Disposition Value Form

[J Grant]

That was for his particular assignment, you assume it for all assignments where subject is an REO ( based on your posts). Furthermore, his client ordered on the 1004 form which is for for an opinion of market value.

When he said he "talked with the bank", who did he talk to and did that person understand that a 1004 asks for a MV opinion (on top as purpose of appraisal). Perhaps his client wanted an opinion of market value AND another value of listing it tsell in 90 days. Who knows. I did not see assignment letter so have no idea.

The REO addendum asks a value opinion in X days ( could be 90 days if client specifies) , perhaps the person he spoke to at bank was referring to that.

 

[residentialguy]

You just can't see the forest for the trees, can you. If they want a REO addendum and you see that it is the bank's property, it is highly probable that they want to know what the market value is for the property under the current conditions of sale for them. We need to communicate with the lender and verify.

 

[residentialguy]

Perhaps his client wanted an opinion of market value AND another value of listing it tsell in 90 days. Who knows.

Ahhhh....now you're catching on. With the initial order, it's suspect. Communicate with them and verify what their intended use so that you can deliver a meaningful report - per USPAP instructions.

 

[George Hatch]

I am responsible for answering the questions they actually ask. I may attempt to provide additional info they didn't ask for if I can anticipate that it might be useful to them, but when push comes to shove I cannot assume the responsibility for answering the questions they fail to ask.

 

[Meandering]

Have a requested 1004 w/ REO addendum. Special instructions are "the client is ordering appraisal to help determine a list price"

REO's sell for much less in this neighborhood, about $40-$60K less. ~75% of properties sell within 90 days.

1004 form nor REO addendum suits this clients needs as they are not searching for market value but disposition value.

Did they ask you for disposition value? Or is that your assumption? REO'S do have market value if the seller (the bank) is typically motivated to sell it. Sometime back, in a year or so gone by, a poster from the banking industry stated that banks must sell REOs within 5 years. That should be plenty of time to achieve market value.

Example, in this same town but different neighborhood an REO was listed for $425K and sat for 150 days. Was in similar condition and size of other homes that sell for $415-$430K. Ended up selling for $359K. Asked realtor about initial pricing and final pricing, said "banks appraiser set the price" and sold much less because it's an REO.

Not true. Obviously the appraiser missed which properties were truly comparable to a typical buyer. If your market indicates that the additional risk of purchasing an REO requires a price discount, than that is what the market is (segregated/sub-market). It is within this submarket that you select comparables, determine value and exposure times.

Nowhere in the definition of market value does it single out only owner occupied properties as being able to achieve market value.

Because your market is segmented, you will need to explain it in your market conditions addenda.

Obviously the wrong product was ordered or wrong service was given.

So I don't do a disservice, what form do I use?

To service your client, first clarify the type of value they want. Explain that you don't opine list prices, you opine values. List prices are for sales people and are not printed in stone. Here, we see some listing contracts with sliding list prices based on number of buyer tours per week. If no one tours it in a week, they lower the price.

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[J Grant]

Good post, Marion!

 

[Mr Rex]

I have asked on more than one occasion, particularly when the order specifically excludes use of REO comps and was told that in some cases the lender wants "market value" when they are fully aware that the house will sell at "REO value". From what I was told its part of their accounting and write off ability, with the market value establishing the "basis" of the property value rather than the outstanding mortgage amount . The actual eventual REO sales price is then deducted from the "basis" rather than the outstanding mortgage amount. I am not an accountant and do not know all of the ends and outs of the process of writing off the losses, but at least I was given some feedback.

 

[Meandering]

Did they give a definition of REO Value? My appraisal dictionary was printed back when future value happened in the future instead of today.

 

[J Grant]

You just can't see the forest for the trees, can you. If they want a REO addendum and you see that it is the bank's property, it is highly probable that they want to know what the market value is for the property under the current conditions of sale for them. We need to communicate with the lender and verify.

I have done several hundred of these over the past years, how many have you done? I am aware that since there is an REO addendum and bank owns it, it will be sold as an REO owned property.

Tthey STILL want an opinion of market value if they order on a 1004 form and letter says it and that is what I provide. You have an issue using REO as comps on MV purpose appraisals , which is why you have to twist yourself into a pretzel using made up hybrid value definitions or insisting the client "really" wants a different value etc. Because that's the only way you can justify using an REO as a comp and not adjusting for it is my bet.

On the REO addendum if client has imposed marketing time of X days they will get a second opinion if market indicates it. OMV in 60-90 days exposure for example

I am well aware that these lenders tend to also get BOp's and CMA's from the listing agent who might suggest listing it at a different price than my OMV. Or the asset division might decide to list it, or sell it at a different price than my OMV. But I did my part and provided what they asked for. BTW looking at past performance I have a good track record of REO and short sale opinions I provided selling for close to the OMV many times for whatever that is worth

 

[Mr Rex]

REO value was my terminology. The local market has several segments dominated by REO sales and any property in average or less than average condition is in direct competition with REO sales. So "REO value". When I protested that the property would not sell at "market value" if listed as REO, then I got that explanation. They didn't want to know what it actually would sell for, but "market value" with all the implicit and explicit requirements of the pre-printed definition, including typical motivation, adequate exposure etc etc.