REO question

[Tatianna]

On the REO addendum, at bottom, above signature line, I don't know what to do for the last two lines: As is estimate of value based on a client-imposed restricted market exposure time of 120 days. (not to exceed 120 days) and the line: AS-repaired estimate of value based on a client-imposed restricted market exposure time of 120 days (not to exceed 120 days). The 2 amounts I inputed on the first 2 lines are 189,000 and 209,000. meaning that the value I put on the property is 189,000 and after repairs it would be 209,000. I need to know as this is a correction. Thanks

 

[Mike Boyd]

Yes, that is the correct proceedure (if I understand your question)

 

[Ray Miller]

You have your as is value today, your as is value repaired today. Then it is asking for a value more or less, if the sale is not to exceed 120 days. It depends on your projected marketing time. If sales are taking longer then 120 days in your area how much reduction in value to get the subject to sell in that 120 day period.

If I am understanding your question.

 

[Doug Wegener]

Discount

On the REO addendum, at bottom, above signature line, I don't know what to do for the last two lines: As is estimate of value based on a client-imposed restricted market exposure time of 120 days. (not to exceed 120 days) and the line: AS-repaired estimate of value based on a client-imposed restricted market exposure time of 120 days (not to exceed 120 days). The 2 amounts I inputed on the first 2 lines are 189,000 and 209,000. meaning that the value I put on the property is 189,000 and after repairs it would be 209,000. I need to know as this is a correction. Thanks

It depends on your market and your marketing times.

If you have non-REO comps with marketing times above 120 days, are you seeing them sell higher than the sales with less than 120 days marketing times?. That would be your market derived figure for the cliient imposed restricted marketing times.

Also, if possible, you should have a market derived adjustment for repairs which is typically more (most of the time a lot more) than the cost to repair.

In many of my markets REO's have become the market and the last 2 lines are the same as the first two lines because everything that is selling has a reduced marketing time.

 

[The Sheriff]

Hate to break this to you... but you can't just place differing values on their and complete a summary appraisal report appropriately. You need to have comps gridded out that support both values, or all four values, and then have narrative disclosing the differences between each of the values and how the opinion of market value changes for each opinion of value. You have opened up a can of worms on this one. My last REO addendum and report took approximately five hours to write, and the property required no major repairs. Welcome to hell on these things!

 

[MZ818]

I try and find similar pendings that went under contract within 30-120 days in order to support my client imposed value. Add them in your sales grid as comps 4-6 to further support your client imposed value. Many markets right now have inventory moving within 30 days, since those markets are REO driven. It takes alot of research and time to do these REO's.

 

[The Sheriff]

I just posted some narrative on here about what is appropriate in completing the REO addendum... in addition to what you stated here MZ818 on how to properly complete the assignment.

 

[Brad Ellis]

Tatianna,

Both Sheriff and mz have given you direction that, while not necessarily bad procedure, is simply not correct. Sheriff got it from a CE class and kudos to him for taking it, but he was given some incorrect information. How do I know?

I happen to run such a department for a bank.

So, here is the skinny. Unless the market is substantially influenced by or dominated by REOs, your client will first be looking at normal market value. They need to know that first to make their business decision.

Next, if the subject will bring less under a forced shorter marketing time, that now becomes a quick sale/dispostion/liquidation value. You need to define that with your source as well but you do not need to grid out any more comps. You may simply discuss them in a paragraph or such.

The same applies to the as repaired values- and be careful there because the repairs for REO properties often cause changes that we may not see in normal marketing circumstances. Normally, doing upgrades, etc. will not always result in value increases that exceed their cost; we all are comfortable with that since cost does not equal value.

However, in certain REOs doing this stuff will result in a profit- often double the cost. That is why investors buy them, invest the money and resell them for a profit.

So, when using the REO addendum, you need to provide 3 listings but you need not grid out seperate sets of comps for each value.

Brad

 

[The Sheriff]

Thanks Brad... now I feel like there are at least 30-50 of us that were there that are misinformed and overworking...

 

[CURT VAN HOOSER]

Tatianna, I would suggest that you check with your client to see what the their restricted time frame is. While the form says "not to exceed 120 days." The client may want 30, 60, or 90 days.