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REO Addendum - market value with client imposed exposure of 30 days?

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Appraisal Santa Fe

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Sophomore Member
Joined
Mar 27, 2008
Professional Status
Certified Residential Appraiser
State
New Mexico
Any help is much appreciated.
How do I determine an estimate of value given a client imposed restricted market exposure time of 30 or 60 days when typical market time is over 90 days in the subject's area?
I have very limited information as sales in the area are quite slow. Only 3 comps in the last year under 60 days on and one was brand new. No REO's in the MLS in the area.

I'm stumped.:huh:

Thanks for the help!!

RC
 
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Mztk1

Senior Member
Joined
Dec 3, 2006
Professional Status
Certified Residential Appraiser
State
Florida
Don't know what do to without having the sales data but normally I find comps that sold within the required exposure time, use two like that, and then sales that are typical market time, and use two like that. If there's a difference that is my market reaction for quick sale. Trouble is, here at least, if the house took longer to sell the market was decreasing and there is rarely a difference in price compared to the ones that sold in 30 days.
 

Riick

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Aug 14, 2007
Professional Status
Certified Residential Appraiser
State
Delaware
If/When there IS no data.. you have to use your best professional judgement.
This is the reason they pay you the Big Bucks, no?

So, just HOW cheap do you have to make it, to sell in 30 days or less?
--- 10% under the market?
---------5%?
---------------20%?

BTW-- when will it get to market?
((If they fool around, and take 3 months.. market could have fallen significantly further... or maybe there will be a miracle, and the market will rise!))
 

DWiley

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Apr 4, 2007
Professional Status
Certified Residential Appraiser
State
Tennessee
One might attack this problem by studying sales in other locations. If one can find sales that sold in 30 to 60 days one can then compare the prices to to other sales of similar properties that sold in the "normal" time frame. From that data one could extract a discount percentage to apply.
 

Metamorphic

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Mar 15, 2008
Professional Status
Certified Residential Appraiser
State
California
It seems like if you've got plenty of supply but no demand, your 30 day pricing will have to be such that the sale creates its own demand. To me that says its priced such that savvy investors and/or non-savvy 1st time buyers will appreciate the obvious value of the property and be willing to move fast before the competition moves in.

To attract the 1st time buyers you simply need to be the best buy in the market by some amount that it makes that pricing strategy obvious to that market.

To make sure you're attractive to investors, I'd make sure the price you end up at would make the property reasonably profitable as a rental from day one, based on market rents and typical overheads.
 

Riick

Elite Member
Joined
Aug 14, 2007
Professional Status
Certified Residential Appraiser
State
Delaware
I'd make sure the price you end up at would make the property reasonably profitable as a rental from day one, based on market rents and typical overheads.
Yes.. Except that instead of "reasonably profitable", substitute "profitable".
"Investors" (alternatively read Speculators) are looking for excellent profits.

The fellow who taught me the basics, used to say that if you weren't stealing it, you don't buy it; there's always another one.

In current marketplace, at least around here, investors sure aren't buying for a 5% return.
You need to talk to some in your area, and learn what they're looking for; .....then knock it down a little for puffery.
(Return: Net, cash-on-cash -> After ALL expenses, -vs- total cash including closing costs, and any projected repairs/upgrades)
.
 

Metamorphic

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Joined
Mar 15, 2008
Professional Status
Certified Residential Appraiser
State
California
Yes.. Except that instead of "reasonably profitable", substitute "profitable".
"Investors" (alternatively read Speculators) are looking for excellent profits.

The fellow who taught me the basics, used to say that if you weren't stealing it, you don't buy it; there's always another one.

In current marketplace, at least around here, investors sure aren't buying for a 5% return.
You need to talk to some in your area, and learn what they're looking for; .....then knock it down a little for puffery.
(Return: Net, cash-on-cash -> After ALL expenses, -vs- total cash including closing costs, and any projected repairs/upgrades)
.

I guess it depends on where you are. From what I've been told, until the last couple years, Ca. investors have been giddy if they can buy into a break even property. I'm sure that's become more favorable in the last couple years but I haven't talked to anyone directly about it.
 

DWiley

Elite Member
Joined
Apr 4, 2007
Professional Status
Certified Residential Appraiser
State
Tennessee
In the AI's REO seminar one of the points of emphasis is identifying the market segment that the subject would appeal to. This is often a function of the condition of the home, but can also be a function of general market conditions.

IF the typical buyer of the subject is an investor, one must be careful to reflect the return that a typical investor would require. On the other hand, one should not not assume an investor buyer just because the subject is an REO property.

It all depends on the data found in the subject's market.
 

David Dietz

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Joined
Oct 30, 2006
Professional Status
Certified Residential Appraiser
State
Florida
When sales data and listing data is not an option try polling a few agents as to how much they feel they would have to discount a property in order to sell it within 30 days. The best would be to find agents who deal largely in Relocation and REO listings. Make sure to keep there name, company name and contact info in your work file and you may even want to report it in your work file as to how and who was contacted to verified this information. Again sales data is better but this should help in lue of the data.
 

Damien12

Freshman Member
Joined
Sep 22, 2007
Professional Status
Appraiser Trainee
State
Virginia
Any help is much appreciated.
How do I determine an estimate of value given a client imposed restricted market exposure time of 30 or 60 days when typical market time is over 90 days in the subject's area?
I have very limited information as sales in the area are quite slow. Only 3 comps in the last year under 60 days on and one was brand new. No REO's in the MLS in the area.

I'm stumped.:huh:

Thanks for the help!!

RC
I belive even for REO reports all you need are current listings! as for the
30-60 day thing.. you will have to state that average time is 90 days or whatever it is and let them deal with it!
 
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