REO's as comparables to non-REO

[DMZwerg]

I could have sworn I saw that horse twitch.

:laugh: Yeah, but most probably feel is better to stand back and watch the horse for a while to be certain rather than be closer and know for certain that the horse is twitching when you get kicked! :icon_mrgreen:


My reason for bringing it up over and over and over and over and over and over again is that, having worked with cows & horses, I know what getting "gently tossed" (as my aunt put it) 10 feet feels like so I don't ever want to get kicked and thus, when I see the horse twitching, figure it is my business to warn people that the horse ain't dead and could still kick them.

How that pertains to the discussion is thus:
Many appraisers seem to be of the opinion that when a certain portion of the market is REO sales (I have heard as low as 30% but most seem to think somewhere at or over 51% is the threshold) then they ARE the market and can be used in appraisals without comment, adjustment, or even due analysis. In other words they think that the REO Fairy come down, wave a magic wand, and suddenly they are the same as traditional sales and meet all the points mentioned under the Definition of Market Value. Some claim the REO Fairy doesn't actually change the REOs but alters the Definition of Market Value such that it is Earnest in the city and John in the country. Well, there isn't an REO Fairy nor a magic wand, so if the appraiser is using a FNMA form with its Definition of Market Value then the appraiser should be aware of what each and every word and phrase of that definition means and entails. Further, when not using such a form then they should make certain that both they and their client should be in agreement as to what value is being developed, its definition, and how it applies.

So, the net result is that there are two camps:

1. The definition on the FNMA form does not change.
2. I can do whatever the heck I want (including change my interpretation of the definition to fit my needs and make it easier on myself) and I don't owe my client an explanation.

Now we have lackeys of the client pressuring to "reinterpret" the Definition of Market Value on the FNMA form to better fit THEIR needs, aka to cause the deliberate low-balling of values in certain markets. Camp 2 does not seem to comprehend what is wrong with that (aka, changing the definition and what that really means for the profession).

That's the problem, the horse isn't dead, but rather has kicked down the fence and is about to cause a stampede!

 

[ValueArtist]

If there is no disparity between the sales price of REO's and standard sales, this may indicate that REO's are driving the market, in which case they would best represent Market Value. Now if there is a significant disparity between the sales prices of distressed and standard sales, you may need to analyze deeper to uncover any causes outside of liquidation that may be at play.....REO's- liquidation value(limited market exposure at sale price).

 

[VegasWayne]

Las Vegas has had the highest foreclosure rate of any U.S. metropolitan area for 49 months in a row. I'm working on an appraisal now where all comparable sales in the market area for the past year were either short sales or REO's. All comparable listings are for short sales or REO's. At some point REO's and short sales become the market.

 

[residentialguy]

Las Vegas has had the highest foreclosure rate of any U.S. metropolitan area for 49 months in a row. I'm working on an appraisal now where all comparable sales in the market area for the past year were either short sales or REO's. All comparable listings are for short sales or REO's. At some point REO's and short sales become the market.

but they don't represent the definition of FNMA's Market Value.

 

[VegasWayne]

The appraisal is not for a FNMA loan and I'm not using their form.

 

[Randolph Kinney]

Las Vegas has had the highest foreclosure rate of any U.S. metropolitan area for 49 months in a row. I'm working on an appraisal now where all comparable sales in the market area for the past year were either short sales or REO's. All comparable listings are for short sales or REO's. At some point REO's and short sales become the market.

VegasWayne, you just don't grasp the concept of market value and the ResGuy / DMZerg method of appraising.

You have to find those traditional sales, no matter how far back in time, no matter how far away from the subject so you can manufacture those traditional sales from your current, local neighborhood sales - based upon adjustments.

Use the word "complex" to describe why you did that. Yeah, that's the ticket!

 

[residentialguy]

The appraisal is not for a FNMA loan and I'm not using their form.

Cool.

To CYA, I would be very clear that the opinion of value is the most probable price the subject would sell for as a REO (or Short) sale.

 

[Mr Rex]

but they don't represent the definition of FNMA's Market Value.

Says you. Even fat Fannie, the one that authored and published the form has no such interpretation, that REOs or shorts are not "market transactions".

 

[residentialguy]

Says you. Even fat Fannie, the one that authored and published the form has no such interpretation, that REOs or shorts are not "market transactions".

I don't argue that they aren't market transactions. Every sale in the market is a market transaction. It doesn't fit fat Fannie's (say that fast 3 times) definition of MV, though.

 

[Mr Rex]

Sure it does. You and DMZ are just using your version of "literal" interpretation of the meanings of the separate words in the defintion, with a heavy dose of your interpretation.