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Learning about the "quick sale" and "liquidation value"

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mpb5431

Freshman Member
Joined
Apr 3, 2007
Professional Status
Licensed Appraiser
State
Arizona
Okay, I've been looking through a lot of posts to try and learn more about this.

I am trying to work with a agent who doesn't know exactly what they want (SOW & definition of value) and I'm not experienced enough with this to guide the process.

I'm looking for educational resources to learn more about developing an appraisal for a quick sale/pre-forclosure/liquidation value type assignment?

The agent's goal:
-To speed up the process of a short sale with the bank.
-BPO is higher than any current offerings from the agents' clients.
-Agent would like to have an appraisal showing the value this bank should really expect (agents is assuming it will be different than the BPO)

Lot's of relevant issues have been brought up on previous posts; however as we all know...the threads tend to go off in all sorts of directions subverting my attention.

Some of the topics I'm interested in learning more about:

1) When to use "as-is" vs. subject to repairs, etc. (what factors are the clients considering to determine what they want?)

2) Typically these are drive-by "inspections", there must be concerns with that.

3) When researching the market conditions how do I clearly communicate the current market as far as foreclosures/pending foreclosures/current listings/conditions of sales, etc. Are there any "key characteristics to note" or "generally accepted statistics" helpful to the client?

4) I've never had an appraisal assignment asking for value bracketing, high/low/most likely (When/why/how does one approach this)

5) Information about marketing time as it relates to a quick sale. How does this impact the search for relevant comparable properties; or better yet how do you define what is relevant and what is not.

6) Is reflecting an anticipated selling price with less than 30 days marketing time the right way to think about this.

Summary:
I have not accepted any assignments of this nature yet for reasons of competence. I'm looking to improve my competence by finding objective sources of information on theses topics. Can you help?

Again, if I was more experienced with this I would be better able to help my client define what should be asked for. Ideally I would be able to assist in the development of a clear SOW and definition of value.

cheers,
MB
 

mpb5431

Freshman Member
Joined
Apr 3, 2007
Professional Status
Licensed Appraiser
State
Arizona
perhaps this should be under APPRAISAL EDUCATION
 

Dale Smalley

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Florida
Typical REO work - Find a mentor in you area that does lots of REO assignments or take a break and wait for the market to rebound.
 

mpb5431

Freshman Member
Joined
Apr 3, 2007
Professional Status
Licensed Appraiser
State
Arizona
Thanks,
Leaning towards taking a break, the resume is in full circulation.

Not doing much else now tho, so I'll look into it.
 

Mike Boyd

Elite Member
Joined
Jan 18, 2002
Professional Status
Retired Appraiser
State
California
perhaps this should be under APPRAISAL EDUCATION

I was thinking the same thing. Too many questions and an obvious lack of knowledge and experience. Where would a respondant start? Appraisal 101? Dale is correct: If you have several of these, find an experienced appraiser to partner with. One thing to note: If this is a drive-by report, you cannot be expected to note any needed repairs, the "as is" or "as repaired" values, or even the Quick sales....except in generalities.

Call one of the appraisal schools such as McKissock and ask when and if they will have any classes on REO work.
 

Elliott

Elite Member
Joined
Apr 23, 2002
Professional Status
Certified General Appraiser
State
Oregon
mbp,
That is certainly a confusing SOW, your being tugged all sorts of directions.
How about this, tell them your going to use the standard definition of
market value that's on the form. I frequently tell clients that standard
MV is about all I can do since that's what the market does and that's
what all the data I use tends to indicate. So you do a standard MV
estimate. Then you can address the other issues of 'short sale' or
those other things. But at least you have a foundation of MV.

Sometimes when people craft a MV definition or SOW, they are trying
to influence the appraisal in a direction to benefit them, and disadvantage
someone else.
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
First off I ditto Elliott on the pulled many directions - be careful not to take any bait... the world is full of trechary!
1) When to use "as-is" vs. subject to repairs, etc.
Answer depends on 'the market' and what is happening in terms of available properties (Principal of Substitution)... what is the present available supply and demand and how do they compare to your subject - are folks buying fixer uppers 'as-is' or are repairs going to be required to bring your subject to 'marketability' within its specific sub-market? These are needed on top of 'required' repairs... to bring to FHA/Fannie standards...

(what factors are the clients considering to determine what they want?)
eh? who care about the client? Ok more seriously - that part requires a lot of discussion or assumption. See the MV suggestion above AND clarify what option(s) the client is seeking to pursue beyond that point.

2) Typically these are drive-by "inspections", there must be concerns with that.
I would try to avoid such assignments as Drive-bys- if you do elect to take one on that basis - clarify your SOW and condtion your opinion carefully as to what ASSumptions you are making and caution that any alteration of any of the condition/assumptions on which the value opinion was made would void the opinion in its entirety! Did a lot of those for the IRS - no way around it - interior was not an opition! For a short sale I'd really push for the interior viewing.

3) When researching the market conditions how do I clearly communicate the current market as far as foreclosures/pending foreclosures/current listings/conditions of sales, etc.
Again SOW - define what you are appraising (subject quality and condition) then compare to its submarket- the properties with which it is most likely to compete!

Are there any "key characteristics to note" or "generally accepted statistics" helpful to the client?
depends on the market in which your subject fits - if there are lots of comparable properties within your defined neighborhood, best to show how the defined area is responding to any observed changes, such as overall marketability (time/DOM of comparable sales), perceived value increases decreases within the general area, within the specific style/size and etc!

4) I've never had an appraisal assignment asking for value bracketing, high/low/most likely (When/why/how does one approach this)
Value bracketing can be an excellent tool when there is insufficient data to form nice general data graphs or opinions, which are further supported by bracketing with specific comparable sales by size, condition, location, and whatever else are the most relevant features for the neighborhood... If you subject is at an extreme in any feature you may not be real comfortable with a pin-point answer. :shrug: Probable range is from $X to $Z and the most probable price is $Y... based on yada-yada reconciliation!

5) Information about marketing time as it relates to a quick sale. How does this impact the search for relevant comparable properties; or better yet how do you define what is relevant and what is not.
Again where does your subject fit into the current market and any developing trends you think you see! THAT is the kicker in a changing market! The only way I know to handle this one in a stable market is interviews of buyers sellers and agents... and then compare the anecdotes to data analysis. If you see a trend in reporting, AND it is supported by market data, you can probably publish with impunity! I generally start by sectioning off some sales by DOM, and see what the most recent list:sale ratio is doing... If your databases permit, I also like to see what original list/DOM does... If folks are repeatedly dropping the prices to achieve a sale... its telling you something. If the list:sale price ratios are low within a specific sub-market and specified DOM range it may indicate the breakpoints at which buyers are willing to pony up for immediate purchase!

6) Is reflecting an anticipated selling price with less than 30 days marketing time the right way to think about this.
Actually the proper way to consider this question is "What price would the property be negotiated at to SELL as of the effective date" It really is not a fully 'prospective value' it is TODAY's list value, to sell AT LIST within the next 90 days.

Mouthy and wordy those are starting points for consideration. Regular review of specific sub-markets, conditions of sales, and knowledge of the current Agent buzzwords to code for certain conditions (needs a little work, freshing up, minor repairs, Handy-man special-- means what in your area under current conditions)

What is the current absorption rate (historical) and the best guess for tomorrow based on pre-foreclosures, and FSBO signs in the yards?

And more than anything else start talking to agents about what they are seeing in the trenches - talk to several and get a feel for who has a clue about REAL current and trending market conditions in your area.

I used to do a lot or the FHA REO's in my area - and when I had my finger on that particular pulse I ran for over a full year of 99.9996% appraised value to actual sale price. In no individual quarter was I off more than 3% - and we have seasonal value swings!! (which I took into account in my guesstimates of value).

I would start with any HUD classes available within your region. There are more REO-geared CE classes available these days - frankly I'd try to find some classes which are NOT taught by any of the major organizations, but attended by a wider group of appraisers... I'd also seek out 'seasoned' appraisers who might assist in learning what to ask about and where to start your data analysis within specific value/size/quality ranges since REO's are coming in all across the board!... Quite seriously, finding a few highly knowledgeable agents is going to be of benefit. Chat over lunch. Go to the local board and ASK the secretaries who would be the best ones to start with!

Bon chance!
 
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