Guidance On How To Appraise

[J Grant]

I agree with you.

I agree with me. The lending industry is set up to take 1004's only for 5 different values.

Appraisers such as @J Grant give them 5 different values on the 1004 fully knowing the value she gave was not the value they wanted.

She appraised as if Bill owned the property. The bank wants as if they own the property. These homes sell at 2 different probable prices.

She doesn't care what they want. She cares what she wants.

Problem. USPAP implies the client and appraiser are on the same page.

J Grant says no. USPAP is incorrect. What they ordered is what they get. What they want is if no concern.

You were correct all along turning down these assignments, you are incompetent to do them, as evidenced by the statements that are clueless. (for a while seemed like you were trying to understand)

It's not about what I want, or you want, or what you think the bank "wants". If the appraisal states "purpose" market value, and the opinion of value is stated as " market value", and the definition uses is "market value" then appraiser provides an opinion of market value. The appraiser is being misleading, if they provide a "different value" , then the value definition used.

If you want to declare the hundreds of thousands of appraisals for REO owned properties done over the years on a 1004 form as "wrong"...okay. I give them "5 different values?? Are you referring to the REO addendum, which asks for as repaired value and a second set of values with a specified marketing time?. Are all the appraisals done with an REO addendum over the years wrong too? I say no, USPAP is incorrect?? So many clueless statements on the above post.

 

[residentialguy]

If you want to declare the hundreds of thousands of appraisals for REO owned properties done over the years on a 1004 form as "wrong"...okay

Yes, a majority are wrong and a majority are sitting on the market over priced because of it.

Please stop this ! An REO owned property can sell for MVO, below MV, or even over MV, depending on the property and market. If the property is sold under distress sale terms, with severely exposure time or limited advertising, that would be client ordering it with a different value definition.

No, I won't stop as REO's are almost always sell below market value. Rarely do they match it and only a dumbass would pay more than market value for a distressed sale. And yes, they are under distress to sell. It's just sucking money from them every day they own that house that they never wanted to own.

 

[Terrel L. Shields]

It's just sucking money from them

For a bank it also sucks down their reserves because the liability is 100%. And it is "non-performing" whereas sold, that money can generate returns, and only 10% is necessary to hold as reserves.

 

[jay trotta]

But in this case. There would be no difference in ownership. It is for pfs not REO. Here is part of the HUD section referred to from a 2008 mortgagee letter and the actual reg. Does not read like they are looking for an REO value. (My bold)

Key Features of the PFS Program

Establishing Market Value –Mortgagees are reminded to ensure that properties in the PFS program are sold at or near fair market value as established by an independent appraisal, prepared by an appraiser on the FHA Appraisal Roster.

• Minimum List Price Requirements – Properties offered for sale under the PFS program are to be listed for sale at no less than the “as-is” appraised value as determined by a current FHA appraisal, obtained and reviewed by the mortgagee.

Here is the actual reg.

§ 203.370 Pre-foreclosure sales.
(a)General. HUD will pay FHA insurance benefits to mortgagees in cases where, in accordance with all regulations and procedures applicable to pre-foreclosure sales, the mortgaged property is sold by the mortgagor, after default and prior to foreclosure, at its current fair market value (less adjustments as the Commissioner may deem appropriate) but for less than the mortgage loan amount currently outstanding.

(b)Notification of mortgagor. The mortgagee shall give notice, according to prescribed procedures, of the opportunity to be considered for the pre-foreclosure sale procedure to each mortgagor in default. All notices to mortgagors must be in an accessible format, if requested, or if required by the person's known disability, as required by 24 CFR part 9.

(c)Eligibility for the Pre-foreclosure Sale Procedure. In order to be considered for the pre-foreclosure sale procedure, a mortgagor:

(1) Must be an owner occupant in a single family residence that is security for a mortgage insured under this part, unless otherwise prescribed by the Secretary.

(2) Must have an account in default, for such period as determined by the Secretary, which default is the result of an adverse and unavoidable financial situation.

(3) Must have, at the time application is made to pursue a pre-foreclosure sale, a mortgaged property whose current fair market value, compared to the amount needed to discharge the mortgage, meets the criterion established by the Secretary, unless a variance is granted by the Secretary.

(4) Must have received an appropriate disclosure, as prescribed by the Secretary

Dublin, good find and apparently the 1004 would appear to be the proper format under the circumstances, as defined, as HUD / FHA reference "Sold by the mortgagor, after default and prior to foreclosure, at it's current fair market value (less adjustments as the Commissioner may deem appropriate) but for less than the mortgage amount currently outstanding.

Haven't done these in a while and believe I inquired about this at one point, and this should be made part of the "Scope of Work" when Service Engagement Letter is drafted to the appraiser as further Clarification of what is being requested.

 

[J Grant]

Yes, a majority are wrong and a majority are sitting on the market over priced because of it.

No, I won't stop as REO's are almost always sell below market value. Rarely do they match it and only a dumbass would pay more than market value for a distressed sale. And yes, they are under distress to sell. It's just sucking money from them every day they own that house that they never wanted to own.

In my are, REO's tend to sell quickly and tend to be priced well. They may be priced by a listing agent, just because a lender gets a market value appraisal for one, does not mean that is the list price that will be set on it. Regardless of a banks' motives, if the assignment is market value opinion, that is the opinion asked. An individual owner can be as under as much duress or more when selling.

 

[J Grant]

Regardless the PRICE, REO's are not arm's length transactions by definition. The seller is motivated to sell and isn't a typically motivated participant in the transaction.

There is some truth to that, and part of the problem is we all are being incorrect when we talk about proprties seling for market value, or above or below market value. Properties sell for the prices they get. As an appraiser we offer an opinion of market value. When we look at prices , it is more correct to say properties sell within prevailing range of other similar properties, or higher, or lower than prevailing prices, rather than talk about the "value" they sell for.

As far as typically motivated, if many sellers are banks and/or have similar motivations, then they ARE typically motivated. The MV definition only says typically motivated, it does not specify who the participants are ...they can be individual owner sellers and buyers, banks as sellers, investors as buyers etc. If a banks' motives was atypical, then the next question is, was the price affected ? Buyers make up the market too, and if an REO gets bid up by buyers, it can sell for a higher price no matter the motivation of the seller,

In any event, as an appraiser, our opinion of market value, when using the MV defiion and MV is the purpose of the assignment, is at the terms of sale and using the presumed sale buyer and seller in the MV definition, no matter who the "real" named buyer and seller is or what their individual motivations are.

That is why an appraiser's MV opinon can differ from a price arrived at by individuals/entities. The appraiser needs to explain the difference when a price and a market value opinion differ. It's easy to explain why: The MV definition is a transaction at X,Y,Z specified terms and conditions. The real world buyer and seller transact at X,Y,A terms/conditions. A is the differential, and A could be attributed to an atypical motivation, a not well informed party, , not reasonable market exposure, concessions or financing affecting price etc.

 

[residentialguy]

In my are, REO's tend to sell quickly and tend to be priced well. They may be priced by a listing agent, just because a lender gets a market value appraisal for one, does not mean that is the list price that will be set on it. Regardless of a banks' motives, if the assignment is market value opinion, that is the opinion asked. An individual owner can be as under as much duress or more when selling.

Stay focused. The ones that are priced determined by an appraisal for Market Value are not price correctly.

The appraiser is required under USPAP to communicate with the client to make sure that we are solving the correct problem. Appraisers are to required to identify the problem to be solved and the SOW necessary for credible results WHICH IS MEASURED IN THE CONTEXT OF THE INTENDED USE. If information discovered during the course that would led the appraiser to question the assignment would need a different type of value to be credible for the intended use, then the appraiser is required to clear that up with the client, otherwise he or she would be violating USPAP requirements and State Law, in most states.

 

[J Grant]

so fine, clear it up with the client, but they already told you what they want you just don'' want to believe it.

 

[Terrel L. Shields]

if many sellers are banks and/or have similar motivations, then they ARE typically motivated.

Untruth...they have an atypical motivation. They are not end users. They are not intended owners.

 

[J Grant]

Untruth...they have an atypical motivation. They are not end users. They are not intended owners.

Where in USPAP or the MV definition does it define or identify, or exclude, who, or which participants are typically motivated in a given market cycle? Typical is measured by the behavior and motivations other market participants, be they buyers or sellers of similar properties to the subject.