Disposition Value Form

[George Hatch]

Lots of properties sell in as is condition with no contingencies or warranties beyond title. And what's considered "onerous" by the buyers can vary greatly by market segment.

In other words, whatever is "typical" for that market segment at that time, as opposed to the external benchmark you keep trying to fabricate.

 

[Meandering]

It's the warranties that are different with REOs.
No seller disclosure, and no warranty of age of roof, condition, and all those things found in owner occupied seller disclosures. Yes, risk to buyer is higher for REOs.

 

[Meandering]

It's the warranties that are different with REOs.
No seller disclosure, and no warranty of age of roof, condition, and all those things found in owner occupied seller disclosures. Yes, risk to buyer is higher for REOs.

 

[J Grant]

In my area, very few sellers provide warranties of any kind and most resale properties are sold "as is". Only new builder sales offer warranties which they charge a premium for being new.

Not all REO properties sell for less and when they do sell for less, the reasons can vary per individual per market area and property type. How much "less" they sell for than non REO might also determine where market value is...remember , market value is NOT identified as the highest probable price, it is identified as the most probable price.

When REO and non REO owned properties compete, who is paying market value....the buyer who paid more , or the buyer who paid less? ( assuming properties are equivalent in features, condition etc)

A lot of buyer behavior is motivated by perceived risk and reward, not actual risk and reward. Of course an RE property presenting greater actual risk ( poor conditioning, liens, title cloud ), should sell for less. The remainder, much of it is about perception. Which is how property flippers make money.. buy a house with no real issues, maybe in dated cndiiton and REO owned...paint it, clean it, change out appliances and put it back on the market and make $ . Pretty sweet for property flippers. The opposite is builder new houses,buyers perceived by buyers as low risk because newer and comes with a warranty. Meanwhile many new houses lose 10 % to 20% of price if resold within a few years....not sweet for these buyers ;they took on actual risk without realizing it, over paying for what they though was the safety of new and a warranty..

 

[residentialguy]

Lots of properties sell in as is condition with no contingencies or warranties beyond title. And what's considered "onerous" by the buyers can vary greatly by market segment.

In other words, whatever is "typical" for that market segment at that time, as opposed to the external benchmark you keep trying to fabricate.

Not saying that Liquidation Value is for REO only. It is the roundest hole to fit that round peg we have available. I agree with your first paragraph...the appraiser should equate sale terms and appropriate value definitions to identify and simulate relevant marketing scenarios.

As far as your living, breathing interpretation of MV, I'm afraid we're never going to see eye to eye on that. You need a bar in which to measure. To say that undue stimulus happens to be normal that day, week, month... therefore that is the bar for MV and if you don't have undue stimulus to sell, then you have to adjust the comp so it reflect high motivation and undue stimulus like the majority. That's just nuts, George. But that's an old debate of ours.

 

[residentialguy]

JG...you need to keep what they sell for out of this. That doesn't matter. If REOs sell for more than typical owner occupied non-distressed sales, than OP would still use REOs and his opion of LV would be higher than it would be for MV. It is what it is.

 

[George Hatch]

MV, DV, LV are all conceptual constructs that apply to properties of all types. As in, beyond the confines of SFR appraising for the GSEs or even real property interests in general. That's where the unstated assumptions you keep attempting to load into these definitions fall apart.

So yeah, it is "typical" relative to entirety of the market segment in which the subject competes, and not "typical" as defined in isolation to the market.

 

[residentialguy]

Let's keep it simple. They want to know what a REO will sell for. Use like properties with like conditions of sale and you'll find the answer.

 

[George Hatch]

And BTW, between us you have long advocated the "activist" version of appraising wherein the appraiser's role is to "protect" the equity position of America whereas I have advocated the constructionist version of objectively observe and report regardless of the ramifications. So the "living,breathing" tag you are attempting to pin on that doesn't fit it's typical usage.

As for simple, I agree that when their question is what their end is when they sell the property after foreclosing on it then that is what it is; but when their question is what's the MV of the property assuming the typical buyer and seller for that market (whomever the typical buyers and sellers are) then that doesn't include the extra foreclosure resale assumption.

 

[J Grant]

Let's keep it simple. They want to know what a REO will sell for. Use like properties with like conditions of sale and you'll find the answer.

They want to know what the subject property will sell for. Use properties with like conditions and features that compete and you'll find the answer. (comps may or may not be REO owned aka sales type.)

Unless you invent your own definition of value which says "subject as REO " , this definition with the word "subject as an REO" is stated in report as the definition of value you are using, the fact that subject is REO owned does not enter into valuing the property. That is true whether you use the prevailing MV, LV, or DV definition of value (what George was conveying)