REO sales and "Market Value"

[residentialguy]

I am not fabricating stories... I am using examples from real life market scenarios. Read back on your prior posts in various threads where you jump in to defend high SC prices, for example...

I don't advocate over value. You're equating with high SC with over value. A high SC price doesn't mean it is over MV. I do, however, look at all the data and see it for what it is.

 

[residentialguy]

Off to the lake....have a great weekend everyone.

 

[J Grant]

You too , enjoy!

 

[PropertyEconomics]

Maybe you need to revisit AI's "Distressed Sales as Comparables" and their blatant lack of enthusiasm of even suggesting their use.

"Appraisers cannot categorically discount foreclosures and

short sales as potential comps in the sales comparison
approach. However, due to differences between their conditions
of sale and the conditions outlined in the market value
definition they might not be usable as comps. Foreclosures
and short sales usually do not meet the conditions outlined
in the definition of market value. A short sale or a sale of
a property that occurred prior to a foreclosure might have
involved atypical seller motivations (e.g., a highly motivated seller.)"​

I've heard the argument from you and your twin brother that that the flavor of the day sets what is typical. Whatever is predominant (for God only knows what time frame or percentage that entails), it becomes the new Miss Typical Seller. How does AI view atypical? What example did they give to show atypical? ah yes.... "atypical seller motivations e.g., a highly motivated seller" Therefore, a typically motivated seller is one that is not a highly motivated seller.

Typical is not a moving definition. Typical motivation is a standard that means there is no high motivation.

This post is insulting .. First off I have no TWIN brother and Second I dont subscribe to the "flavor of the day" ... what idiotic things to say.

The AI writings are exactly what I have stated ... however, you and others read into the teachings things they do not say.

The more you post the more I see you are but one that argues simply to argue but never shuts up to learn ..... If you wish to believe George Hatch is not one of the brightest here then so be it ... its apparent you would prefer personal attacks.

Enjoy the lake.

 

[JSmith43]

Oh great, first I see a shaky Clint Eastwood talking to a chair and now PE is trying a comedy bit trying to impersonate a jgrant post.

It is pretty funny, PE, but I think it will streak by over the heads of most here.

Even at 82, I still don't think it would be a good idea to cross Clint E. in real life. I think he can act so well because it is close to natural.

I don't want to cross you either, PE. Have a nice Labor Day Weekend!

You too, JGrant (I say, in fear of being posted to death):icon_lol:

 

[PropertyEconomics]

Oh great, first I see a shaky Clint Eastwood talking to a chair and now PE is trying a comedy bit trying to impersonate a jgrant post.

It is pretty funny, PE, but I think it will streak by over the heads of most here.

Even at 82, I still don't think it would be a good idea to cross Clint E. in real life. I think he can act so well because it is close to natural.

I don't want to cross you either, PE. Have a nice Labor Day Weekend!

You too, JGrant (I say, in fear of being posted to death):icon_lol:

Just finished mowing the lawn, its going to be a hot one, and I have some reading to do this afternoon .. will be very relaxing .... and tomorrow a Wine Festival .. what more could a man ask for in the accompaniment of his beautiful wife?

 

[J Grant]

Then your wife must have good taste, PE! Have a good weekend, everyone...we all deserve a break .

 

[Terrel L. Shields]

REO sales can never be MV, also posted about vetting other atypical sales types, and explored the rest of meeting the MV definition, such as buyer actions, then their REO posts would make sense.

Being one of those who believes that an REO sale cannot meet the defintion of "Market Value" by the definition we use...it is a distortion to say that it is not market evidence. Even if the REO were to sell for the same as a true arm's length, undistorted transaction, it is not meeting the test of "arm's length". That does not mean it cannot be adjusted.

Not to delve into the issue of how to determine the amount of adjustment, for me central to the whole issue is that some folks are MARKING DOWN the arm's length, homeowner to homeowner sales to meet the REO price rather than marking up the REO price to that of the uncompelled transaction. Once again. No one was using REO sales in 2005 and marking down sales then. Why are they doing it now? Did the definition of MV change? If it did not then the sales need to be treated the same way.
In a market where REOs are so overwhelming that homeowner to homeowner sales cannot be differentiated, at the very worst, the HO 2 HO sale is still "Market Value" and you cannot make a case that a homeowner selling his home will have to take less than the REO sales. Investors buy value. If they have a choice between the occupied home and a vacant house REO...both at identical pricing and condition/age/size...they will take the occupied dwelling every time. They buy on one metric and one alone. What is the price I pay v. the rents I can get.

Realty Trac is probably as close as anyone scaling the national data. And all those kinds of firms (Radar Logic, Core Logic, Realty Check, etc.) as well as the NAR point out that less than 1 in 4 sales are REO. Short sales sell for more than REO and the non-short/REO sale is higher yet.

Outside a very very few markets even in California, Las Vegas, Phoenix and Florida, I am willing to bet that same situation exists. And if it is true, then over 50% of the market is not REO nor short sale, therefore the dominant market remains the HO 2 HO market and therefore, you cannot make a case for REOs so affecting traditional sales that you need to discount these traditional sales. And if you don't discount them, then the logical thing is you have to adjust the typical REO Up. Nothing else makes logic sense.

 

[J Grant]

Not to delve into the issue of how to determine the amount of adjustment, for me central to the whole issue is that some folks are MARKING DOWN the arm's length, homeowner to homeowner sales to meet the REO price rather than marking up the REO price to that of the uncompelled transaction.

T, I think the above is a rare downward adjustment that is seldom made. My area of FL was one of the hardest hit with REO activity, and I believe I made downward adjustments of non REO sales twice in 3 years. Both involved flip sale situations where the flips were above market and needed a downward adjustment. I think you are concerned about something that is an extremely small part of appraisal activity.

Once again. No one was using REO sales in 2005 and marking down sales then.

Why would they? First of all, there were hardly any REO sales in 2005. And if there were, non REO's were clearly selling for more and in short marketing times, why would anyone adjust them down? The market was rising then. Here in FL, where areas in decline are starting to recover, I would not mark a non REO sale down.


Why are they doing it now? Did the definition of MV change? If it did not then the sales need to be treated the same way.

No, the definition did not change, but markets change. The better appraisers, imo do treat sales the same way, while recognizing changing market conditions. The pertinent question for 2005 is not why appraisers were not using REO sales, it is why they did not adjust for over priced flip sales, builder sales, exotic financing.

In a market where REOs are so overwhelming that homeowner to homeowner sales cannot be differentiated, at the very worst, the HO 2 HO sale is still "Market Value" and you cannot make a case that a homeowner selling his home will have to take less than the REO sales.

In some areas, sadly, at the worst of the decline, that is what happened ( and still happens in troubled condo complexes or subdifvisions with issues ). The homewoners do end up competing and if they want to sell, sell at short sale prices, or default and their home becomes an REO. That may not be desireable market activity, but it is normal in some specific cases. Other cases, when enough investors buy, renovate, and resell for higher prices, values rise again and private owners can sell at higher prices, because now the former REO homes are now higher priced renovated listngs.


Investors buy value. If they have a choice between the occupied home and a vacant house REO...both at identical pricing and condition/age/size...they will take the occupied dwelling every time. They buy on one metric and one alone. What is the price I pay v. the rents I can get.

If an investor has to buy both homes for same price and everything about the homes are the same, some investors might buy the REO. They can close right away and get a tenant in right away. Dealing with a homeowner and their time line can be a PITA. An owner buyer might prefer an occupied house as it more homey feeling, but if they needed an immediate closing for some reaon, they might chose the vacant REO. Most home buyers for personal use would prefer owner occpied, but if an REO has superior features or view or location, they will pick that .

 

[moh malekpour]

residentialguy;2290476

"Appraisers cannot categorically discount foreclosures andshort sales as potential comps in the sales comparison
approach. However, due to differences between their conditions
of sale and the conditions outlined in the market value
definition they might not be usable as comps. Foreclosures
and short sales usually do not meet the conditions outlined
in the definition of market value. A short sale or a sale of
a property that occurred prior to a foreclosure mighthave
involved atypical seller motivations (e.g., a highly motivated seller.)"

You got to pay attention to the word might at the front of any statement
When there is a word might or may be at the front of any statement, it means that the writer of that statement is not 100% sure that what that statement indicates is true. The word might is a wiggle room for writer. It is the writer's assumption that "a foreclosure might have involved atypical seller motivations" or it might have involved typical seller motivations. If there was no word might in that statement, it would include all but with might it doesn't include all. it might include 50%? 70%? the writer doesn't know and no body knows , except you, that all sellers of foreclosures have atypical motivation. That is why the word migh has been used here.
If I say you are right, I mean you are right 100%. If I say you may be right, I mean I am not sure 100%. So, you may be right but you also may be wrong. It might be 50% or 70% either way but I don't know. Remember the song: (you may be right, you may be crazy)