REO house that had the kitchen cabinets, counters and appliances removed.

[Terrel L. Shields]

You are missing the point - the property has to offer a similar level of kitchen in both size and finish that other similar houses offer - in order to estime a cost to cure as well as an adjustment.

I understand. It was a joke, but we did a lot of REOs back in the great recession and often they wanted an "as is" value. So, you basically had to do the cost to cure to estimate a deduction when you didn't have other REOs to deal with. Same with trashed out places. You cannot dismiss junk and trash bags as "personal property" so we were expected to estimate the number of roll offs needed to haul it off and how much labor would be involved. I know we had a few where the light fixtures were taken, and the dishwasher and stove were gone. Cannot remember one where the cabinets were removed but on our own farm, we had a couple of idiots tear out the cabinets and put up shelving. WTF? And once we had the REO residents come back and disassemble a metal shed and take with them leaving only the slab foundation. They were also the ones who left a dog locked up in the house. We met the trailer load of furniture coming from the place when we went in to appraise it. The neighbors heard the dog barking and was there trying to get in the house (locked.) But our key did work at least. The neighbor took the dog.

 

[Lee Lansford ASA]

How in the world do I make a condition adjustment finding a similar sale with similar issues is impossible.

Why do you believe that you have to find a property with a very similar status? You don't.

 

[Overimprovement]

No mention of condition of rest of house? If this is an otherwise C3 home with just the kitchen removed, that is one thing. If it would be C5 even with an older but functional kitchen, that is another.

You are trying to compare overall condition of subject to overall condition of comps. An entire main room missing its stuff makes that a bit challenging, but the suggestions herein are a solid basis. If you had a comp that needed $10K to get it overall C4 condition, and that is similar to what it would cost to bring subject to C4, then you have a good comp, even if the comp has a kitchen (but has other repair needs).

One other item to consider--if the rest of home is C4, the cost to put in a brand new C1 kitchen is not really what you are after. If cabinets and appliances from the local Restore could be bought and installed in the home for say, $3,000--C4 yes, but so is rest of home--then that is another item to consider.

 

[Terrel L. Shields]

One other item to consider--if the rest of home is C4, the cost to put in a brand new C1 kitchen is not really what you are after. If cabinets and appliances from the local Restore could be bought and installed in the home for say, $3,000--C4 yes, but so is rest of home--then that is another item to consider.

Typically, I would aver that most people buying to live there, would put in new cabinets and appliances, but most flippers would do exactly that - Habitat for Humanity or other surplus building materials. We have a local cabinet builder who offers reject cabinets in an annual sale, and they sell cheaper than new. And any number of used furniture places as well as FB market, Craigslist, etc. you can scrounge all sorts of appliances.

Also, I've found flippers have some pro repairmen hacks, and one thing I consistently saw was really bad looking carpets. They brought in some people to re-stretch the carpeting and deep shampoo it. Amazing what a deep clean can do. When I sold my cousin's house (as his estate trustee) I hired a cleaning service, and the place was spotless. I was amazed. Updating an REO can be a lot cheaper than we usually estimate in my book. The pros know how to do it.

 

[Tom D]

You don't have MLS photos of REO sales. And if you don't it's because the inside is beat to h*ll, as most are. I have seen very few REO's that didn't need at least some remod. Biying and flipping myself, if the kichen isn't newer in decent shape, it's coming out and a new one in. Same with a bath. At least there is no demo cost with it gone already

In a REO no kitch or no usable bath is the same as a beat up or old kitchen or bath. Same as the decor, it's all coming out. So in my opinion there is no adjustment because REO are in general below average condition. Now if it's just the kichen being bad, but the rest of the home being ok, then i guess cost new minu deprec to the current house condition. If just 1 item and the house is really nice, then new min dep. But, i ain't ever seen that. No even in a short sale. Doing a 10 year old rehab that is a short sale, a little beat up. Gonna spend $25,000 for updating, but gettin it at a REO sale price, not a normal sale price minus $25,000. Lot of soft costs involved and my greedy profit.

 

[Zoe]

You don't worry about bracketing in REO. You have to do "as is" value estimate and "subject to".

On the REO addendum you estimate costs to cure and delete that according to the condition of each comparable. In other words,

For that house to go conventional, FHA or VA, it would require a kitchen be installed. Apply that to each item the house needs repaired to go conventional FHA or VA.

You have got to use cost estimates in REO. You can give disclosures like you are not a contractor and an estimate by a licensed contractor is recommended.

That is different from like a everyday appraisal where someone is refinancing or selling. Like with VA and FHA and Conventional on a fixed rate long term mortgage, it would require subject to repair. No cost estimate to repair needed. No "as is" value opinion needed. REO is different.

 

[Tom D]

Did hundreds of drive by REO. Easy money and no aggravation. Hate doing a 1004 REO. Too much work for the pay, REO form. And if you don't know the condition before you go out, then an extra comp photo ride. Or no lock box or wrong numbers.

I did like when a realtor had it prepped for a listing. Good discussion on problems and listing value. It looked good when we agreed.

 

[J Grant]

An REO is not the only source of needing repair, fair condition or just plain vanilla C 4 houses - estate sales, older houses that sold for less any of them are fair game as a comp - it is the pyshcial condition at time of sale fo the property, not who owned it. REO means real estate owned; it is a form of ownership. REO is not a type of property nor an assumed condition of a property. Some REO sales are in good condition..

 

[Zoe]

Did hundreds of drive by REO. Easy money and no aggravation. Hate doing a 1004 REO. Too much work for the pay, REO form. And if you don't know the condition before you go out, then an extra comp photo ride. Or no lock box or wrong numbers.

I did like when a realtor had it prepped for a listing. Good discussion on problems and listing value. It looked good when we agreed.

I don't want to count how many I did for Fannie when everybody and their mother needed bailout. Fannie was my client. Memphis was like foreclosure capitol of the world.

Fannie paid pretty good direct. Always paid.

Mortage fraud was rampant in Memphis. FBI and everybody else was in Memphis.

I was working on them everyday for Fannie for a long time.

 

[Tom D]

You have never really done any fix and flip by saying there are some in good condition. From my experience I onky saw 1 foreclosure that was in good condition in 5 years. Maybe some in average minus condition.

I looked at HUD REO for years, they all had problems, they all sold below c4 condition. Now the last 3% interest craze, even REO sold better than before. With fix and flippers REO is an assumed property condtion. And they are the typical buyer. Know their thinking.

And Zoe, within 3 zip codes of me, big city, i was doing 10-15 pre forclosure drive by a week, row houses in my easy appraising life.