REO Comps or non-REO comps

[CANative]

I've got both, there's just as many of each, the houses are similar enough in location, size and condition, and marketing time spread is 19 days to 102 days mixed between REO and non-REO.

Yet there is a $100,000+ spread (at the $210 - $307).

What the heck?! Why is everything such a freaking hassel. I'm sick of appraising.

 

[Tim Hicks (Texas)]

What are you appraising? It appears you have two distinct markets. Not uncommon around here. REO and non-REO with equal amounts of each not effecting each other except you can see actual data showing REO stigma and repair cost reaction.

 

[Mejappz]

Greg, I am having the same problems as well here in Florida. The worst part is that if you chose non -REO sales many times in my experience the bank will have the file reviewed by one of there skippy shops who will in turn chose all REO sales and thus kill your value.

 

[CANative]

What are you appraising?

A house in Cloverdale.

So... adjust the REO's up or the non-REO's down depending on if the subject is a bank owned property or not?

:new_all_coholic:

 

[David Beasley]

What are you appraising? It appears you have two distinct markets. Not uncommon around here. REO and non-REO with equal amounts of each not effecting each other except you can see actual data showing REO stigma and repair cost reaction.

That's my take on that situation Tim. We have it here in observable numbers as well. I generally load up my appraisals with comps in those cases, some arm's length, some REO, and explain AND show the 2 concurrent markets that are happening (Arm's Length & REO resale). I generally provide at least 2 sales of each type in that case, or sometimes up to 3 of each. I have a basic narrative setup about REO sales and stigma as it pertains to higher selling but otherwise similar comps that were offered at arm's length, etc. I finish it off with stats tailored to the specific neighborhood. The negative value attributable to the stigma is often difficult to extract, so far as any discernible trend as far as how much depreciation it brings, as the number is often wildly moving. Some REOs will sell for at or just under their market value while others will sell for upwards of 50% less than their market value (should be based on their size and condition). Compounding the confusion is the fact that some of the 100% sales go in 5 days, or 100 days, the half-off REO resales also can sell in as few as 5 days or as much as 180 days...any trending graph one may try to develop in those situations would look like someone was patterning a shotgun.

In my opinion, one should know as much about these types of areas as possible so they can put forth a good explaination as to why the high, lows, and medians are (likely) skewed
across the measured year on the 1004MC. Taken at face value, the REOs can make an area appear to be declining when it fact it is ONLY the REOs that have declined (due to the "REO stigma") while the arm's length sales are chugging along at stability or possibly even a little appreciation.

 

[Tim Hicks (Texas)]

A house in Cloverdale.

So... adjust the REO's up or the non-REO's down depending on if the subject is a bank owned property or not?

:new_all_coholic:

If you are appraising an REO property, then the REO sales will reflect the market for that property and the stigma attributed to these type sales. If you are appraising an arms length transaction and you really have a market of non-REO sales, then those sales would best reflect the market of typical arms length home sales with no repairs, stigma or market reaction.

 

[Tim Hicks (Texas)]

I think you know all this and you just needed to post something to get your post count up or to stir the preverbial melting pot of disagreements around here.

 

[Mike Garrett RAA]

Simply ask yourself...which one would a buyer buy? End of discussion.

 

[Lee Lansford]

Simply ask yourself...which one would a buyer buy? End of discussion.

Mike, what do you mean?

Lee

 

[CANative]

If you are appraising an REO property, then the REO sales will reflect the market for that property and the stigma attributed to these type sales. If you are appraising an arms length transaction and you really have a market of non-REO sales, then those sales would best reflect the market of typical arms length home sales with no repairs, stigma or market reaction.

Well in my REO addendum could I recommend renting some furniture and a nice homeless couple for a month and suggest not advertising that a bank owns the property? Cost might be $5,000 but could bring an extra $50k-$100k.