REO's as comparables to non-REO

[J Grant]

Dennis, the guidelines you posted for FHA toward the selection and use of REO comps is what I have always followed, and is what I have been trying to convey in my posts (clumsily it seems)

 

[residentialguy]

(clumsily it seems)

Can't argue there! :laugh:

 

[hastalavista]

I think some of the litigators might argue that the contract price is a more important indicator of market value, regardless of other external stimuli.

Unfortunately, without additional clarification by the users regarding the definition of market value, I think you are correct.

A simple.. very simple... end to this discussion would be for the definition of market value to be amended to state the subject property should not be valued is if under an REO or short-sale stigma.

That would provide clear guidance to all appraisers.
That would eliminate the litigation-risk you bring up.
That should make the users very happy because they will be getting exactly what they want.

 

[JSmith43]

1. REOs can be used as comparables (provided they meet the criteria).

Read it again and tell me the author isn't saying to use an REO only if you have to, and then, only if it also meets the following 4 screening criteria...

Edit: I hit the post button in error & completed my thought 2 posts below. Denis managed to get a post in between the delay

 

[hastalavista]

Well, I honestly believe this issue is too uncertain to be considered clear-cut.

And, I'm not convinced that I'm 100% in my argument.

I would prefer it if the definition of MV was clearer. I personally don't care what it is. I do care that I have a clear understanding of it so that I can complete my assignments correctly.


So, I'm tapped out on this at this point.
Anyone that can post an authoritative citation on this will have my gratitude.

What about the appraisers who do REO valuations for Fannie, Freddie or FHA? Do they have a rule that says "don't" or "do" use REOs as comps if the subject is an REO?
Or, is it up to the appraiser to use the best comparables?

 

[J Grant]

Res Guy, I agree with your last post!!

 

[hastalavista]

Read it again and tell me the author isn't saying to use an REO only if you have to, and then, only if it also meets the following 4 screening criteria...

It says

Appraisers may utilize sales comparables from other REO transactions only when such sales are deemed to be the best available for the market area and they meet all of the following criteria:

(my underscore)

It doesn't say only if you have to. It says only when they are "deemed to be the best available".
Isn't that the issue? Are REO sales most similar to an REO subject and therefore become "the best available" while meeting the remaining criteria?

I'm not trying to parse it or be cute. I don't read this to mean "only when I have to". I read it "only when I should".

 

[JSmith43]

1. REOs can be used as comparables (provided they meet the criteria).

Read it again and tell me the author isn't saying to use an REO only if you have to, and then, only if it also meets the following 4 screening criteria...

The presence of a REO comp is made to sound about as welcome as a skunk at a garden party. The 4 conditions are 1. The skunk had a recent bath or the scent creating glands were removed, 2. the skunk had a proper invitation 3. The skunk is physically similar to the other guests 4. After a reasonable exposure time to the guests, they still accept the skunk (would invite the skunk to another garden party)

 

[JSmith43]

I thought the FHA comments were harsher than I view the usefulness & applicability of REO comps. I use them when the available non REO comps are such that the REO comps bring the same or less variance to the table.

 

[residentialguy]

It says (my underscore)

It doesn't say only if you have to. It says only when they are "deemed to be the best available".
Isn't that the issue? Are REO sales most similar to an REO subject and therefore become "the best available" while meeting the remaining criteria?

I'm not trying to parse it or be cute. I don't read this to mean "only when I have to". I read it "only when I should".

Mentor is spot on.
It says "Appraisers may utilize sales comparables from other REO transactions" ...not should utilize them. And even then, only a few would be considered allowable if they pass the test. Not a ringing endorsement by any stretch of the imagination.