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REO appraisal - what type of value am I going for?

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graindart

Junior Member
Joined
Jan 20, 2002
Professional Status
Certified Residential Appraiser
State
Montana
I've been reading a bit about REO appraisals, so I have a question......a client orders an REO appraisal and wants it done on a 2055......they ask that you base value on normal marketing time.......what value and / or date am I suppose to be finding?

A normal 2055 appraisal would be done for Market Value on the date of the inspection. So for an REO, do I still state that and just attach an REO addendum stating what my educated guess on what it will sell for in a few months if put on the market now?

Hope my question's not too confusing, I'm kind of confused, so any help would be greatly appreciated.
 
Every company is different. Call them and have them clarify what they want. I don't think a 2055 is appropriate for an REO, but do what you want. I charge extra for REO properties. Most expect a 0-90 day marketing time value and typical marketing time value if the typical time is over 90 days. Plus, many want "as is" and "as repaired" values in both situations. Try to use other foreclosure sales or HUD home sales to guage the REO "as is" value. I usually use at least one foreclosure sale and then a typical "as repaired" home sale. Good Luck!
 
Good advice Tim. I am working on a repo right now. The clerks that order these things are most often poorly guided or should be flippin burgers. I never use a 2055 on a repo; but I rarely use a 2055 anyway. If your client is looking for a typical marketing period then you are finding market value. I definitely charge more, depending on the length of the "cost to cure" laundry list and its related mechanics working back in "as-repaired value" and market time discounting. I have a couple of clients that I additionally council to repair to sell "as-is".

Good Luck!
 
Sometimes they order a 2055 when they think someone is still in the home, or if they don't have possession or deed to it as yet. In that case, you do have to do the "usual" drive-by" and assume that everything is in "Average" condition - unless you can tell otherwise from the street. I would be REAL careful thinking that it might be empty - I thought that one time and as I approached the property, Mr. Dog met me half way. Usually the company ordering the appraisal knows whether or not anyone is in the home. The only 2055's I've done were occupied properties.

For one property I did several drive-bys and then a full when they vacated the property.
 
At the top of the Fannie Mae Form 2055 it states "THIS SUMMARY APPRAISAL REPORT IS INTENDED FOR USE BY THE LENDER/CLIENT FOR A MORTGAGE FINANCE TRANSACTION ONLY."

Is the REO for a mortgage finance transaction only? If not, you may be using the incorrect form. Of course, you may submit the report on toilet paper if you wish, but the use of the appropriate form would appear to better serve the clients needs, not necessarily their desires.

Use of the 1004 with appropriate addenda should cover all the clients needs adequately.
 
The ones to watch are the people who call asking how soon you can do an REO and when they find your time and cost acceptable, tell you they will fax an order right over.

When the order arrives, you find that for your normal fee they want itemized repairs with cost-to-cure, value "as is" and value "as repaired", estimated selling price in 120 days, 4 comps, 4 current offerings with detailed comments on comparison to subject, etc. What they want is a relocation appraisal for which most of us charge a heck of a lot more because it is a heck of a lot more work. And one must remember that all of these are "Add-ons" to the normal appraisal process, taking time to complete.

When anybody calls about REO, one of the first things I ask is for their conditions to be placed on the order. I then adjust my fee and my time line accordingly. I think the trick for them is to get you locked into a time and fee and then you are hesitant to back out of an order.
 
Typically REO appraisals need to know more about the condition, with an AS IS estimate and a Repaired estimate. We are trying to see what repairs are worth doing ourselves or if they should be left to an investor. Additionally we need to know what the active listings are to set the pricing.

If they are ordering a 2055 drive by it may not be forclosed yet
On a 2055 they may be more interested in the market activity of comps and listings. Is this an REO area with vacant homes and board ups or just the common foreclosure.

I my opinion you need to get inside to do a real REO report as the big changes in value happen when you open the front door.

Just call it like you see it. (dont make everything average)
 
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