REO Appraisal

[Tom4value]

Some appraisers mistakenly think they need to find "REO comps" for a subject that is REO-owned (or in pre-foreclosure)

That is not true - though sometimes REO sales are the best comps, orther times, they are not. An REO appraisal usually asks for a market value opinion - though it can also ask for a second market value opinion with a restricted listing /DOM exposure - the client should have it on the engagement letter what they want, or ask. Or have an experienced local appraiser help with the assignment

Technically, you are not wrong (about needing an REO comp) but like other issues where appraisers think that you “have” to do something, you do it because that is what your peers do. Most but not all clients want a market value and a “liquidation” value. I have seen old school appraisers say, “Hey Mac? Whaddya give for a discount for liquidation value?”. Of course, good appraisers would use an REO comp to extract an adjustment for the REO, since buyers rarely pay full market value for an REO. Best if you use several (doesn’t have to be comparable to the subject if you comp it out to the REO property) to derive a percentage adjustment as opposed to a dollar adjustment.

 

[sputnam]

Most of those requirements should be clearly stated in the engagement letter. Some REO assignments require an as is and as repaired value. Some only want one active listing, some want 3. Some want the REO addendum, some do not. Some want the 2010 version of the REO addendum which asks more details on the active listings. Some want the repairs itemized and not a lump sum. I prefer using the REO addendum since the preprinted verbiage adds an element of protection. ie, not a contractor, etc. The client should tell you what they require.

Should be... but often aren't. My approach is, if it's not in the Letter of Engagement... then, I didn't agree to do it. Doesn't mean I won't... but if you ask me to go back and do it.. there may be an additional fee... at my discretion.

 

[Tom D]

FHA REO value definition is different from a conv REO value. Why, i know not. Maybe some better brains here can clarify why.

 

[J Grant]

FHA REO value definition is different from a conv REO value. Why, i know not. Maybe some better brains here can clarify why.

? Where is the statement for that?
I have not found a definition of "REO value".
Its market value - if there is a limitation of market exposure that might affect the value. Some REO assignments require a second value opinion with a sale under 60 days, for example. That can be often be found on a REO addendum.

 

[Tom D]

Ehhh grant, glad you could remember the FHA market definition thingy name for REO use. As much of FHA that i did, it was only a few FHA REO that i saw that definition needed.
It was a specific FHA definition of how FHA defined market value different than what we normally use. I know somebody here knows it, have seen it here. Blah, blah, blah who cares anyway, the order should tell you. Never Mind.

 

[Sadie]

My main REO client wants as is non REO comps. But some want REO comps if available. It depends is the answer.

 

[J Grant]

My main REO client wants as is non REO comps. But some want REO comps if available. It depends is the answer.

? Since when does the client tell us what comps to use?

 

[Sadie]

? Since when does the client tell us what comps to use?

That was the question the OP (?) asked, do I need to use REO comps. The client can request what ever they want. Its up to you to decide what to do. I have seen clients request distressed sales. I think I mis-typed, that particular client doesn't want REO comps, they want a value that would be as if typically marketed without a stigma such as foreclosure or short sale on it, if possible.

 

[Tom D]

I've only seen several REO that were left in decent condition. Most are vacant for a couple of years, with different $ problems. And they seem to be beat to hell, or no maintenance.
So, after seeing it beat up how can you use normal comps. When interest rates really went down, REO were selling at non REO prices. But my experience is that the typical REO is not a typical c4 sales. So how much of a depreciation do you take off, especially if needs work. So then to go see, look for the comps, or go back out to take comp photos being FHA, you made minimal pay for your time.

The ones i did after a foreclosure, a realtor was already involved. So, i had a good talk with the realtor who had inspected the property. Would now know the problems and what the listing realtor said the list price should be. Saved me time. Also, there seemed to only be a couple of realtors who handle them. Before it was many realtors. A mort servicing co handling the REO is a different problem.

 

[sputnam]

? Where is the statement for that?
I have not found a definition of "REO value".
Its market value - if there is a limitation of market exposure that might affect the value. Some REO assignments require a second value opinion with a sale under 60 days, for example. That can be often be found on a REO addendum.

That's right. It is market value. Depending on the Client, they may also want Liquidation Value.