REO sales and "Market Value"

[residentialguy]

REOs that have similar exposure of the traditional sale (3-6mo) are about 20% lower. Liqidation sales that sell under 60 days are at about 35% lower. These are all conventional financing (few cash sales). No seller financing or seller concessions.

 

[J Grant]

Okay, interseting...why would a buyer pay 20% more for a vacant lot? Just because it is non REO? There is no vacant house or other issues...I could understand quick sale prices lower as they are priced to sell fast...usually quick sales are cash deals but maybe not in your area....is the 20% more true for lots like your subject, or generic study using lots similar and dis similar to subect?

I'll take your word for the research, just hard to figure out why if financing is not an influence, why a well informed buyer would pay 20% more for a virtually identical lot.

 

[residentialguy]

LOL...you don't want to know about my subject's lot. Been working on this for weeks. Quite the complex assignment, I can tell you that.

 

[cejack]

I'm not going to comment on residential issues. But I would tell you to look at APB Valuation Advisory #3 and AI Guide Note 11.

Then post the definitions for "disposition value", "liquidation value", and "market value" (per FIRREA / CFR) up on your bulletin boards.

Then sprinkle that in with looking and reading the "fair market value" definition for bankruptcy and for deficiency judgments in your state's jurisdiction.

Pay very close attention to aligning the proper intended use with the proper definition of value consistent with the intended use. Answers for each different market with different market conditions and different intended uses and associated value definitions will result in different answers for different folks. Not going to expound here on that as that would take too long and you should just read the APB and Guide Note.

Also, if you haven't gotten into the habit of reporting a Most Probable Buyer, I liked that idea in APB #3 and would suggest developing that section in your reports in distressed markets.

 

[DMZwerg]

Zwerg, how did you come up with that so soon?

Pardon me for accidentally repeating one of your points.:icon_lol:

Sorry to take so long, but it is the same or similar letter used by same poster before ... in one of those "rounds" that happened last year or year before that he insists happens only once every 3-5 years ... (aka, he forgot it was me & ResGuy countering him 3 years ago, last year, and again this year, and makes the 2nd or 3rd time he brought up such a letter in last 2 years or so).

 

[DMZwerg]

DMZs posts don't acknowledge the fact that both entities stated their official positions. Even if they are wrong on an intellectual basis their opinions can still be considered indicative of the current party line. The whole point of standards is to exploit the utility in the market of uniformity and conformity. The point is that the market participants take their cues on appraisal-related issues from the appraisers, not the other way around.

Gotcha. It is not a "Standard" until it is published in USPAP.

Doesn't matter if the writer is head of the ASC, ASB, or USofA, until it hits an officially published Standard, Advisory Opinion, FAQ, or the new one called a "Guideline" it is supplemental information and is not binding. Potentially useful in context, but not out of context like you try to push.

Thanks for playing!

From my perspective some of you guys have painted yourselves into this corner. I didn't do that and I'm not picking on you. I'm just pointing out that you're standing in the corner with a massive logic fail on your hands.

Actually, it seems to me that your logic is faulty.

When two people can read the same documents over and over and their interpretations continue to vary it may be that the topic is not one of logic and science but has strayed into the territory of "belief" ...

BTW, one thing that is stated in Guidenote 11 is that if one uses a distressed sale and does not adjust the appraiser must comment. Any argument on that?

George is right, market value definitions continue to change. In fact, we wrote them ourselves to meet our scope of work. There are many definitions of market value. But, for now I am going to continue with my history lesson :laugh:

The AIREA tried to explain the MV definition in the 8th edition by saying:

"Market Value represents an expected price that should result under specific market conditions"

But, It seems that the 8th edition MV definition was so cumbersome and confusing, a revised MV definition was issued by AIREA in the Rev.Ed. of the Real Estate Appraisal Terminology.

"The most probable price in terms of money which a property should bring in competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus."

Yeah, but we *should* all be interpreting the definitions the same way, the fact that we are not is concerning.

The AIRREA 8th Edition definition would seem to fit George's and JGrant's interpretation and if that one was used I would have no arguments except to ask "are you stating the specific market conditions in your report?"

The Rev.Ed. definition appears more similar to the current and has those two terms that cause trouble: "fair sale" and "undue stimulus". We not have some appraisers claiming the meaning of "undue" is "atypical for the local market".

I'm not going to comment on residential issues. But I would tell you to look at APB Valuation Advisory #3 and AI Guide Note 11.

Then post the definitions for "disposition value", "liquidation value", and "market value" (per FIRREA / CFR) up on your bulletin boards.

Then sprinkle that in with looking and reading the "fair market value" definition for bankruptcy and for deficiency judgments in your state's jurisdiction.

Pay very close attention to aligning the proper intended use with the proper definition of value consistent with the intended use. Answers for each different market with different market conditions and different intended uses and associated value definitions will result in different answers for different folks. Not going to expound here on that as that would take too long and you should just read the APB and Guide Note.

Also, if you haven't gotten into the habit of reporting a Most Probable Buyer, I liked that idea in APB #3 and would suggest developing that section in your reports in distressed markets.

Actually, we "discussed" Guidenote 11 at length for most the thread. Turns out it is possible for some people to interpret that differently than others.

 

[cejack]

Actually, we "discussed" Guidenote 11 at length for most the thread. Turns out it is possible for some people to interpret that differently than others.

That would be exactly one of my points from reading Guidenote 11 and APB #3. People SHOULD be interpreting it differently depending on their market and the relative intended use and market value (or "fair market value") definition that is in operation for their particular intended use in their particular market area and legal jurisdiction. (I'm talking about bankruptcy, deficiency, and standard federally insured lending appraisals here.)

Of course Guidenotes or APB's are not binding like USPAP. They are not meant to be anything else. But they do offer some pretty good ideas for handling thorny issues in a variety of different markets.

There are no hard and fast rules as I see it in the whole debate. It is largely going to depend on your particular market and where in the cycle you find yourself in your particular market. That's what I think APB #3 and Guidenote 11 espouse.

But I think everyone should read it very carefully themselves and see how they line up with your particular market. If you're confused ask the question herein and pay closest attention to the folks in your market area that you respect and see what they say after reading APB #3 and Guide Note 11.

 

[George Hatch]

Gotcha. It is not a "Standard" until it is published in USPAP.

Doesn't matter if the writer is head of the ASC, ASB, or USofA, until it hits an officially published Standard, Advisory Opinion, FAQ, or the new one called a "Guideline" it is supplemental information and is not binding. Potentially useful in context, but not out of context like you try to push.

Thanks for playing!

You're being unduly thick here. Both entities are citing USPAP as the basis for their reasoning. USPAP is an appraisal standard and with respect to mortgage lending assignments, the one entity is literally THE source of recognized appraisal standards in the USA.


Both of these entities can be considered representative of the mainstream of our profession. When it comes to the technical aspects of appraising you would have to have a really good reason to disagree with either of them. Something more than your personal opinions or your local observations in the one property type.

Even if both entities were technically incorrect on this issue, an allegation you have yet to demonstrate, they still are both considered by most appraisers and users of appraisals to be authoritative references on the technical aspects of appraising. And you are not.

If/when you can come up with a more authoritative reference for licensed appraisers to heed then we can discuss it seriously but until then you've been coming up short. Repeatedly.

In the ongoing disagreement between the appraisal profession and the "other valuation professionals" people are choosing their allegiances. I've chosen to align behind TAF, as is entirely appropriate for a veteran USPAP Instructor, not to mention any other professional appraiser or any state licensing agency. If/when push comes to shove that is always a defensible position for any licensee.

You've apparently chosen to trivialize and disregard their input as well as the reasoning they're using to explain it, inclusive of their references to appraisal standards. So be it. As far as I can see the difference between your position and mine is that you're operating without a net. You've got nobody who counts to point to as being supportive of your opinion. And in my opinion and as far as appraising goes Lawrence Yun doesn't count.

 

[JSmith43]

As far as I can see the difference between your position and mine is that you're operating without a net.

Pardon me, but aren't you operating with an imaginary halo again? (veteran USPAP instructor, etc, as if they are all of one mind on this topic. I can think of more than one USPAP instructor that has posted on this topic but has better things to do than butt heads with you.

There is contradictory authoritative information that has been presented & I think Zwerg & others have ranked the sources logically, with APB #3 ranked 1st & AI Guide note 11 ranked 2nd.

You can hang your hat on the other sources, a letter with an intended use of heading off unfavorable legislation in a political arena & RK's preference for court decisions not on point with the intended use of FIRREA MV appraisals. That is more like working with a butterfly net.

 

[JSmith43]

OK. I answered in kind, perhaps taking the sport of it away from Zwerg. I needed a work break

Now let me summarize, not in kind, but professionally. I respectfully disagree for the reasons stated, but am always open to other views & new information.