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REO or Foreclosures as Comps

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Maveric33

Thread Starter
Sophomore Member
Joined
Apr 18, 2007
Professional Status
Licensed Appraiser
State
California
Hi All,

Do any of you use REO/Bank owned or foreclosures as comps? Do you state why you did not use a REO or foreclosure in the addendum?

Thanks!
 

Randolph Kinney

Elite Member
Joined
Apr 7, 2005
Professional Status
Retired Appraiser
State
North Carolina
Hi All,

Do any of you use REO/Bank owned or foreclosures as comps? Do you state why you did not use a REO or foreclosure in the addendum?

Thanks!
Yes and, sort of. If half of the properties are REO and short sales, I don't have any problem using them since they are driving the market.
 

Sue Miller

Freshman Member
Joined
Nov 30, 2004
Professional Status
Licensed Appraiser
State
California
Am I missing something?

You stated: "Do any of you use REO/Bank owned or foreclosures as comps?"

I hope you're referring to the one's that the Bank has already owned for some time, has listed, then actually sold them to a real borrower. Are you?

What I mean is that people should be careful not to just look in Title and see that a home in Corona "sold" for $500K in January. It might actually have been taken back (transfer of title) by the bank for $500K (i.e. the loan amount owed) and the same home is currently being listed for $450K on MLS.

IMO that's not a comp, but some seem to be using them as.
 

Ken Youngkrantz

Junior Member
Joined
Dec 2, 2003
Professional Status
Licensed Appraiser
State
California
Yes, especially if I am doing a REO property. I just completed a report where the REO properties are selling for 15% less than non REO properties. If you have an REO property that is selling seems you should be using REO sales.

And before everyone jumps all over me, REO properties are properties which the bank owns and is selling or attempting to sell. These are not the Trustee's deeds where the bank gets the property back.
 

David Dietz

Member
Joined
Oct 30, 2006
Professional Status
Certified Residential Appraiser
State
Florida
In my market area short sales and bank are inching over 52% of the offered properties, under this situation if the properties are list like typical homes and have exposure time I will consider them. They are steering the market here. As for commenting on ones I do not use, typically I do not unless I feel one may raise questions later. This really all depends on the market of course.
 

reliantappraisals

Junior Member
Joined
Mar 12, 2007
Professional Status
Licensed Appraiser
State
California
I am. if you pull up a list of 20 comps and 17 of them are foreclosures. and the remainder are all 4-6 months old. its obviouse where the market is.
 

TJSum

Elite Member
Joined
Nov 12, 2007
Professional Status
Certified Residential Appraiser
State
Maryland
Not only that, but in many areas these short sales and REO sales are setting the market. So the "typical" sales are falling in line with these prices or they are not selling period. The only advantage the "typical" sales have is that they do not have to jump through those third party hoops. It can take an act of congress to get some of those short sales to actually settle given the number of "third parties" who have to sign off on it. I just did an appraisal for a lender deciding on whether to accept a short sale offer, they were holding the second mortgage, the first was held by another lender, so not only do the lenders have to agree with the price but they have to agree with each other what the price should be.
 

Atlanta CG

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
The easy way to find out is to look at the active listings. If they are around the same $ as the foreclosure/short sale closings, then that is the current value for that market. Banks now want 2 sales with closings within the past 90 days. Usually that includes the f/ss as well.
 

reliantappraisals

Junior Member
Joined
Mar 12, 2007
Professional Status
Licensed Appraiser
State
California
Maveric33

to answer the 2nd part of your question, I will indicate why I did or did not use foreclosures in the area.
I find it most important to comment why you did NOT use foreclosures, an underwriter when questioning your comps will usually send you a list of comps that are all foreclosures in my experiance.
 

Flygirl 152

Senior Member
Joined
May 3, 2006
Professional Status
Certified Residential Appraiser
State
California
I just completed two appraisals on the opposite end of the spectrum. One is in an area in which none of the homes are under $1 million and is located in a very desirable school district, the other is in an area in which homes are now selling for under $500k.

For each of these two properties I did a 2 year comparative market analysis to analyze what is happening in each of these neighborhoods so it can be included in my report. (I do this for every appraisal these days due to the market conditions.)

The property over $1 mil does not have any short sale or REO properties which have sold or are listed. So I mention that in the market conditions section. In addition to the fact that the neighborhood has a very desirable school system, and that over the past two years the values have remained stable likely as a result.

The other neighborhood which homes are now selling less than $500k, the declining box is checked of course, and I calculate the percentage of decline for every quarter within the past 2 years and report that in the market conditions. I then use a mix of typical sales and REO and short sales on the market grid, and explain that the subjects neighborhood is REO driven, and to please see market conditions section. (Actually in this neighborhood it was hard to find a sale that was typical of the market. As opposed to 5 years ago when I could pull comps and have 13 matched pairs! Its crazy!)

In some neighborhoods I've noted that there is just a few, like 1 or 2 short sales, but no REO's. (I have done my market analysis of course.) In that case I use all typical sales, and explain that although there are 2 short sales noted in the subjects neighborhood, the market in this area of market influence does not appear to be short sale or REO driven. (Of course that is only if that is what my analysis reveals.)

There has only been one client of mine that freaked when he got the report that was checked declining. But, that's the way it goes; I refuse to check stable if it's not stable.

Hope this helped.
 
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