REO sales and "Market Value"

[Terrel L. Shields]

The bank for this kind of appraisal usually has its own SCOPE of WORK that comes in the form of Supplemental REO Appraisal Addendum.

In my 20 years, I have never encountered the REO Appraisal Addendum from a bank. But then again, I work for local BANKS...not national secondary market feeder banks and mortgage lenders.

BANKS...local ... need only to determine the value to place on their books which makes the examiners very happy....no appraisal and they get very saddd.... The Credit Dept or whatever its called "Special Assets" will work out the asking price with a Realtor. That Realtor may advise them to drop the price to get a quicker sale. Or they may be so upside down in it, they hold out for a higher price. I've not found many that sold for more than what I appraised them for, in fact, cannot think of but one. And since the last 4 folks have went under on that property (a chicken farm) I really expect no better fate for this guy unless he is smart enough to get it back into production then flip it right quick. I have seen them sell one we appraised for $24,000 for $19,000 to the man who lived there. He was an old preacher and had the cash...was just easier for him to buy it than to move. Sold in 10 days of when we appraised it. They were happy to sell it sans commissions and get it done fast.

 

[Randolph Kinney]

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.

Using the info you posted in post 232, you had 40 sales for the last 12 months. 6 of those sales were normal sales or 15%. Does that meet your nearly 100% distressed sales claim?

Zillow has 145 foreclosure listings in zip code 55411. There are 88 listings that are not foreclosure.

Zillow does not have the granularity to segregate short sales in the listings, only foreclosure.

You have 5 short sales out of 40 in post 232. 5 short sales + 6 normal sales = 11 non-foreclosure sales or 72.5% foreclosure sales.

Zillow has current listings and they indicate 62.2% of the listings are foreclosure sales.

You never posted the listings in your neighborhood and how that statistic looks.

I am just saying ... your claim of nearly 100% distressed sales = 85% distressed sales by your own data.

 

[residentialguy]

Using the info you posted in post 232, you had 40 sales for the last 12 months. 6 of those sales were normal sales or 15%. Does that meet your nearly 100% distressed sales claim?

No, they were not normal sales, they were REO Rehabbed/Renovated investor flips. So unless your subject has been upgraded and rehabbed, your comps will be all distressed sales, so YES that does meet my nearly 100% distressed sales claim.

No go find a younger boy to play your tricks on because you aren't going to win a trophy with this one.

 

[J Grant]

Wow, you guys have really been duking it out!

I find, when one does a specific appraisal, the subject defines what comps to use. If the subject is a good condition home, what relevance does a poor conditon home have to it, whether an REO or not? Way too much time making charts and median prices etc, when the answer is right there in your research to your subject. If your subject is in poor condition, then use poor condition comps, and likely some will be REO's, and some of the REO's will sell for distress sale prices. Take it one report at a time..charts are appropriate research for a workfile but then one has to delve into what is relevant to our subject.

IF there are REO sales or short sales showing around subject, the appraiser needs to find out why those short sales and REO sales are occurring , who is buying them, what they are doing with them, and what % of pending inventory is comprised of REO and short sales...are they drying up, or not?

Finding out why short and REO sales are in our subject area can define how one treats them, whether to apply adjustments to them, and what the pipeline of inventory indicates for most current trend.

A high percent of REO sales in a troubled condo complex, for example, may be expected to continue, if the building itself has severe markeability or financial issues. There are some condo or townhome assoc projecs here with such severe issues, that the REO problem is not going to go away...for example, shoddy construction, or very high maint fees and assesments or litigation, or a very large number of rentals which means banks won't finance units, etc. Just doing a chart of area condos or running Zillow stats won't reveal that information.

On the opposite side, a single family home area that suffered a lot of REO's in last few years due to prior years of over inflated values, if the homes are being bought and fixed up and lived in, with a small number of investor flips sold renovated and the new owners are living in them, that neighborhood is on the upswing and an REO sale used as a comp there might deserve an upward adjusment.

Down the road, another single family home subdivision, but this one is older smaller houses and near commercial use in a less desireable area. This area attracts property flippers and investors who rent, and the age of homes and poor location and high number of rental properties might show that the ocassional high sale of a flip is over market, and might even deserve a downward adjustment, or if no adjustment, then less weight.

It is report by report and neighborhood by neighborhood. Relying on broad area statistical research could lead to an appraiser approaching a report wtih assumptions that might not be valid in the immediate subject area and its particular market conditions.

 

[Randolph Kinney]

No, they were not normal sales, they were REO Rehabbed/Renovated investor flips. So unless your subject has been upgraded and rehabbed, your comps will be all distressed sales, so YES that does meet my nearly 100% distressed sales claim.

No go find a younger boy to play your tricks on because you aren't going to win a trophy with this one.

Showing just a little sensitivity? :laugh: And your age? And inexperience?

In your chart (thank you for posting) you left out the classification REO Rehabbed/Renovated investor flip sale. I took the classification to be normal when REO, SHORT, AUCTION had NO, NO and NO. You had 6 sales like that or 15% of your data.

And I see that you in agreement and have adopted Mr. Hatch's observation and opinion that no matter who the seller is, they are competing with the rest of the market and operating under stress.

Lets look at 2915 Fremont Ave N where the CDOM is 312 days, the original listing price was $85,000 and the sold price was $50,000. Did the investor make any money? But according to Zillow, there were no prior sales in the last 5 years and only cosmetic updates were made.

Now, do you want to discuss the current listings in your neighborhood? Or are you embarrassed to post that information for fear it may show a contradiction?

 

[residentialguy]

Dude, you need to stop messing with areas that are not your expertise. Why are you going on about this atypical financed roach? Seriously. That house had foundation cracks, water intrusion issues in the basement as well as the roof, and it had bat infestation. Ever smell bats? Their crap soaks into the house walls. It was filed and fined twice in the past year for Nuisance Condition. Not to mention, the homeowner has cats for that special after scent...probably to cover the bat stench.

This is also a contract for deed with the seller at high interest rates.

Good grief, you're getting desperate.

There are areas here where you will find that all of your similar homes are REOs. What is your point in all the embarrassment you're putting on yourself? It is a fact you're going to have to live with.

 

[Randolph Kinney]

Dude, you need to stop messing with areas that are not your expertise. Why are you going on about this atypical financed roach? Seriously. That house had foundation cracks, water intrusion issues in the basement as well as the roof, and it had bat infestation. Ever smell bats? Their crap soaks into the house walls. It was filed and fined twice in the past year for Nuisance Condition. Not to mention, the homeowner has cats for that special after scent...probably to cover the bat stench.

This is also a contract for deed with the seller at high interest rates.

Good grief, you're getting desperate.

There are areas here where you will find that all of your similar homes are REOs. What is your point in all the embarrassment you're putting on yourself?

Gee, nice to know you know the history and the MLS is not disclosing any of what you describe but calls the home cosmetically updated.

But you called it an investor flip sale!

Was 2915 Fremont Ave N where the CDOM is 312 days an investor flip sale?

The columns REO, SHORT, AUCTION had NO, NO and NO for this property.

Now lets talk about your neighborhood, JORDAN, where the 40 sales you posted came from.

Please take note of the above screen shot from Zillow of the JORDAN neighborhood.

There are 25 listings for sale by agent in the last 12 months.
There are 42 listings that are foreclosures in the last 12 months.

There are 93 sold properties in the JORDAN neighborhood in the last 12 months.

You only show 40 sold properties in the last 12 months claiming 6 of those (15%) are investor flip sales.

What happened to the other 53 properties that sold in the JORDAN neighborhood in the last 12 months?

You may know the neighborhood but you are not convincing me you have presented your data in a way that does not mislead everyone by excluding other relavant sales and listings.

Now you need another column for your data: contract for deed with seller financing in addition to investor flip.

You have the burden of proof when you made the claim: nearly 100% distressed sales and we are just now finding out that 6 of the sales are investor flips - WHOOPS! - 5 are investor flip sales and 1 is a contract for deed with the MLS description being bogus, according to you.

You may not be embarrassed, but you should be. :laugh:

 

[residentialguy]

Gee, nice to know you know the history and the MLS is not disclosing any of what you describe but calls the home cosmetically updated.

Having MLS membership gives you access to seller disclosure and municipality issues. Believe it or not...some listing agents lie. You are making a good case for why a local appraiser should be hired, though.

Gee, nice to know you know the history and the MLS is not disclosing any of what you describe but calls the home cosmetically updated.

But you called it an investor flip sale!

LOL. Really??? ....you need to bump up your specticle power, old man. Here's a flashback to my earlier post

Couldn't resist. Here's a neighborhood in NW Mpls. All distressed sales, with 6 flips and one non REO/ss on 2915 Fremont, which was a contract for deed.

You might want to stop while you're way behind.

 

[residentialguy]

Now lets talk about your neighborhood, JORDAN, where the 40 sales you posted came from.

I didn't use the whole Jordan area, nor did I claim any such thing. I said "Here's a neighborhood in NW Mpls". I suggest you stay in your own market. I wouldn't dream of telling you what you should use as neighborhood boundaries... and neither should you.

and again...when I said nearly 100% distressed sales, that was meant to be assignment specific for comps. I then went beyond that you show it was nearly all distressed with a few distressed sales that were investor purchased for renovated flips.

 

[SANDY]

Mr Know it all Res Guy gets his butt handed to him again. I think Mentor needs some company Res!