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REO's as comparables to non-REO

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Originally Posted by Denis DeSaix
The as-is market value of an REO property is what it would sell for, as-is (as-is an REO).
The client is not asking for the most probable price of a REO. I used to think that until I came here

Really? Are you appraising an REO on a form where it states that the purpose of the report is to find the most probable price the subject would bring , as defined by market value? If you are, and signed off on it, then you were supposed to be appraising for the most probable price, and are in violation of USPAP if you did not.

You just signed off on a report that states the puprose of the report is find market value , defined as the most probable price! (even though the client happens to be a lender)
 
Sales data should not exceed six months between the date of the appraisal and the sale date of the comparable, and must not exceed twelve months.

Must not? Got a link to this mandate?
 
Dennis and others, this is how I see it.

If you appraise a house that is REO owned, if you feel it has a stigma, and thus the standard you are going to use will differ from appaising it for the most probable price aka market value, then you have to invoke the departure provision, and state that on the report.

Because if it sates on the report form or addendum that the purpose of the report is to find the most probable price of the subject (market value), then that is what you signed off on as having done.

If you signed off that you made your analysis under the stated scope of work to find the most probable price/MV, but then you on your own decision went off and appraised it for liquidation or below market value,, don't you have to state that in the report? Doesn't have the client agree in writing that is what they wanted?

Are you deceiving your client if they hire you to find MV for a subject that they own as an REO, and you ignore that and instead choose comps to support a liquidation value, but the SOW on the form says market value/aka the most probable price?

Because if you sign off on a report where it states the purpose is to find the most probable price for the subject, (MV), then you just swore you did so. If it turns out on review that your methodology for choosing comps was for liquuidation value rather than MV, is that a violation of the purpose of the appraisal, if the purpose was to find MV?
 
if the market differentiates between REO and non-REO based on the listing status,
That would be extremely hard to prove.
So would your assumption that REO's automatically have "stigmas".

I agree that many times, REO's may sell for less than non REO owned. But that usually has more to do with the fact that REO's are vacant and the seller might take less to sell them more quickly. That still does not automatiaclly eliminate them as comps. It also does not mean they sold less because of a "stigma", or "listing status"

First of all, MLS listings are used primarily for agents to find homes to sell their buyers. The listings are not usually even seen by the buyers till they meet the agent in their car to see the home ( or the agent may email the listing)

I did sell RE, including HUD homes, quite a few years ago. There used to be a rule that to be a res apraiser you had to be a realtor first and it had some merit. We have to remember, the primary selection criteria for choosing comps is the principle of substitution, which comps most closely resemble the subject. IF an REO home closely resembles what a buyer wants, the agent will show it, along with a non REO home. These days, with REO's and short sales saturating many markets, it would be very hard to prove a stigma.
 
J Grant,

No one is saying to ignore other factors that influence value, (ie condition of the property)...and just lay all the blame on condition of sale "stigma".

There is, in general, a market aversion to buying REOs. This is typically (not always) an investment type of property. Why would that be? Because they can flip them and sell it at market value to make a profit. Banks can be a PITA. People don't like vacant, "as-is" properties.

They are less reliable properties to use. Many times, they don't have good descriptions and interior photos, if they have them at all. REO agents are difficult to work with and as useful as teats on a bore pig. Want to see an agent go into a "deer in the headlight" look? Ask them about the motivation of the seller on a REO. Or better yet, try to call B of A and ask them yourself. Homeowners can't even get a hold of their own lender with and straight answers. They are all over the board with motivation. One thing in common is that they have to get it off their books. They never wanted that property...they were forced into it because of a fraudulent homeowner breaking their contract with them. Banks are at a disadvantage and the market knows this...that's why they pay less for them. But, buyer beware...they're like a box of chocolates.

We are very close to agreeing...it's when you change the guide to which you are adjusting your comp. The second you take it off of a fair sale that has no extra motivation and/or stimulus to sell, the fair sale is out of the game and God only knows what value you're giving.
 
Thanks for reminding me re departure rule

If there is no departure rule provisioin now, and an appraiser signed off a report stating they appraised the subject for the most probable price, (MV), but in fact they did not do so, and instead they approached the assignment from the view that because the subject is REO owned, and in their opinion has a "stigma" , therefore they appraised it instead of at the most probable price, they appraised the subject for the lowest price, or for liquidation value, where would they disclose that on the report?

Or, does them appraising for other than MV/probable price negate them signing that they did so, and they should have turned down the assignment if they had no intention of appraising it to most probable price MV and that was the scope of work?
 
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Somewhat of a tortured interpretation of the "late great" Departure Provision.
 
J Grant said:
If there is no departure rule provisioin now, and an appraiser signed off a report stating they appraised the subject for the most probable price, (MV), but in fact they did not do so, and instead they approached the assignment from the view that because the subject is REO owned, and in their opinion has a "stigma" , therefore they appraised it instead of at the most probable price, they appraised the subject for the lowest price, or for liquidation value, where would they disclose that on the report?

Or, does them appraising for other than MV/probable price negate them signing that they did so, and they should have turned down the assignment if they had no intention of appraising it to most probable price MV and that was the scope of work?
Click to expand...

Answer B. Appraiser must turn down an unacceptable assignment.
 
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