REOs, Short Sales and unusual requests

[Bobby Bucks]

Lately I’ve been getting some rather unusual requests. I’ve had 3
instances where I completed REO assignments and a few weeks later
after the properties went under contract I get a request to “use” my
report for the purchase. What happens is that the listing agent knows I
completed the REO report and suggests to the selling agent that they
call me. Of course this brings up several issues which never fails to
anger the commission obsessed, room temperature IQ agents
involved......naturally they want a fast, cheap (or free) appraisal for their
buyer so they can brag about it. If you folks think a
“recert/update/nightmare” demand from a mortgage broker is a pain,
wait until you have an REO “free appraisal” demand. Your blood
pressure is guaranteed to rise.
The other area is in short sales. I had one last month for one of those
gung ho Carlton Sheets types who was convinced he was stealing the
property. Actually he was getting the home for what it was worth, but
who am I to rain on his parade? Anyway, this guy now wants to use my
report for financing the property involved in the short sale. Of course if
the initial assignment is complete, it is normally permissible to complete
a second separate assignment on the same property. Now, my concern is
this. If you’re doing a report on a property where the owner, (the bank)
will in all likelihood be thoroughly reviewing your report while making
the decision on what price to sell, wouldn’t it by highly irregular to have
the person buying the property using the services of the same appraiser
for the purchase? Would you want to be on the witness stand explaining
yourself in a situation like that? Even if you did everything proper would it be worth the risk
and hassle? I’ve been refusing these types of requests when I have even
an ounce of concern. It’s much easier for them to get a new report from
someone else. I’ve made more than one agent furious over this, but
that’s nothing new for the ranch. Naturally if the buyer paid cash for
the property, did repairs and then wanted financing later I would have
no issue.....is anyone else running into these situations? If you do REO work, it's going to happen.

 

[Judy Whitehead (Florida)]

Actually we did have one last year. Fortunately, the lender wanted another appraisal when it sold - a new one, in other words. It was only a month or so after the REO. They also did not have a problem with our completing the new appraisal. Perhaps I'm dense, but I don't see what the problem is. If the home was worth $$$ and then one month later, (assuming nothing had been repaired, etc.) then a new appraisal would take into consideration any new comparables sales during that period.

If you mean a "short sale" the buyer purchased the home for a much lower figure than your first appraisal, then perhaps we're simply talking a sale similar to a distressed one. I would simply explain in the second appraisal that the subject was an REO and was not a typical sale and proceed to value it based on the usual things.

 

[Oregon Doug]

Bobby - most of my appraisal work now is REO properties and I get these requests all the time. Basically, I tell 'em "if you ain't my client, I ain't talking to you". Period. I do a lot of government REO and typically the utilities are off when I inspect the home so that a "utility check" is required. It's not uncommon for the govmt to give my appraisal away to a buyer who's lender wants me to go back and do a utility check and/or repair Completion Certificate for free. (see above).

If they present me with a copy of the written assignment from my original client, I'll put 'em on the clock for $150/hr and talk to 'em all day long.

I'm glad to hear that someone else is seeing short sales - I don't feel some lonesome.

Dee Dee - a "short sale" is one in which the sale price/proceeds is less than the mortgage balance due. In these cases, the seller brings cash to the closing or, more commonly, the lender forgives the balance due rather than proceed through a foreclosure (foreclosures can be expensive). Often the seller in unaware that the balance foregiven is taxed as ordinary income by the IRS - you can imagine the April 15th suprise!

Oregon Doug

 

[Farm Gal]

Often the seller in unaware that the balance foregiven is taxed as ordinary income by the IRS - you can imagine the April 15th suprise!

I am personally aware of several cases in which IF this was ever explained the homeowner was unaware of itThey might have been so shell-shocked that they didn't hear, OR it was just buried in the 'mountain of forms to be signed' :evil: . They were in fact attempting to get out from under a mortgage no longer maintainable, (ugly divorce and kid's medical payments in one sad case) without completely ruining their credit. I think the taxation took one gal under.

I wonder how many more of these we are going to see: I think the lenders are moving faster to foreclose also, the extended process is no longer occurring... 30-90 days after notice of impending they are GONE.