REO sales and "Market Value"

[residentialguy]

George H, I agree...when MV is above SC price, then it is, and I'll appraise above it...as you said, there is no reason to lower a MVO to a SC price just to match them up.

Agreed.....

 

[J Grant]

We agree, and it's Monday!

 

[Joyce Potts]

The rules will continue to evolve. Until then, all you can do is pick your direction, disclose why and how you picked your direction. When you have a market where 30% - 100% are 'distressed sales as I've seen in my areas I'm not sure how you can argue that their inclusion in certain cases is not warranted because of your interpretation of the defintiion of market value (assuming the URAR).

1) United States Bankruptcy Court, Northern California District, Case Number 10-50394-ASW, Victoria and Annaliza Duarte Debtors, Memorandum Decision Re: Motion to Determine Value and Status of Junior Lienholder's Claim. (Use of Short Sales and Bank Owned Market Data).
[URL="http://www.bankruptcymastery.com/wp-content/uploads/2011/07/duarte-dueling-appraisers.pdf"][url]http://www.bankruptcymastery.com/wp-content/uploads/2011/07/duarte-dueling-appraisers.pdf[/URL][/URL]

2) Appraisal Foundation - Appraisal Opinion AO-13:
[URL="http://appraiserworkshops.blogspot.com/2011/06/appraisal-foundation-q.html"][url]http://appraiserworkshops.blogspot.com/2011/06/appraisal-foundation-q.html[/URL][/URL]

3) Appraisal Institute -
[URL="http://info.appraisalinstitute.org/blog/bid/119155/Appraisal-Institute-Helps-Appraisers-Choose-Comparable-Sales-in-Declining-Markets"][url]http://info.appraisalinstitute.org/blog/bid/119155/Appraisal-Institute-Helps-Appraisers-Choose-Comparable-Sales-in-Declining-Markets[/URL][/URL]

And here's a last suggestion to hopefully cover your arse as well:

The 'Appraiser's Larger MLS Data Sampling' is provided (see Addenda) with the MLS "Special Sale Provision" highlighted indicating the ratio of Arm's-Length, REO/Bank Owned or Short Sales within the larger data population. While providing this additional information exceeds typical USPAP, Relocation, Lender, GSE, HUD, VA and Inter-Agency appraisal protocols and guidelines, its purpose is to provide full disclosure and transparency as to the Appraiser(s) reasoning, comp selection, analyses and methodology used in this valuation assignment. The Client(s), underwriters, reviewers and all Intended Users are encouraged to have a thorough understanding of current and changing market characteristics and trends in addition to the Appraiser(s)' micro and macro analyses utilized to assist them in making a well-informed and prudent decision in accordance with the 'Intended Use' and definition of 'Market Value' set out in the Scope of Work herein.

 

[J Grant]

Joyce posted good information.

One of the things that appraisers fail to do, and need to do, is ask the question, why are there REO sales for my subject? You need to ask for your own report development, and it helps strengthen the report ( and lessens the chance of it being misleading, if you find out WHY there are a number of REO sales.

A property does not become REO status in a vacuum, and if a number of REO sales are present in a subject building, PUD, or development, why are they there? Were they bought during the high market cycle and the borrowers are underwater and defaulting? Were they property flips that maybe were fraudulant sales the first time around? If it's a condo project, are there building or maint cost issues that are leading to owners defaulting? Is it newer construction that sold too high in initial phase ?

Answer the reasons why the REO's are there, and that could help explain why they are selling for less, and what people are doing with them...are they buying the REO's to live in? To rent out? To fix up and flip?

The answers to these questions help determine the adjustment, if any, for REO status and trend in building. If there are no REO listings, is that a long term trend? Have most of them already been absorbed?

In the past, in declining or stable markets, market evidence was not always there to adjust REO sales up, (but there is evidence in some local areas now, when market conditions are rapidly improving and few or no REO listings are present.).

 

[Mile High Trout]

http://s3.amazonaws.com/kym-assets/photos/images/original/000/129/410/its%20a%20trap%20fixedv%20.jpg?1307043943

Market influence for predominantly REO markets: High/Low approach of mixed example influence. Anything less is uncivilized.

Sorry meme so big. Best one, but way huge. Actually swapped down. Click link for larger meme.

 

[Joyce Potts]

[url]http://s3.amazonaws.com/kym-assets/photos/images/original/000/129/410/its%20a%20trap%20fixedv%20.jpg?1307043943[/URL]

Market influence for predominantly REO markets: High/Low approach of mixed example influence. Anything less is uncivilized.

Sorry meme so big. Best one, but way huge. Actually swapped down. Click link for larger meme.

The perfect visual that goes with you name.

 

[Terrel L. Shields]

Private had a $17,000 downward adjustment

when does REO desperation financing trump CASH...what the *&^% does MV definition say in terms of WHAT??? CASH.

Turn it into the state

 

[J Grant]

I think he meant private sale, Terrel, not private financing . You didn't see the report and want to turn an appraiser into the state? What if someone suggested doing that to you based on internet heresay about a report you did?

 

[Mike Garrett RAA]

Come on guys...use some common sense! Forget you are the world's greatest appraiser and just for a moment pretend you are a buyer. You are typically motivated to buy a property to live in. You are well represented by an agent who shows you several properties that are identical. One is priced at, say, $200,000. The next one is priced at $215,000, and the third one is priced at $225,000. Remember...those are identical. Which one are you going to buy?

Now...you find out the one priced at $200,000 is a bank owned property? Do you really care? Remember the properties are identical. So, you enter into a contract to buy it. What is it's value?

Along comes the appraiser. He finds several sales ranging from, say, $200,000 to $225,000. Again, all are identical...forget for a moment adjustable items such as found on page two of the URAR form. What is he/she going to value the property? Would it be at the contract price? Would it be at the sold price of an REO? Would it be at the sales price of a traditional sale with conventional financing? Would it be at the middle of the Indicated Value as Adjusted?

The fact of the matter is...we, as appraisers report the market and then make an educated guess. Sometimes that guess might be above the contract price, sometimes below, and sometimes right on. My opinion? Use a mix of all sales within the market and let the chips fall where they may.

 

[AnonApprsr]

I wouldn't make an adjustment, just consider it during the reconciliation of the SCA.