrier

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Joined
Jul 7, 2003
Professional Status
Certified General Appraiser
State
Michigan
REOs are not valued under market value for FNMA, they are valued under a term called disposition value. Which is dictated by FNMA or your client. This changed in the last conference call with FNMA in November.
 

DWiley

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Apr 4, 2007
Professional Status
Certified Residential Appraiser
State
Tennessee
In some REO assignments the client is seeking something other than a standard Market Value (e.g. liquidation value, "quick-sale" value, etc.). As with any asisgnment, the appraiser should determine and apply the applicable definition. This should be done based on communication with the client.

The new AI REO seminar has a section dealing specifically with this issue.
 

leelansford

Elite Member
Joined
Mar 29, 2002
Professional Status
Certified Residential Appraiser
State
Illinois
We all have text book definition of what Market Value is under normal guidelines and a normal market. What do you use for the definition of market value for an REO?

If the client is an institutional lender and is requesting an opinion of Market Value to be communicated (in part) using one of Fannie's forms, I believe the expectation is to use Fannie definition of MV.
 

Richard Carlsen

Elite Member
Joined
Jan 15, 2002
Professional Status
Licensed Appraiser
State
Michigan
REOs are not valued under market value for FNMA, they are valued under a term called disposition value. Which is dictated by FNMA or your client. This changed in the last conference call with FNMA in November.


If FNMA has made this change, it has not filtered down to the appraisers as yet because my REO addendum, most often specified by the client, specifies an "as is" Market Value (as defined in the 1004 reporting form).
 

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Kali the Boston Terrier

Senior Member
Joined
Jul 7, 2003
Professional Status
Certified General Appraiser
State
Michigan
FNMA has filtered it to their appraisers,we had a long conference call with them a couple of months ago. I've got several lengthy packages emailed and our last meeting they gave us new guidelines.
 

Richard Carlsen

Elite Member
Joined
Jan 15, 2002
Professional Status
Licensed Appraiser
State
Michigan
we had a long conference call with them a couple of months ago. I've got several lengthy packages emailed and our last meeting they gave us new guidelines.


Sorry but conference calls, emailed packages and meeting with a few appraisers does not, in my opinion, constitute notification nor dissemination to the appraisal community.

Like so many other things we've dealt with in the past with FNMA, a few say this and a few say that while the report user is left out in the dark and ultimately the cold.

You make changes to appraisal requirements by publicizing them, by changing the required reporting forms and in todays market place, having a specific web site where an appraiser can go to get the latest, definitive word on rules and regulations. FNMA's web site is the worst of the bad sites out there.
 

Riick

Elite Member
Joined
Aug 14, 2007
Professional Status
Certified Residential Appraiser
State
Delaware
From Fannie

Brian..... FNMA may have had a conference call changing definitions and/or requirements.
HOWEVER... No one told ME, or, apparently, the section of FNMA that orders REO appraisals. m2:

Below is the relevant portion of a FNMA request for a REO I got the other day:

Your report should adhere to the following NPDC Supplemental Requirements:

INTERIOR & EXTERIOR REPORTS TO INCLUDE:
  • Subject's as-is value, as-repaired value, and repair estimate clearly stated on Repair Addendum.
  • Values should reflect the typical marketing time of subject's market. Specific values are required, a range is unacceptable.
  • Minimum of (3) comparable sales and (3) competitive listings to be included on the adjustment grids. Foreclosure sales should be utilized only when they are a significant part of the market.
  • Use data to support the as-is and as-repaired values. Include at least one as-repaired comp to support your as-repaired value.
  • Note if sale and listing comps are REO in market grid
  • On the Repair Addendum - A list of itemized costs of repairs to bring property to average marketable condition (Not applicable for exterior appraisals.) Lump-sum estimates are unacceptable. Please exclude remodel and renovation costs. Assume as-is condition to be clean and secure. Do not include such items as cleaning or inspection fees, debris removal, landscaping, extermination costs, or costs to secure. Report only the probability of the existence of any hidden or unapparent condition, and recommend an inspection. Do not estimate the cost to repair a condition you assume to exist. (Ex. Mechanicals, well, and septic). Repair addendum must be included in the report regardless of whether repairs are needed or not. If no repairs are needed, simply state so on the Repair Addendum.
  • Interior follow-up appraisal must reflect recent sale and listing data
  • Include photos of subject, sales, and listings.
  • Minimum of 3 interior photos to evidence condition. Include more photos if needed to show damage (Not applicable for exterior appraisals)
  • Days On Market for sales and listing comps should be reflected in the market grid
  • Subject's sketch with exterior dimensions (interior for condos) and square footage calculations with room placement (Not applicable for exterior appraisals)
  • One or more location map(s) situating the Subject, the Sales, and the Listings
  • Flood maps if available
  • Comparable's distance and direction from the subject
  • Cost Approach is not required, however, include site value Only
  • Subdivision names in location section of grid if applicable
 
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