REO Help

[Tim Hicks (Texas)]

It depends on the scope of work for the client. Direct Fannie Mae REOs have your grid three sales, three listings and only fill out the repair section of the REO addendum. They don't ask for four values either, only two. Other clients need only three sales and three listings on the REO addendum with four values. Ask your client for the scope of work.

 

[Tim Hicks (Texas)]

It depends on the scope of work for the client. Direct Fannie Mae REOs have your grid three sales, three listings and only fill out the repair section of the REO addendum. They don't ask for four values either, only two. Other clients need only three sales and three listings on the REO addendum with four values. Ask your client for the scope of work.

 

[Amy Perkins]

You only need one sale that is an REO, Estate Sale, or Short Sale, then extract out the difference and adjust for everything that is not a liquidation sale. Just make sure it's recent so it is similar to the market.

 

[residentialguy]

Unchangeable definition of market value?

Correct. Market value is a specific defined value based upon specific conditions of sale. Those conditions are what make up the definition of Market Value. For example: It ceases to be "market value" when you change the buyer and seller to where they are under undue stimulus to sell, or say the payment is not in cash and is affected by special financing, or the property must sell in a limited or extended time frame.

The REO Adden asks for 4 values at the bottom. What do the last 2 say?

''AS-IS'' estimate of market value based on a client-imposed restricted market exposure time of days
''AS-REPAIRED'' estimate of market value based on a client-imposed restricted market exposure time of days

Ooopsie They better get another type of value with a definition that fits those specific conditions.

 

[Mr Rex]

If sold on the open market, then there is a market value definition for any scenario. Got USPAP?

MARKET VALUE: a type of value, stated as an opinion, that presumes the transfer of a property (i.e., a right
93 of ownership or a bundle of such rights), as of a certain date, under specific conditions set forth in the definition
94 of the term identified by the appraiser as applicable in an appraisal.
95 Comment: Forming an opinion of market value is the purpose of many real property appraisal
96 assignments, particularly when the client’s intended use includes more than one intended user.
97 The conditions included in market value definitions establish market perspectives for
98 development of the opinion. These conditions may vary from definition to definition but
99 generally fall into three categories:
100 1. the relationship, knowledge, and motivation of the parties (i.e., seller and buyer);
2. the terms of sale (e.g., cash, cash equivalent, 101 or other terms); and
102 3. the conditions of sale (e.g., exposure in a competitive market for a reasonable time
103 prior to sale).
104 Appraisers are cautioned to identify the exact definition of market value, and its authority,
105 applicable in each appraisal completed for the purpose of market value.

 

[residentialguy]

The Supplemental addendum is tied to the 1004 and the 1004 clarified the definition of market value and a supplemental definition of market value is explicitly prohibited: "Modifications, additions, or deletions to the intended use, intended user, definition of market value, or assumptions and limiting conditions are not permitted."

There are plenty of market values for any scenario. There's Liquidation value, Disposition value, Market value, etc....they are all market values. Pick the one where the definition fits the conditions. A thorough and accurate appraisal analysis is beyond the scope of the existing Supplemental REO Addendum. The established format and guidelines preclude appropriate analysis and incites sloppy reasoning and misleading results. The intended use should be made clear, but it is not.

Supplemental comments and definitions are needed to develop appropriate values in most markets, despite the 1004 guidelines to the contrary.

In the event of a post-foreclosure appraisal for marketing listing price purposes, expanded analysis and commentary to the limited rights and warranties in the REO purchase agreement is necessary to provide reliable results.

A complete and accurate residential REO appraisal analysis is not compatible with the established format. They need to redesign the Sup Addn to clarify the intended use of the appraisal, to supplement the appropriate definitions of value, to refine the comparable selection process, and to develop clarifying supportive reasoning. Restricted rights of conveyance and undue motivation inherent in REO sales must be recognized to ensure precise and thorough reasoning and accurate results that address the client's needs. Got USPAP?

 

[Meandering]

expanded analysis and commentary to the limited rights and warranties in the REO purchase agreement is necessary to provide reliable results.

FINALLY!

 

[residentialguy]

lol...I've always agreed with that Hence why "market value" (as defined by FNMA) isn't applicable for REO appraisals where the actual intended use is to either aid the client in collateral analysis for audit, repossession, or marketing decisions. The function of the appraisal may include redemption and liquidation, short sale, or renegotiation of the underlying mortgage. Of course, they keep that information in the dark and any appraiser accepting that is in conflict with USPAP requiring communication so that the appraiser can deliver a report that is applicable to the intended use and not misleading. The Supplemental REO Appraisal Addendum makes it worse because it is a supplement to a form that does not allow a supplement or change, on top of the fact that the addendum does it address the real issues of REOs.

REOs are a distinct market segment. They are "as-is", non-disclosure, vacant properties further bastardized by the real estate purchase addendum. This supplement to the state-specific purchase agreement is universally mandated by the secured lender's legal counsel as a contingency of resale. The addendum stipulates to the seller's status as owner through foreclosure and disclaims liability for repairs, overt or latent defects, building code or zoning enforcement, and prospective title claims. These disclaimers are unilateral and onerous to the extent of requiring a prospective buyer to prepay de-winterizing and re-winterizing expenses, if necessary, to facilitate a third-party building inspection. As a rule, these disclaimers supersede those of an arm's-length sale, with fewer conveyed rights.

An REO title is transferred by limited warranty or delivery deed or, if clouded, by quit claim deed. Title insurance is not offered. In the event of a quit claim deed, a lapse of time or lawsuit may be necessary to assure quiet title for resale with a warranty deed. This contrasts with arm's-length market sales, which typically transfer with a warranty deed, insured title, and, in many states, seller disclosures. Not to mention that the seller has the drive of actually having the ability to profit from the sale, as opposed to REOs.

 

[Deleted member 134708]

10 minute fix over at FNMA. Could of done it faster than creating the REO addendum form.

Modify the current 1004 and modify MV definition With a few words. Call it the 1004REO.

Problem solved. Until then, most clients will continue to have no clue what product they actually want and appraiser will continue to give them the wrong product.

 

[residentialguy]

10 minute fix over at FNMA. Could of done it faster than creating the REO addendum form.

Modify the current 1004 and modify MV definition With a few words. Call it the 1004REO.

Problem solved. Until then, most clients will continue to have no clue what product they actually want and appraiser will continue to give them the wrong product.

Bravo! It would be a type of Liquidation Value specific to REO properties. Call it "REO Value"