Distressed Properties were used for all comps!

[Lawrence R.]

So, can 2 people restate the positions here? Am I on the right path here?

1. REO's are the market if there are enough( by percentage?) of them, and should be used, unadjusted as the best indicator of the market?

2. REOs never reflect a market value and should can be used, but must be adjusted for their non-market based pricing?

I got a little lost. a couple of TLDR comments, too.

Remember folks, brevity is the soul of wit.

BTW, I have an opinion on this, just not trying to reveal it through these questions...just getting clarity on others' positions.

 

[DMZwerg]

What some consider undue stimulus, others consider typical motivation.

In the definition of Market Value we have the #1 absolute first thing to consider and that is that the buyer and seller are "typically motivated". What does that mean?
<quote>
I think Lobos is correct that REO sales, when they make up a large portion of the locationally, physically and functionally most similar sales, set the barometer for what "typically motivates" a seller in a given market area.

The problem with the thought that an appraiser can "massage" Undue Stimulus to equate to Typically Motivated based solely on the opinion of the appraiser and the temporary current market is that it ignores the fact that there exists more than one definition of "Value". The FIRREA Definition of Market Value is NOT the only definition of market value let alone value. If some appraisers are deciding that if some type of motivation should equate to "typical motivated" solely because it is the most common in their particular market in some limited time frame then they are in reality stating that there is no difference between (fair) Market Value, Disposition Value and/or Liquidation Value as the three are primarily different based on the motivation of the seller ("typically motivated", "under compulsion", and "extreme compulsion" respectively). The definition of a distressed sale, per The Dictionary of Real Estate Appraisal, 4th Ed (p.86) is "A sale involving a seller acting under duress. see also disposition value,; forced sale; liquidation value.

As far as I can tell most proponents of using distressed sales as comps, without analysis, adjustment nor comment, when reporting an appraisal on a FNMA form are most typically ignorant of the fact that other definitions of value exist and believe that the FIRREA definition presented on the FNMA form is a "one definition to rule them all" kind of thing and appropriate for all residential appraising.

So, can 2 people restate the positions here? Am I on the right path here?
<snip>
2. REOs never reflect a market value and should can be used, but must be adjusted for their non-market based pricing?

For an argument for 2 see the earlier statements in my post.