REO's as comparables to non-REO

[hastalavista]

Is it quick marketing time what's important or REO status?

I vote REO status. :new_smile-l:

 

[J Grant]

I tried to copy an actual REO addendum I did but because it is on Wintota copyright software, it won't let me paste it here, even when i made a PDF file and scanned it in my computer, if anyone knows how to do it , let me know.

So instead I am retyping here the section from the REO addendum asking for four diff estimates, this page is attached to appraisal report.

A) "As Is" estimate of market value based on a reasonable makret esposure time as rendered in attached appraisal report: $50,000

The $50,000 is the MV for subject from attached report. In case there is any confusion, "as is" refers to home ("as is" , without lender making repairs.

B) As Repaired estimate of market value based on a reasonable markete exposure time : $51,000 (added $1000 to the MV for lender making repairs such as fixing tile )

C)"As Is" estimate of market value of client imposed restricted maketing time of (60-90) days. $48000
To clarify, "as is" refers to home without lender making repairs.

D) "As Repaired" estimate of market value based on a client imposed restricted market exposure time of 60-90 days. $49000

Okay, to sum up.

There is the appraisal report, purpose is to find MV. So, if an appraiser is asked to prepare a report for MV of a lender owned home, they develop the appraisal looking for MV, as they would in any other report looking for MV of a property.

Then, on the REO addendum, the lender asks for some conditional estimates of value. These additional estimates on the addendum, do not change the original market value developed in the attached report.

On the REO addendum, the client is not asking for a dispostion value ( if they were, it would be spelled out, "Provide an estimate of dispositon value"
Re, per definition of dispostion value, it is a future value in a shortened marketing time where the seller has a compulsion to sell in that marketing time.

Though the client is asking for an estimate of what the property might sell for in a 60-90 day time, in reality, they are not under compulsion to sell it in 60-90 days, ( as we have seen, REO's can be on the market a year or more) The client is asking for a theoretical estimate of value if sold in a 60-90 day marketing time, so they can make decisions about listing strategy, offers that come in from buyers etc.

 

[J Grant]

Doesn't every appraiser appraise to a range in Reconciliation then grudgingly put in a point value in the boxes when reporting a summary on a FNMA form or such? I have been doing that for years now.

NO!!!!!

The reconcillation is where the appraiser reconciles any diffrerences between sales comparison approach, income apporach and cost approach.

The point value is developed by the appraiser adjusting the comps to the subject on sales comparison approach.

Grudgingly putting in a point value in a box from a range in the reconcilliation approach?? That is your own private way of appraising ...

When appraisers discuss on the report a range of value in the comps, or a range of value in area sales, it is for the puprose of letting the client know that there is a wide range of prices among sales in the community, due to changing market conditions (or whatever the reason is)

 

[hastalavista]

I vote REO status. :new_smile-l:

I'll add to my prior response.
To your full question, which goes to intended use and meaningful results (my bold for emphasis):

is imposed marketing time really the best way to measure what an REO would sell for? Is it quick marketing time what's important or REO status?

If the REO status is an element of comparison used by the market participants, then I vote the REO status is more important than marketing time in measuring what an REO would sell for (although there may be some coincidental relationship with the value indicators).

I'm not re-opening the consensus opinion that the definition of market value precludes such consideration as repeatedly stated by most on this thread.

By the way, anyone who doubts that knowledgeable market participants would not consider status as an element of comparison in and by itself, can look at the poll conducted by Mentor and draw your own conclusions.

http://appraisersforum.com/showthread.php?t=175147

 

[J Grant]

I'll add to my prior response.
To your full question, which goes to intended use and meaningful results (my bold for emphasis):
If the REO status is an element of comparison used by the market participants, then I vote the REO status is more important than marketing time in measuring what an REO would sell for (although there may be some coincidental relationship with the value indicators).

I'm not re-opening the consensus opinion that the definition of market value precludes such consideration as repeatedly stated by most on this thread.

By the way, anyone who doubts that knowledgeable market participants would not consider status as an element of comparison in and by itself, can look at the poll conducted by Mentor and draw your own conclusions.

http://appraisersforum.com/showthread.php?t=175147

Per above, a measurable adjustment for market status reaction in our area, would be a condition of sale adjustment when comparing an REO sale to a subject., agree on that point!

 

[CANative]

I'm with Denis on this issue. I'm not at liberty to say exactly why but we've both had the benefit of hearing how a real world "power user" of REO appraisals thinks.