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REOs and time adjustments

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Bobby Bucks

Elite Member
Joined
Jan 27, 2002
Professional Status
Real Estate Agent or Broker
State
North Dakota
Is anyone else making "negative" time adjustments on REOs and pre-foreclosures for manufactured homes? They certainly seem warranted in some cases especially when the listings support it. The principal of substitution should come into play on these I would think. It seems that not too long ago the active listings for manufactured homes were usless since many of the owners were not motivated or serious sellers and they were establishing their list price based on their last "sky high" refi mortgage broker deal.......but when reality sets in and they need to sell a realistic offering price seems to pop up. At any rate, I've got one where I'm looking at across the board negative adjustments of 10% based on active listings of almost identical GLA and age and all on the same street. The client isn't requiring listings, but with the REO mess they are the market IMHO. I'm betting our resident guru from Crowley has run into this before. :)
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
Bobby:

In our area we still have plenty of pie in the sky listings that some fool goes ahead and buys, under the ASSumption that the REO listings are trashed and therefore not 'comparable' - in most cases they didn't even look (ably assisted by Mr/Ms "I want my Co-Mission" Reality-or.

I am calling it stupid buyer/agent syndrome. There are some few REO's on the market, but nearly as many as you have down in your neck of the woods... y e t... 8O

I see no need in my market at present to make such an adjustment as the number of homes effected by competition (at this point) seem few. I have to agree with you: if there are a significant number of places on the market for 'realistic' prices or even 'fire sale' prices, the market would seem to be defined by those available properties.

As usual: just eggsplain what you did and why, they may ask about the yellow dripping form your chin, point to the plate and move on... Seems unlikely that folks would pay more for one box than the numerous other available ones.
 

Tim Hicks (Texas)

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Texas
Actually, Bobby, we have so many REO manufactured home sales, they dominate the market. I would say 95% of the manufactured home sales are REO sales in the areas I work. It takes more effort to provide a non-REO property for an "as repaired" value than it does to provide the two REO sales I use in REO appraisals. I have not had to make negative adjustments for time, only negative adjustments for condition for the one regular sale. The truth be known, the REO homes are in darn good condition. At least every one I have appraised has needed minimal repairs (less than $5,000). I just did one in Alvarado. 44 sales and 40 of them are REO in the past year. I just did one in Springtown (parker county), 38 sales and 35 are REO. There are so many REO sales that I would argue the REO market is the market. I would look at the sales versus the listings in your market. What is the dominant listings. Prospective sellers don't have a prayer selling their home for $80-120,000, when there are same size, same age manufactured home listings for half that price. Note how many have been on the market for extended periods for this reason. Note how many eventually ended up as REO properties. The manufactured home boom has gone bust and the debris is hitting the fan. If you don't have many REO sales yet, don't worry, you will very soon. If you don't have many REO sales I would highly recommend that negative time adjustment, because I would bet you will be able to support it. Yawn, what a worthless, sad subject to be knowledgeable about. :(
 

Tim Hicks (Texas)

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Texas
Bobby, I forgot to disclose that I usually have a wide range in my REO appraisals. The two REO home sales need very little adjustments. The one regular sale usually has large adjustments and still ends up about $20,000 higher than the REO properties. I just explain that the market is flooded with REO properties and the "as repaired" value is essentially the REO value plus repair cost. I then give a quick summary that states that there are so many REO listings that it does not bode well for the REO market. Over-listing a REO manufactured home is the kiss of death. The one I just did in Springtown, I did an REO appraisal on last February. The agent did not agree with my $52,000 value and listed it for 89,000, then $79,000, then $69,000. Now a new agent has it listed for $50,000. Boy, it feels good to be right, sometimes. My new appraisal has three new sales from the subject addition and my new value is $48,000. So, that should answer your negative time adjustment question. The key to selling these "homes that lost their wheels" is pricing them with a 90 market time in mind. I wonder how Colorado, FL and NC are doing with these things since they have been trailing TX in most sales for the past few years?
 

Bobby Bucks

Elite Member
Joined
Jan 27, 2002
Professional Status
Real Estate Agent or Broker
State
North Dakota
thanks folks.

Tim while I was doing the one I referred to another REO was being listed on that same street.....the agent is obviously new and listed the sucker for $25 grand higher than the rest of the street....it is $15K more than it would cost new! *lol* That will be one to follow.

Lee Ann thanks for the IRA link. As for REO "Trailers" I've strarted treating them like a land appraisal and an auto appraisal combined...... :)
 

Karl

Elite Member
Joined
Jan 15, 2002
Professional Status
Licensed Appraiser
State
Arizona
My problem here is I have not had "Normal" sale of a Manufactured resale on less than an acre of land in the past 6 months 22 REO's This is going out 25 mile radius.
 

Dale Smalley

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Florida
You are probally right giving a negative adjustments. I mostly use the active listings to value the REOs for sale as they are usally lower than the sales prices. You would be supprised how close the NADA book value and the listings are.
 

Caterina Platt

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
New Mexico
Bobby,

What I've noticed playing out here is a steep decline, then a rather flat low market. Initially, most of the REO's were absolutely trashed condition. Some sold for thousands less than the jacked up prices of the land alone several years before. This has been going on for a couple of years now, and currently the majority of the REO's are as Tim says, in pretty darn good condition. If your market is in the beginning of this REO cycle, then by all means pay more attention to those listings. It sounds as though you've still got some declining to go in your market and your analysis notes you're already smart to the trend.

Tim and I's markets, as they have for the past 18 months or so, sound like mirrors of each other. I think I counted 50 some sales last time I did one in my nearby MH area with only 3 or 4 being owner/occupant sales.

Just drove through a development in the south end of Albuquerque this past weekend where I'd estimate no less than 50% vacancy, many board ups, a couple of lots with the homes removed and the destroyed remains of the foundations and steps still standing. I can remember in mid '98 when I was working for the MH dealership, these lots were all the rage. $40K+ on soft REC terms with a 2 year call. Foundation, landscaping and steps included in the deal and bury the borrower in a chattel mortgage payment on top of it. The place was a ghost town like reminder of those scams and their results. It was truly nauseating.
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
So why then is our market so different? We do have some REO sales but it is not the predominent.
 

Caterina Platt

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
New Mexico
Dunno Mike. The places in my market that I am seeing this were the areas that folks with enough money and decent credit wouldn't have bought. Not even on a bet. Those who had bad luck/credit/divorce and were desperate for the American dream, settled for these locations in the first place. When a rough spot hit again (usually due to poor life decisions), they bailed in droves. Most were buried in over valued, high interest situations before the bottom fell out of the market.

Many parts of my market are doing quite well. In some locations I'm seeing decent measureable gains over the past year. It's a few less than desireable locations that this phenomenon is taking place.
 
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