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foreclosure article in my local paper

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DianaOKC

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Oklahoma
Ms Berry is a big timer hear for REOs. She gets them for all over the state and has many agents in her office along with her that do the BPOs. I don't know who HUD is using for the appraisals she sees but I know mine pretty much right on. She and I have had many conversations about houses and the market. She is pretty dim on the future but this is all she does all the time. http://newsok.com/foreclosure-appearances-can-be-deceiving/article/3284423 and this http://newsok.com/property-seizures-increase-43-percent-in-second-quarter/article/3284425
 

Marcia Langley

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That puts appraisers in a bad light.

I wonder to what she would attribute the gap between appraised price and sales price?

I can think of a dozen reasons right off the bat, some of which might reflect badly on this agent and some of which have to do with the lender's marketing decisions.

But if we as appraisers want to contemplate the possible appraiser issues, one might be to consider whether client's demands should be blindly followed or stood up to. I'm thinking of the common client's demand that other foreclosures not be used as comps.

Appraisers have to know when to stand up to a client and insist that foreclosures are the market in many cases.
 

RSW

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I think that the writer needs to read the definition of market value in the URAR. I do a lot of REO appraisals and most of my clients want to know what the market value is with no stigma attached. If we appraisers use the market value definition in the URAR then we have to appraise it with no stigma attached. We should take into consideration the condition of the dwelling and make the approperate adjustments accordingly. The REO addendum is where the stigma may be reflected when you look at the marketing time of 90-120 days or less.

I would think that most agents doing BPO's don't have a clue as to what market value is.
 

leelansford

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...REO appraisals and most of my clients want to know what the market value is with no stigma attached...



I don't know much about "stigma", but I do know that under present market conditions and in neighborhoods where I regularly appraise, dwellings in less than perfect condition and setting vacant do generally sell for fewer $$ than owner-occupied (if not Short Sale) properties.
 

Metamorphic

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California
Appraisers have to know when to stand up to a client and insist that foreclosures are the market in many cases.

Exactly my thought. My rule of thumb recently has been 20% for the gap between REO and Normal pricing, which is pretty close to the 24% gap the article documents.

Seems like maybe we should be talking about how/when to incorporate REOs into the appraisal.

The situation where there's pretty much all REOs or little/no REOs is pretty cut and dried. But what about when there's some? Is the effect on REOs in the market linear? Should we be including REOs in the comp grid in proportion to their occurrence in the market (25% REOs = 1 out of 4 comps are reos, 50% REOs = 2 out of 4 comps are REOs, etc), or is there some level of progresive'ness to the effect of REOs on the market (if there's 25% REOs should you be looking for 2 or 3 out of 4 REO comps)? Is it more important to look at the rate of REO Listings or Sales to evaluate their effect on market value?
 

RSW

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Tennessee
I don't know much about "stigma", but I do know that under present market conditions and in neighborhoods where I regularly appraise, dwellings in less than perfect condition and setting vacant do generally sell for fewer $$ than owner-occupied (if not Short Sale) properties.

I understand what you are saying. But, they may be setting vacant and generally sell for fewer $$ due to their condition. You can provide an appraisal using the definition of market value in the URAR based upon its current condition. It makes sence that ower-occupied homes would sell for more than a property in less than perfect condition since they would typically be in better condition.

If you ever try and do a HUD REO appraisal and adjust for market reaction due to the property being a foreclosure, they will send it back to you. That adjustment should be factored into the condition adjustments some how.
 

DianaOKC

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Oklahoma
In the one article where they mention the 2 different houses. The beat up one is in a high REO market and the other is not. Of course the difference for a REO sale in a high REO market is going to be much different than a regular appraisal price. I suspect that many times the realtor isn't getting the REO addendum part of the appraisal where it has the 90 price but rather just the regular price which can be quite a bit different in a high REO market. I had a realtor call me the other day for advice on a REO condo here after she had received a copy of the appraisal, she didn't get the REO addendum or didn't understand it. Can make a big difference. The story is supposed to be continued next week and I wrote to the author and invited him to our forum.
 

Marcia Langley

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Missouri
Diana,

I'd almost bet you that the agent in the story was using the highest value in the appraisal even if she did have and understand the REO addendum.

You know, "damn lies and statistics..."

Another statistic missing from the report was the gap between the BPOs and the sales prices. That might be an interesting statistic except for the fact that she would be reporting on her own work which could call into question her impartiality.

One also wonders how impartial her reporting of appraisers' work is as well.

But we could go on all day about the source. There is some truth in that some appraisers aren't as competent as they should be a rapidly declining market.
 

Walter Kirk

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Jun 24, 2003
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New Jersey
Many years ago HUD administered it's REO's and used appraisers from it's fee panel, who were among the best in the area and who were paid full fee. There weren't many appraisal problems.

Today HUD uses contractors to administer their REO's and the contractors use low bid appraisers. The results of this are reflected in the article.
 

Ariba

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Feb 8, 2004
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Certified Residential Appraiser
State
Colorado
Exactly my thought. My rule of thumb recently has been 20% for the gap between REO and Normal pricing, which is pretty close to the 24% gap the article documents.

Using your rule of thumb should I now add 20% for the REO property and normal pricing to get an opinion of market value? :icon_question:


In many REO markets there is no "normal pricing". In these market areas you could not find a closed sale from an owner or owner occupied property. Much less finding a closed sale within 3 months of the effective date of the appraisal. REO properties in these market area are the USPAP definition market value.
 
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