Lis pendens

[Mike Ault]

And that's proper. Again, for the vast majority of the appraisals discussed on this forum, F/F regs/guidelines are the elephant in the room.

I still say that attempting to temper a value on a property subject to a LP is a fool's errand. Assumptions are in place to allow appraisers to complete a report. When the assumptions say 'subject to clear title', LP's, taxes, judgements, etc. have no effect on the value of the real estate. If your assumptions say the same thing and yet you try to come up with a value from rectal extraction, you are producing a misleading report.

So you have two properties, one with a 10 million lawsuit pending against it with the duration & outcome of the matter uncertain, and the other one free and clear. You're telling me that typically motivated and well informed buyers wouldn't differentiate between the two properties? And figuring out what discount typically motivated buyers would apply to such a property is "too hard" or would be a product of "rectal extraction"? I believe issuing an appraisal without discussing the matter at length would be the misleading one. Our certifications aren't "get out of jail free cards", they must be reasonably applied.

 

[DTB]

If I were advising a borrower on what to offer for a property like that, I certainly wouldn't advise them to pay retail price because I believe those almost invariably transact at a substantial discount due to the uncertainty and inconvenience involved.

That's a bit of a problem.

I have bought several w/ lis pendens and found it to be no big deal.

Short sales on the other hand, were often a major PIA

 

[Mike Ault]

Not at all the same. A short sale needs the approval of shorted lender before it can close. Technically a property can be sold with lis pendes, but who would want to purchase something they may lose in a lawsuit that they have nothing to do with. I sincerely doubt you could get financing with it. And not conventional.

Actually some of the shorted lenders are the ones in second position.

Mike, you need to read what I wrote. And Mark. Like a disco ball, there are several sides to this situation.

Well, for one thing, we are forming an opinion of value in terms of cash or its equivalent, not in terms of "financing probabilities" so the fact that lenders won't close on a property with a lawsuit against it doesn't really enter into the picture, does it? What would somebody with a fistful of cash offer for something "they may lose in a lawsuit that they have nothing to do with"? The same as the one next-door without the lawsuit pending? I would hate to argue that in court, no matter what the fine print in the certifications has to say about it.

 

[Sadie]

So you have two properties, one with a 10 million lawsuit pending against it with the duration & outcome of the matter uncertain, and the other one free and clear. You're telling me that typically motivated and well informed buyers wouldn't differentiate between the two properties? And figuring out what discount typically motivated buyers would apply to such a property is "too hard" or would be a product of "rectal extraction"? I believe issuing an appraisal without discussing the matter at length would be the misleading one. Our certifications aren't "get out of jail free cards", they must be reasonably applied.

Typically motivated buyer wouldn't come within a 3 mile radius of that property. Perhaps your client wants to know what the value would be if there were no stigma on it. You can certainly do that.

 

[DTB]

Isn't the assumption of clear and marketable title the issue?

One can address the legal issues w/o making $$ adjustment based on the assumption the property will transfer with clear title.

 

[Mike Ault]

Isn't the assumption of clear and marketable title the issue?

One can address the legal issues w/o making $$ adjustment based on the assumption the property will transfer with clear title.

Typically motivated buyer wouldn't come within a 3 mile radius of that property. Perhaps your client wants to know what the value would be if there were no stigma on it. You can certainly do that.

Yes we can. Quite often REO clients need to know what the property would be worth in a typical market value scenario instead of a stigmatized, repossessed scenario as well and we make the appropriate disclosures. What we don't do, however, is pretend that a repossessed property is worth the same as the owner occupied one next door without putting everyone on notice that "we don't really mean that".

 

[Sadie]

Yes we can. Quite often REO clients need to know what the property would be worth in a typical market value scenario instead of a stigmatized, repossessed scenario as well and we make the appropriate disclosures. What we don't do, however, is pretend that a repossessed property is worth the same as the owner occupied one next door without putting everyone on notice that "we don't really mean that".

Some REO and Short Sale clients want to know what the property would be worth w/o the stigma. They KNOW its an REO/Short Sale property, they want to know what the as is value is as if there were no foreclosure on it. The differential between the 2 for so they can adequately figure out P/L and forecasting. There is more to managing a mortgage portfolio than plain vanilla conventional mortgages.

 

[Terrel L. Shields]

1. The appraiser will not be responsible for matters of a legal nature that affect either the property being appraised or the title to it, except for information that he or she became aware of during the research involved in performing this appraisal. The appraiser assumes that the title is good and marketable and will not render any opinions about the title.​

 

[Mark K]

So you have two properties, one with a 10 million lawsuit pending against it with the duration & outcome of the matter uncertain, and the other one free and clear. You're telling me that typically motivated and well informed buyers wouldn't differentiate between the two properties? And figuring out what discount typically motivated buyers would apply to such a property is "too hard" or would be a product of "rectal extraction"? I believe issuing an appraisal without discussing the matter at length would be the misleading one. Our certifications aren't "get out of jail free cards", they must be reasonably applied.

I suppose there's two scenarios being discussed here. 1. F/F mortgage loan. The lender will not loan on the property with a LP and the title company will not issue insurance. So basically, its a non-issue. Its not a difficult concept to understand that the appraiser is appraising under the assumption of clear title. No adjustment to the value is warranted. It is reasonable in this instance.

2. You're asked by a client to come up with a value for a property with a $10M lawsuit against it. Unless you know when and how the case will be resolved, attempting to make a WAG re; the value is a waste of time. In reality, no potential buyer would make an offer for such a property. Its nonsense to think that the subject can be credibly appraised. I was involved with a property with a LP filed by the state for condemnation ( I was court appointed appraiser). 1 acre acquisition out of 70, approx. It took 9 years and a trip to the state Supreme Court and sent back for retrial before it was resolved. State vs. Bishop if you're interested. Anyone trying to appraise the property at the start of the case would have NO idea that it would take that long. And any other case can be the same. Its not "too hard", its not possible to try to render a credible valuation; a waste of time.

 

[ZZGAMAZZ]

I suppose there's two scenarios being discussed here. 1. F/F mortgage loan. The lender will not loan on the property with a LP and the title company will not issue insurance. So basically, its a non-issue. Its not a difficult concept to understand that the appraiser is appraising under the assumption of clear title. No adjustment to the value is warranted. It is reasonable in this instance.

2. You're asked by a client to come up with a value for a property with a $10M lawsuit against it. Unless you know when and how the case will be resolved, attempting to make a WAG re; the value is a waste of time. In reality, no potential buyer would make an offer for such a property. Its nonsense to think that the subject can be credibly appraised. I was involved with a property with a LP filed by the state for condemnation ( I was court appointed appraiser). 1 acre acquisition out of 70, approx. It took 9 years and a trip to the state Supreme Court and sent back for retrial before it was resolved. State vs. Bishop if you're interested. Anyone trying to appraise the property at the start of the case would have NO idea that it would take that long. And any other case can be the same. Its not "too hard", its not possible to try to render a credible valuation; a waste of time.

Does a typical MLS listing describe aliens? I think I will ask MLS compliance...