REO's as comparables to non-REO

[Deanie]

I am wondering what opinions are about using REO properties when appraising a non-REO property for a refinance. The property I am doing is a 1959 Rambler that has an updated kitchen, siding, flooring etc. All done about 6 years ago. The entire neighborhood is 1955-1961 Ramblers many in the same condition and with the same amount of updating as the subject. Most of the sales in the past 6 months are REO's (not short sales). The broker wants me to go outside the neighborhood (as far as need be) in order to use only non-REO's for comparables. He suggested using a comp that was 1.5 miles away and out of the neighborhood. The REO's in the immediate neighborhood are in the same condition and are selling in the same amount of time as non-REO's. What does everyone else do? Am I ok using REO sales? I have looked on fanniemae.com for info but haven't found anything on this subject. If anyone can lead me in the right direction for more info i would appreciate it.

 

[jakeboeger]

If the subject property was listed for sale would a buyer also consider the comparable REO properties?

Based on the information you have provided I think you would have to utilize the REO sales, especially if they are in similar condition to the subject.

 

[Lloyd Bonafide]

The broker wants me to go outside the neighborhood (as far as need be) in order to use only non-REO's for comparables. He suggested using a comp that was 1.5 miles away and out of the neighborhood.

Why is the broker telling you what comps to use on a refi?? (And why are you listening?)

 

[Deanie]

He disputed the value with the management co. and suggested that i should have used 2 other comps that he supplied. Also the homeowner called me today and told me what the broker said and that he was filing a complaint with the lender. I stated in the report why i used 2 REO's as comparables.

 

[Randolph Kinney]

There was an appraiser, ResGuy or something like that, in MN that was a proponent of using traditional sales only and if you did use distress sales, to adjust for them.

Maybe you can look him up on the forum and ask him how he does it.

 

[Lee Lansford]

I am wondering...

Based upon what you uncovered during this assignment and your knowledge of the neighborhood in general and housing which competes with the subject property in particular, what is the relationship, as to price paid, for properties which are "clones" except that some sell as bank-owned and others sell "traditional"?

You do report that "most" (but, then, not all) recent sales are REOs; what does the market value tell you as regarding my above question?

 

[Mike Garrett RAA]

Just wait til the loan officer and the home owner tell you to appraise the property for what they need or they will kidnap your wife and child. Are you nuts or something? My first call would be to the state to report the loan officer.

 

[VolcanoLvr]

Principle of Substitution.

Would a typical buyer, who wanted to live in your subject neighborhood, go far away just to pay more?

Appraisers MUST pay attention to comparable REO and Short Sales in their subject neighborhood. And your report better dern well contain one or more if that's what is happening in the area. You cannot ignore these sales.

The 'broker' is just a salesperson, and wants high dollars.

The borrower is emotionally tied to the property, and probably does not really know what's happening nearby with sales and values.

You did the right thing. Don't back down.

 

[hastalavista]

There was an appraiser, ResGuy or something like that, ...

Your memory is correct.
I haven't seen ResGuy for a while?

 

[Randolph Kinney]

Your memory is correct.
I haven't seen ResGuy for a while?

Yeah, wonder what happened to him. He use to police the forum to assure appraisers that the only way to get market value was to use traditional sales even if that meant going miles away from the subject in a suburban neighborhood to find traditional sales.

You presented the best argument on short sales I have seen - ie. using like for like for the same stigma.