REO sales and "Market Value"

[DMZwerg]

No purchase on that concept T.

Actually see post 231.

And who's to say the non foreclosed examples actually had fair disclosure anyways?

Disclosure or not is one thing, *RISK* is what causes the difference. When a non-foreclosed property did not have fair disclosure the buyer has a better chance of successfully reclaiming all or a portion of their loss. Whe the property is a foreclosure there is less recourse as the buyer is assumed to be assuming the risk (thus sale price consistent with disposition value rather than (FIRREA) Market Value).

Owner-occupier seller is under duty to disclose certain facts, bank sells "as is" in an attempt to try and distance themselves from the responsibility for things they did not know about and presumably had no way to determine if not obvious to cursory inspection.

Risk and liability. That is point one.

Motivation of seller is point two.

Exposure/marketing time (and ability to NOT sell if they chose) is point three.

Do you really need more points?

Fair disclosure is basically more of a misdirectional argument. You can hardly prove fair disclosure is a standard practice, what with every piece of paper signed originating from the mind of a sleezy lawyer who forces the buyer to accept all responsibility regardless of disclosure issues.

I believe that comes under the phrase "each acting prudently, knowledgeably" in the FIRREA DoMV, which condition the buyer did not meet if he let "a sleezy lawyer" force him to "accept all responsibility regardless of disclosure". Fails as an Arm's Length Transaction and fails under the FIRREA DoMV ... throw it out or analyze, comment and adjust appropriately.
Now, given foreclosures, these are likely a bit more difficult to detect off hand, but that is what due diligence is about.

I'm from the Mpls area. 30-40% is not a problem? woohoo I'll alert the press.

Racine COUNTY is in the same boat (even parts have had new construction and the far corner has seen price increases and few foreclosures ... as is Chicago Metro (to the south) and Milwaukee Metro (to the north).

BTW, circa 2009, City of Milwaukee, east of Sherman Boulevard near Capitol had 95%+ foreclosures & short sales ... at least in one neighborhood and as showed up on a comp search. NBHDs around that one were 90%+, and I am not retired so I will not be going back through all my reports to find the exact data. You are retired, see if you can find it Kinney

 

[Randolph Kinney]

I had to look that one up in the dic. EEWWW! Why do you know that word!

It's called education. You lean these words in school, like Roman history. It was part of the culture. We have it now IN OUR society; it's called NAMBLA.

 

[Randolph Kinney]

Not a zip code, just a neighborhood. As you can see at the bottome, there are no GLA, no style, no year built...that's all the sf homes that are selling in that neighborhood.

2708 Irving Ave N
Minneapolis, MN 55411

Sqft: 1,399

Year built: 1925



2931 Dupont Ave N
Minneapolis, MN 55411

Sqft: 1,848

Year built: 2003



2900 Logan Ave N
Minneapolis, MN 55411

Sqft: 751

Year built: 1950

2918 Morgan Ave N
Minneapolis, MN 55411

Sqft: 1,406

Year built: 1941


Just a sampling. The neighborhood boundaries can be given. I looked these up on Goole Maps and on Zillow.

Check these homes out on Zillow in that neighborhood.

http://www.zillow.com/homes/logan-a...5,44.991345,-93.318053_rect/15_zm/0_mmm/1_rs/

 

[Randolph Kinney]

Here's what the 55411 Zip Code looks like for current listings and recently sold.

 

[residentialguy]

Yeah...those are all REOs and short sales you posted on 243. Last one is expired.

I went by a map draw within that area, not the whole zip.

 

[gregb]

2814 Oliver Avenue, Minneapolis 55411. Sold for $3,000. Should be plenty of similar data to establish land value...oh wait, its an REO and distress sale...fiddlesticks!

 

[Randolph Kinney]

According to Zillow, zip code 55411 has 145 single family foreclosure listings as of this date.

http://www.zillow.com/homes/55411_r....262467,44.980008,-93.34538_rect/13_zm/0_mmm/

There are a total of 85 single family listings that are not foreclosures as of this date.

http://www.zillow.com/homes/55411_r...93,-93.21599,44.947062,-93.381815_rect/12_zm/

There were a total of 260 single family homes that sold in the last 12 months as of this date.

http://www.zillow.com/homes/55411_r...93,-93.21599,44.947062,-93.381815_rect/12_zm/

 

[moh malekpour]

Suppose a bank has recently foreclosed a property and now owns it and has asked you to do an appraisal on it. The bank for this kind of appraisal usually has its own SCOPE of WORK that comes in the form of Supplemental REO Appraisal Addendum. For that form, the bank requires and you agree to provide at least 3 listings, itemized repairs and their estimated costs if any, provide DOM for comparable sales that you used in appraisal report and provide 4 different values:

1-“As Is” estimate of Market Value based on a reasonable exposure time rendered in the attached appraisal report
2-“As repaired” estimate of Market Value based on a reasonable exposure time rendered in the attached appraisal report
3-“As is” estimate of Market Value based on Client-Imposed restricted market exposure time of days not to exceed 120 days
4-“As Repaired” Estimate of Market Value based on Client-Imposed restricted market exposure time of days not to exceed 120 days

Suppose the property is in a very good condition and doesn’t need any repair so the estimate of market value 1 and 2 should be the same and the estimate of market value 3 and 4 should be the same

By now, you know that the subject of your property is REO and per your scope of work you need to provide a market value based on URAR definition of market value and a market value based on your client-imposed restricted market exposure time.

First: what kinds of comps do you select for this appraisal? A- comps that were sold as REO sales without adjusting them for being REO because you are appraising an REO property? B- comps that are Arms Length comps and if you have to use REO comps, you adjust them upward to equate them with Arms Length comps because your assignment is to provide As is estimate market value based on reasonable exposure time?

You also suppose that the DOM for comp 1 is 7 days, comp 2 is 15 days and comp 3 is 35 days. How do you estimate market value based on client imposed restricted market exposure that is within 1- 30 days? Is it going to be lower than the value on page 2 of URAR and in what basis? Your client imposed restricted market exposure time (1-30 days) is within the range of your comps DOM.
By this time the bank through your appraisal report knows about the condition of the property and the condition of the market and knows that its restricted market exposure time is typical for that market and decides to list the property.
1-Do you think the bank should let the broker to list the property lower than the market value that you have provided and for what reason?
2- Do you think that if the property was listed at the estimated market value, it will sell at that price within the time fame of your 3 comps that you used for this appraisal?
3-If the broker listed the property at the market value and sold it within the time frame of your comps that you used for the appraisal, that sale should be adjusted upward when it was used as a comp on later dates because it is an REO property? Another word, is this sale still a distressed sale although it was sold at the market value that you provided?

REO property and distressed sale are two different concepts. REO property is an ownership of the property. A distressed sale is the feeling or the mindset of the owner of any property that is urged or forced to sell under any circumstances that could be REO, divorce, death, bankruptcy, illness, short sale or anything else. The owner of the property who is distressed because of divorce, illness, owning unwanted property or another factor is forced or urged to sell the property in quicker than typical market exposure time and to do so, has to discount the asking price so that property could sell at that time frame that the owner needs. If the owner’s time frame is equal to the typical market exposure time, then the owner has no urge and doesn’t need to discount the asking price because he knows that the property will sell at the needed time frame

 

[residentialguy]

According to Zillow, zip code 55411 has 145 single family foreclosure listings as of this date.

I told you 3 times now, this was a neighborhood, not a zip code. There's a difference. Don't know why you keep bringing that up. You're going to have to live with the fact that I deal with extreme distressed sales, too.

 

[residentialguy]

Suppose a bank has recently foreclosed a property and now owns it and has asked you to do an appraisal on it. The bank for this kind of appraisal usually has its own SCOPE of WORK that comes in the form of Supplemental REO Appraisal Addendum. For that form, the bank requires and you agree to provide at least 3 listings, itemized repairs and their estimated costs if any, provide DOM for comparable sales that you used in appraisal report and provide 4 different values:

Many times the bank wants to know the distressed value of these values, not market value of a sale without high compulsion/undue stimus to sell. You need to check with them.

REO property and distressed sale are two different concepts. REO property is an ownership of the property. A distressed sale is the feeling or the mindset of the owner of any property that is urged or forced to sell.

This is true, and a REO (bank owned) sale is always considered a distressed sale and will always be treated by the buyers as such.