REO's as comparables to non-REO

[DMZwerg]

comp does not meet all criteria of the type of MV requested

A comp is not supposed to meet the criteria of MV.
(see my related posts)

We are estabishing MV for the subject , not picking comps that way ( comps are supposed to be arms length transactions, which is still not the same thing as MV)

Actually, reverse that.
The SUBJECT does not have to meet the definition of market value, the COMPS do. The value is what you are appraising to, not the sale contract you are looking at. If it was the way you worded it then what would be the definition for a refinance (so buyer or seller)? m2:

 

[DMZwerg]

But if the subject is an REO, and the appraisal is "as-is", and the market does react to the listing status differences, then using a non-REO as a comparable for an REO without analyzing (and, I'd argue, adjusting for) the difference will conclude a value that isn't "as is" for the subject.

Dude!
"How to Use the URAR 2nd Ed", page 160, bottom of the page:

This appraisal is made ...
Indicate whether the final value estimate is based on the present condition of the property "as is" or, if not, how the condition of the property ...

So, Mr. DeSaix, what in blazes does the condition of the property have to do with subject status as an REO or the definition of market value? Appraising "as is" (condition) or "subject to" (completion of plans) or "subject to" (completed repairs) or "subject to" (Extraordinary Assumption condition/deficiency does not require repair) are a separate issue dealing with condition. It affects the value determined, but not in the way or for the reason you describe.

Hopefully now you know what you didn't know before.

 

[DMZwerg]

The client is asking for the market value of the subject, as-is.
If its listing status creates a stigma that is (a) identifiable and (b) measurable, should that listing status not be considered as an element of comparison (in my scenario, the market is using it as such).

Simple:
The definition of market value has not changed, and if there has been no new actuivity on the market and no indication the market has declined both an REO and a "flip" a moth or so later could well have the exact same market value under the FNMA/FIRREA definition. Why? Because if the condition has not changed then the appraisal is made in the same "as is" condition of the subject, and thus if the market has not changed the market value should be the same. The difference could be the client and the intended use, but that would be applicable to the definition used and we already stipulated FNMA/FIRREA, so QED I think.

 

[DMZwerg]

Here is what I found (so far) regarding FHA's position:



This quote appears to imply the following:
1. REOs can be used as comparables (provided they meet the criteria).
2. REO sales can be between willing participants (buyers and sellers); so the argument that all REOs, by definition, have unwilling participants (the seller) is contradictory to this point. Clearly, from FHA's perspective, some REO sellers can be "willing".
3. Distress sales are identified as being "Sheriff Sales". The statement implies that REOs are not always considered a "distress sale".

You missed point 4: "comparable property subject to reasonable adjustment"
4. REOs must be reasonably adjusted to be used. (Period)

 

[DMZwerg]

Except maybe for your penchant for going outside the neighborhood and mayber further back in time to find "better" "typical" comps (your defintions), I don't see anything new. So yes the question is, what's your point?

Huh.
I could have sworn that FHA statement said "market area" and not "the neighborhood". I must need my ears checked because one of us is obviously not seeing straight!

NHBD A, B, C & D could all be in the same market area from my reading of that. :new_snipersmilie:

 

[DMZwerg]

Sorry for posting 5 posts in a row, but I was late in seeing Terrel's post and the FHA post. I think between that post, "as is" meaning condition rather than status, and the confusing between the subject needing to meet the definition being used rather than the comps needing to be adjusted to meet it we are finally about to be on the same page ... aka, the page Terrel, ResGuy Mentor and I started on (note: we 4 do not all agree, but are fairly close in even in our disagreement).

Glad we could help clear some things up!

 

[J Grant]

Actually, reverse that.
The SUBJECT does not have to meet the definition of market value, the COMPS do. The value is what you are appraising to, not the sale contract you are looking at. If it was the way you worded it then what would be the definition for a refinance (so buyer or seller)? m2:

NO A THOUSAND TIMES NO THE ABOVE USPAP VIOLATION

Do me a favor. Open up a report on your computer. Look at what it says on the form at the very top, under the large USPAP letters.

It states: "The purpose of this summary appraisal report is to provide the lender/client with an accurate and adequately supported opinion of the market value of the subject property"

Then, on the addendum, there is a definition of market value: "the most probable price which a property would bring in a competitve and open market under all conditions requisite for a fair sale, the buyer and seller each acting prudently etc till end of definition"

In other words, the defintiion of market value exists to provide a "theoretical sale condition" of the suject, aka the most probable price which a property ( the subject) would bring in a competitive and open market etc".

It has nothing to do with whether or not the subject has a contract of sale. You could be going to do an appraisal on a subject where the owner wants to refinance, but you sitll apply the MV "theroetical sale condtion", aka the definition, "the most probable price a property would bring on the open market", as a way of finding the MV of the subject.

 

[J Grant]

The terms "fair sale" and "fair market value" were common in usage before FIRREA. No need to make them up.

Traditional sale is used on this forum a lot because too many appraisers can not seem to comprehend the difference between REOs/short/estate/RELO and sales that do not meet any of those specific definitions, especially since the traditional usage of the term "fair sale" has fallen out of fashion except in one place ... the standard definition of market value used by FNMA and such under FIRREA. See link, definition (g) and the 5 points clarifying beneath it.

The definition of MV exists to define the value of the subject, see my above post, at top of page it states purpose of the appraisal, to provide the lender/cleint with the makret value of the subject property.

And then on the addendum, the term MV is defined, and it is meant to apply to finding the value of the subject (puropose of the appraisal) It is too bad on the forms they separated it by the pages and MV definition shows up in the Firea/USPAP form addendum, instead of directly underneath the purpose of the appraisal statmenet.

What some appraisers are doing, is taking the defintion of MV alone, not related to the purpose of the appraisal (finding MV for the subject). They are taking the defintion and applying it to a criteria for comp selection, as you are doing

(If the client wanted the appraiser to find the MV for the comps, the purpose of the assignment were to find the market value of the comps, not the subject) Then the statement at top of USPAP form would say "Purpose of appraisal is to find MV of the comps," and on sales comparison page/end of report, , instead of a numerical appraised value of the subject, there would be three sets of values,, (if 3 comps were used), a numerical appraised value of comp1, comp2 and comp 3.

 

[J Grant]

Why would you?

Market value is based on what value you are appraising based on the definition of market value used (and thus the comps), NOT what the subject is. CONDITION of the subject affects the value as it related to whether the appraisal is made "as is" or "subject to" (Hypothetical "as repaired", Hypothetical "as constructed" or even an Extraordinary Assumption").

Maybe you did not comprehend her point nor enlighten her as to the finer points of WHAT definition of WHAT market value? :icon_mrgreen:

NO again, and USPAP vioiation if you are apprising the market value of the comps and not the subject. It clearly states on top of form the purpose of the appraisal is to provide a mraket value for the subject (please open a USPAP form on your computer or a printed form and find it at top)

The reason Dennis's peer was correct in this instance, is that USPAP asks we apply the market defintion to the subject for puproses of the appraisal, as an assumptive set of conditions to find MV for the subject, according to a set of criteria, what the property ( the subject) would bring in an open market etc", thus, for report purposes, if the subject house happens to be owned by a lender we still treat it the same as if it were a house not owned by a lender, and we treat a house that has a contract of sale the same as a house that is being appraised as a refinance. When I say we treat them all the same, I mean, per USPAP purpose of the appraisal, we apply the definition of MV as an assumptive condition to the subject, the most probable price it would bring on an open market in a fair sale, (even if the subject in a refi appraisal is not for sale)ajbbu theor "conditonin fo oes of the peeTrreererjbeoubigiAGAAGAgai

 

[residentialguy]

Originally Posted by DMZwerg
Actually, reverse that.
The SUBJECT does not have to meet the definition of market value, the COMPS do. The value is what you are appraising to, not the sale contract you are looking at. If it was the way you worded it then what would be the definition for a refinance (so buyer or seller)? m2:

NO A THOUSAND TIMES NO THE ABOVE USPAP VIOLATION

Do me a favor. Open up a report on your computer. Look at what it says on the form at the very top, under the large USPAP letters.

It states: "The purpose of this summary appraisal report is to provide the lender/client with an accurate and adequately supported opinion of the market value of the subject property"

Then, on the addendum, there is a definition of market value: "the most probable price which a property would bring in a competitve and open market under all conditions requisite for a fair sale, the buyer and seller each acting prudently etc till end of definition"

In other words, the defintiion of market value exists to provide a "theoretical sale condition" of the suject, aka the most probable price which a property ( the subject) would bring in a competitive and open market etc".

It has nothing to do with whether or not the subject has a contract of sale. You could be going to do an appraisal on a subject where the owner wants to refinance, but you sitll apply the MV "theroetical sale condtion", aka the definition, "the most probable price a property would bring on the open market", as a way of finding the MV of the subject.

I think you two are on the same page here and someone's misreading. You both (me, too) are saying that the subject's contract is moot.