Lis pendens

[ZZGAMAZZ]

Does the appraiser make a distinction between real property--subject or comparables; active, under contract, or sold--that is/was a short sale--with or without a NOD?

 

[sputnam]

We appraise RIGHTS in real property. Key distinction.

Technically accurate.... and very nit picky. You knew what was being said.

If you know there is a lien or lis pendens on a property you are appraising, then you report that it exists. Usually your assignment is to develop market value. The definition of market value include 'clear title'.

 

[Overimprovement]

Technically accurate.... and very nit picky. You knew what was being said.

If you know there is a lien or lis pendens on a property you are appraising, then you report that it exists. Usually your assignment is to develop market value. The definition of market value include 'clear title'.

I was trying to bridge the gap in understanding for those who didn't think a lis pendens mattered to market value.

 

[sputnam]

I was trying to bridge the gap in understanding for those who didn't think a lis pendens mattered to market value.

It doesn't.... since part of the definition of market value is 'clear title'

 

[Overimprovement]

It doesn't.... since part of the definition of market value is 'clear title'

I've known many not pursue a home with a lis pendens on it. Eventual clear title or not. But to each their own.

 

[Mike Ault]

I've known many not pursue a home with a lis pendens on it. Eventual clear title or not. But to each their own.

Most people would come to the conclusion that they suffer from a value diminution similar to the one suffered by "short sales" back in the day… Buyers simply didn't want to wait around for the title to get cleared up before they could close, and the ones that did expected a substantial discount.

 

[sputnam]

I've known many not pursue a home with a lis pendens on it. Eventual clear title or not. But to each their own.

Of course. The most common assignment is to develop and report an opinion of the current market value of the property... AS DEFINED. Market value assumes clear title, reasonable exposure, etc. Definitions matter.

 

[Mike Ault]

Of course. The most common assignment is to develop and report an opinion of the current market value of the property... AS DEFINED. Market value assumes clear title, reasonable exposure, etc. Definitions matter.

Stigma matters as well. When the market recognizes a value diminution due to matters of a legal nature, the appraisal should reflect it. I simply do too many relocation, REO and private assignments where people really want to know what the property is worth on the open market at the time they ordered the appraisal to accept the fact that lenders don't care about things like that. "Caveat away" though.

 

[Mark K]

Stigma matters as well. When the market recognizes a value diminution due to matters of a legal nature, the appraisal should reflect it. I simply do too many relocation, REO and private assignments where people really want to know what the property is worth on the open market at the time they ordered the appraisal to accept the fact that lenders don't care about things like that. "Caveat away" though.

The vast majority of appraisals are based on the assumption of clear title. Period. No effect on MV. In my experience as a broker, when this situation occurs, the offer is written basically that "The property will have clear title within 30 days to facilitate an insured closing or else this offer is null and void and the earnest money will be returned to the buyer", something to that effect.

An appraiser would need quite an extensive comps file that reflects the diminution in value due to various LPs where the subject's court case has the same issues and the same chronology as the subject. Otherwise you're doing little more than guessing when and how the LP will be cleared. Every lawsuit is different and trying to speculate on the effect on value is essentially a waste of time, and IMO, would produce a report that lacks credibility. Unless of course, you include an assumption that the case will be cleared up within ___ months/years, effectively the same as assuming clear title.

 

[Mike Ault]

The vast majority of appraisals are based on the assumption of clear title. Period. No effect on MV. In my experience as a broker, when this situation occurs, the offer is written basically that "The property will have clear title within 30 days to facilitate an insured closing or else this offer is null and void and the earnest money will be returned to the buyer", something to that effect.

An appraiser would need quite an extensive comps file that reflects the diminution in value due to various LPs where the subject's court case has the same issues and the same chronology as the subject. Otherwise you're doing little more than guessing when and how the LP will be cleared. Every lawsuit is different and trying to speculate on the effect on value is essentially a waste of time, and IMO, would produce a report that lacks credibility. Unless of course, you include an assumption that the case will be cleared up within ___ months/years, effectively the same as assuming clear title.

Trying to "prove" how much value diminution there was associated with short sales was difficult as well. It got worse as publicity spread, tales of people waiting four months or longer to close made those properties almost the stigmatized as black mold did. We had some here that were selling below REO values for the same floor plan in the same neighborhood because buyers's for them simply didn't want to wait. I never used one of those as comparables because they almost always closed substantially below market value. Now, if you had to appraise one of those for a private party, would you tell your client that they should offer as much for it as one that didn't suffer from that legal matter? I contend that the most probable price that property would bring is considerably below its unstigmatized "market value", and I would have the data to back it up.