REO Comp Question

[residentialguy]

that' s ridiculous to say you can't verify the bank's motivations- big amazing surprise- their motivation is to sell the property. wow, that was hard.

Are you pretending to be a box of rocks or are you actually that dumb?
Why do they want to sell the property is what you are to find out - the stimulus behind the sale! You are to verify what is the motivation behind the seller wanting to sell that property... because that can affect the price.

 

[J Grant]

BS , we verify terms of sale, we can ask about motivation of course, and can get a range of response- truthful answers, lies, or no answer at all depending. But the acid test is the price- what was the meeting of minds, between buyer and seller? A seller in an ugly divorce can be motivated to sell fast, but in a strong market they'll get a good price anyway. It's not just motivation by any means.

To claim you can't understand a lender's motivation to sell an REO is beyond ridiculous. Their motivations are more consistent and obvious than the hidden or shifting motivations of private sellers. The lender needs to sell the asset in a certain # of years, and they try to recover the owed mortgage amount if possible. If they place the property on MLS they rely on RE agent to sell it., and of course they would like to see it sold in a timely manner. What is the big mystery about the bank's "motivations"

 

[residentialguy]

But the acid test is the price- what was the meeting of minds, between buyer and seller? A seller in an ugly divorce can be motivated to sell fast, but in a strong market they'll get a good price anyway. It's not just motivation by any means.

In that case, you would not adjust. However, if it did not sell at a "good price" that a sale without that motivation would sell for, then the motivation affected it. A typically motivated seller would not sell below market value, therefore we would need to adjust for that motivation that influenced the seller to accept a lower sale price.

 

[J Grant]

In that case, you would not adjust. However, if it didn't sell at a good price, then the motivation affected it. A typically motivated buyer would not sell below market value so we would need to adjust for that motivation that influenced the seller to sell lower.

That's the issue, you are trying to get a predetermined value direction ( higher price). However, the market pays what it will pay. It's not a matter of selling "below market value", it's a matter of whether or not market value is on the lower end for a property (due to condition, supply/demand/ identified buyer etc)

Analyzing whether a sale sold "below market" and should be adjusted for terms or whether the price was low because that is all the market is paying? If you come in with a predetermined idea of where the market price should be, it affects assignment results.

 

[residentialguy]

That's the issue, you are trying to get a predetermined value direction ( higher price). However, the market pays what it will pay. It's not a matter of selling "below market value", it's a matter of whether or not market value is on the lower end for a property (due to condition, supply/demand/ identified buyer etc)

Analyzing whether a sale sold "below market" and should be adjusted for terms or whether the price was low because that is all the market is paying? If you come in with a predetermined idea of where the market price should be, it affects assignment results.

No, I'm not. I'm finding out whether or not the motivations affected the price. We do the same thing with concessions, financing, etc. What would the property sell for without that variable.
Why do you think a good portion of the definition of market value deals with motivation and undue stimulus??? By ignoring it, YOU are now predetermining a value direction to your way.

 

[residentialguy]

Analyzing whether a sale sold "below market" and should be adjusted for terms or whether the price was low because that is all the market is paying? If you come in with a predetermined idea of where the market price should be, it affects assignment results.

You have a 1 bedroom house selling at 200k. Your identical 1 bed comps are selling at 200k. The 2 bedrooms are selling at 210k. You adjust the 2 bedrooms -$10k for the bedroom. Is that a predetermined idea of where the market price should be? If so, then we're all guilty. The variances affected the assignment results. No different with motivations, or special financing, or concessions.

 

[J Grant]

Okay, if by your reasoning the buyers and sellers motivations affect prices on an REO down, why are you adjusting them "up"? The motivations are supposed to be typically motivated- and if the motivations of most buyers for a property ( bargain hunters if property is poor condition) is to pay low, why are you adjusting the price "up"? The typically motivated sellers, banks included, would want to get more $, but if the buyers for their property are not willing to pay more, they will take buyer's price, or not sell . That i why undue stimulus is about PRICE , not motivations. The motivation only says typically motivated ( typical compared to other buyers or sellers for that property in market conditions). If terms of sale or DOM or cash etc are seen to impact price, then adjust for it.

 

[J Grant]

You have a 1 bedroom house selling at 200k. Your identical 1 bed comps are selling at 200k. The 2 bedrooms are selling at 210k. You adjust the 2 bedrooms -$10k for the bedroom. Is that a predetermined idea of where the market price should be? If so, then we're all guilty.

That has nothing to do with it. An additional bedroom is a property value feature, not subjective "motivations"- or more accurately, an appraiser not understanding/identifying the motivations of typical buyer for that of of property.

REO or non REO, we adjust for value driven property features. This discussion is about adjusting for motivations/terms of sale impact on price. ( the line segment prior to adjusting for physical characteristics)

 

[Mr Rex]

It is what it is. If REOs sell with a distinct stigma, then it would be misleading to not utilize relevant REO comparable sales. You can't pretend that the subject is not REO (and as such does not meet the pre-printed definition of market value) as the seller is not typically motivated. The appraiser is the bus driver and the client is a passenger, otherwise the driver is going to be thrown under the bus.

An appraiser must not allow assignment conditions to limit the scope of work to such a degree that the
441 assignment results are not credible in the context of the intended use.
442 Comment: If relevant information is not available because of assignment conditions that limit
443 research opportunities (such as conditions that place limitations on inspection or information
444 gathering), an appraiser must withdraw from the assignment unless the appraiser can:
445 • modify the assignment conditions to expand the scope of work to include gathering
446 the information; or
447 • use an extraordinary assumption about such information, if credible assignment
448 results can still be developed.
449 An appraiser must not allow the intended use of an assignment or a client’s objectives to cause the
450 assignment results to be biased

 

[residentialguy]

This discussion is about adjusting for motivations/terms of sale impact on price. ( the line segment prior to adjusting for physical characteristics)

We are to reflect the presumed sale in market value in which motivations and undue stimulus are part of the REQUIRED conditions of that sale we are to reflect. If you aren't adjusting for those, then your opinion is not reflecting Market Value, as defined. You now have a misleading report!