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Manufactured REO's

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Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
I'm seeing a LOT of REO wobbley boxes lately. 4 new listings in MLS, Freddie just had a REO auction a couple of weeks ago, and on and on......

Looked at one yesterday, listed at $41K, that I thought would make a good investment. Pulled the foreclosure deed to see that they had bid it in a little over $56K. Went out to look at it, and it is a DOG. I wouldn't give 'em $35,000 for it. Ouch, that one's gonna hurt. And with GA's new preditory lending laws, that listing is going to sit for a while. Is any one financing these things now?? It's getting to be very interesting in my parts.
 

yvonne dill

Sophomore Member
Joined
Jan 21, 2003
Fella-You've got no idea just how interesting it is. I don't do GA; our CA branch does them, I have no idea who finances them, but I can tell ya, your neighbor to the north NC, has a ton of REO mfg homes. They're worth about $30K-$36K all day long. Doesn't matter if they're 1-3 yrs old and 2000 SF. $30-$36K. Same in OK. Here's the interesting part. There are sales of owner occupied mfg homes in both states that sell for $50K, $60K, up to $100K depending on lot sizes and amenities. The minute you say REO. Boom! The bottom falls out of the value. Now, if I could just get appraisers to understand the impact STIGMA has on value, I might get some good REO appraisals on mfg housing. Heck-I wish I could get the corporate office in CA to understand the impact STIGMA has on value. They don't want to hear it.
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
Yvonne:

I understand stigma when I trip over it... Sometimes I am not looking and whoops there it IS!

I cannot make the users of my reports with the possible exception of HUD understand stigma...

Have you any suggestions as to how to narratively document the findings other than a pretty graph with non REO and REO sales in tight clusters that would get the point across?

:oops: for those not infrequent cases where the 'best' 3 sales are/are not REO, but an adjustment is warrented?
 

Bill_FL

Senior Member
Joined
Aug 23, 2002
Professional Status
Certified General Appraiser
State
Florida
Yvonne,

In another thread, I thought what you might be referring to is stigma. THis is the problem from the appraiser's side.

On most appraisal orders for REO's that I have received, it says in big bold letters, DO NOT USE OTHER REO SALES AS COMPARABLES.

Ok, then how do I prove stigma. I quit doing REO's that have that qualifier. When you attempt to adjust for it, without using the REO sales, the underwriter would have a cow.

I do not think of this as a "stigma" as that means to me something is wrong with or something bad has happened in the property. What does happen, is the typical REO buyer automatically thinks if they can not get it at 30-50% of market value from foreclosure, then they wont buy it. The fault is not a stigma, but the lenders taking ridicoulsy low offers on the properties they have foreclosed on.
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
Bill:

If in a town setting where new modulars are atypical, a top line one on cement foundation in fairly pristine condition remains on the market for 340 days... because the lender listed it for 20K more than I appraised it for... what's it worth? (

What it finally sold for: at 5K less than I appraised?
Which is what it actually sold for after a protracted marketing period...
Because they (DUH) overlisted in the first place :x

or more or less what I thought as of the effective date?
(the fact tha the interior was strongly PINK may have affected the buyer perception... :roll: )

who knows :roll: ...
 

Caterina Platt

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
New Mexico
Ahh! Bill, it's the entreprenurial profit, external depreciation, condition, functional depreciation, site clean up..... all of these contribute to that 'stigma' of the REO.

Drives me nuts. FNMA wanted me to quit making an adjustment for entreprenurial profit (sweat equity) and site clean up. Like the problem was gonna go away if the appraiser didn't use that line item. :roll: My response in a nicely worded, professional letter to my rep at FNMA got me squat. In fact, when I went out on my own and tried to market to FNMA for biz, I got the 'we have plenty of appraisers in your area' response. Ok, you have people who are going to pander and lie. Fine. Have at it.

The buyer sees REO or abandoned property in so-so shape and what do they do? They expect a distress sale discount. Period. On most, it's warranted. Gotta reflect it somehow. I think what hacks me off the most is that we are in essence being asked to come in with a higher than market supported appraisal by leaving out critical influences. Ummm. Hmmm. Does stock price/mortgage pool rates have anything to do with this???? Fix your own problems folks. Don't leave it on the backs of your REO appraisers who you then turn around and grade for market accuracy after the sale of the dump. If ya don't wanna know the truth, don't ask an appraiser.
 

Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
On most appraisal orders for REO's that I have received, it says in big bold letters, DO NOT USE OTHER REO SALES AS COMPARABLES.
I'd have to turn that request down........because REO's ARE THE MARKET NOW. Yeeehaw, we're havin' fun, and the lenders love me. :p

FNMA wanted me to quit making an adjustment for entreprenurial profit (sweat equity) and site clean up.
Caterina, reverse number hit it...... puff it down with the condition and effective age adjustment. :wink: :lol:
 

Tim The Enchanter

Elite Member
Joined
Jan 24, 2002
Professional Status
Certified Residential Appraiser
State
California
Quote:
FNMA wanted me to quit making an adjustment for entreprenurial profit (sweat equity) and site clean up.

Caterina, reverse number hit it...... puff it down with the condition and effective age adjustment.

Exactly, it'as the same thing. Sweat equity, fair to poor condition.... 8)
 

Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
Lee, I agree......your on the right path. If they will not allow for entreprenurial profit to be considered, I don't see any other choice but to hit it hard for condition. I guess they just want the adjustments to be quantative rather than qualative. But it's definitely reasonable for the buyer to expect entreprenurial profit for messing with a foreclosure. Bought 1 last month for $52,000 at a Freddie auction, it was on the market for almost a year at $78.

Oopps, that's another one the appraiser miss the number on. 8) :lol:
 

yvonne dill

Sophomore Member
Joined
Jan 21, 2003
If you guys think you're confused about entrepreneurial profit. You need to be at my desk. My immediate supervisor is 20+ yrs degreed SRA. He WANTS to see entrepreneurial profit in a REO appraisal. My asset managers and appraisal co-ordinator, DO NOT want to see E.P.

Just my opinion, but if you identify a property as an investor probable property, then how do you not recognized E.P.? My reviews constantly tell the corporate idiots that an investor will only buy a property if he CAN MAKE MONEY. Must be priced with E.P. in mind.

I have to get very elementary with asset managers. Would you pay $50K for a house that needs $20K in repairs when you knew that when you sold it you could only get your $70K back?
 
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