Short Sale Appraisal Question

[JSmith43]

The difference, as I see it, is the bank not wanting to go to foreclosure on the property and the related expense. There was a report a while back that said the average cost to the mortgage holder for a foreclosure was something like $20,000 in addition to a time of from 6 months to a year...thus, the bank is willing to discount the mortgage by, say, $15,000.

I went to a live presentation where the National Field Short Sale Manager for WF shared with us statistics that his mother ship calculated. They yield 10% more, on avg, going the short sale route than REO. Therefore they are rolling on the short sale promotion & streamlining their efforts so that agents won't advise their clients to ignore short sale offerings as much due to delays and bs back door offerings, etc.

He told a joke. "How many of you in attendance filled out the survey to change the name of a Short Sale to a Fx%$# ("Fudge") of a long Sale?" The whole room erupted in shared laughter of the acknowledged exasperation of making a short sale work for a specific buyer.

 

[J Grant]

Simply ask yourself this ...

There are two properties offered for sale. They are in the same neighborhood. They are the exact same model and in very similar condition. One is offered as a traditional sale at, say, $200,000. The other is a short sale and offered at, say, $185,000. Which one would you, as the buyer buy? Now, tell me what is market value?

I guess it depends on whether you have 2-10 months to wait and see if your offer is going to be accepted on the Short Sale (even if you offer full list price, which is often a "fishing expedition" thrown out by the realtor and with no guarantee that the lender will approve said price).

Short sales are popular, and many buyers are willing to put up with a delay or aggravaiton to save 15k. It is rare these days for a short sale approval to take 10 months. That used to be so, but most banks have streamlined the process and many agents specialize in short sales.

Do you have a guarantee that interest rates will remain absolutely STABLE during this potential waiting period and that your lender will hold your "rate lock" during this process if you choose the $185,000.00 home?

No you don't, but borrowers are confident enough that the 185k price at a 15k discount will more than make up for an interest price rise (or they can withdraw their offer if interest rates rise.)

Short sales don't appeal to every buyer and they don't have to . In this market, there are a range of "typical" buyers, from those who want only an REO or short sale to those who want only a traditional sale to those who are open to all sales types. The diff now is that in the past, buyers did not have this range of sale types to choose from. They had pretty much only the traditional sale, with an occasional REO sale outlier, usually boarded up or in inferior condition. All that has changed, and now buyers have several predominant sales types to choose from in a given market, each sale type has some advantages and some disadvanteges.

 

[J Grant]

There is a reason one type of sale is selling at 200k and one selling at 185k - there is something making them unequal.

The only thing "unequal" about them is the condition of sale, one is a short sale listing and the other private owner with no bank involvement.

The one at 185k is has baggage that needs to be adjusted.

This is according to YOU. This is the whole problem with your approach, you assume every short sale or REO sale has to be automatically adjusted UP, which then assumes that that the MV is always a high benchmark, since you either adjust every lower REO and short sale up (or by your own admission, see below, you don't inlcude these sales)

Once adjusted, they both are selling at 200k.

This is again YOUR view, that the short sale should always be adjusted up to the higher traditional sale. As we saw in recent court cases, the courts recognize that the MV in an area is not automatically a benchmark high value set by the traditional sales.


I like to pick the sales that don't need as much adjustment as well as the sales where there is more clarity on the motivations.

This is a very weak argument for not using short or REO sales in cases where they should be used ( I am not saying they should always be used, but you are stating you like to pick sales that don't need as much adjustment, aka only traditional sales, no matter what the market says).

This is a weak arbument since the only reason that the REO and short sales get so much adjustment is that YOU decide to add an upward adjsutment to every short and REO sale, no matter what the market conditions are. Does it ever occur to you that there are times when the market indicates that these sales should not be adjusted up?

As far as clarity of motivations and choosing sales because of it, this a weak argument, the motivations have been discusses at great length in other threads on the topic, It is your personal view that REO or short sale motivations are murky and unclear ... inf fact they are pretty straightforwad and often more transparent than many private owner motivations ( and besides, we are not appraising motivations of sellers, we are appraising their effect on price as seen in the market, therefore, the argument that we need to know every nuance behind a lender's motivation to sell is false)

 

[realbiz]

Simply ask yourself this ...

There are two properties offered for sale. They are in the same neighborhood. They are the exact same model and in very similar condition. One is offered as a traditional sale at, say, $200,000. The other is a short sale and offered at, say, $185,000. Which one would you, as the buyer buy? Now, tell me what is market value?

When I reply to questions on this site it is based on my experiences. Mike, here in my market if the MV is $200,000 buyers will jump on the standard sale and close as soon as possible. I have family members who have bought properties over the past few years and some bought short sales. They are still taking up to one year for some lenders no matter what has been reported. I did a sale this week that the offer was made in 2010. Rates are at a all time low who wants to wait on the bank to respond. Yes some are faster then others, but it is still a roll of the dice. My daugther had a backup offer in on a condo last year for 210K (original asking price 185K, bank approved for 210K). Original buyer could not qualify at 210K, the bank would not accept the backup offer instead they foreclosed. Six months later the bank sold the property for 210K. What banks do here still do not make sense. As far as the brokers they will list the properties as low as possible hoping the bank accepts and they get a quick sale. Yet when they sale a standard home in the area they do not want you to use the short sales. Market value is market value on a short sale, what the bank accepts is based on the information they are receiving including BPO's. I can tell you many stories on short sales in my market, however they may not be the same as other parts of the county. On short sale appraisals I do for the bank they ask for current market value along with a REO addendum. It is then their decision which value they will accept. If the market is all REO sales and short sales then that is the market. However, if there are good standard sales in the area those are the ones that I use. As I said in my first post, many people at taking advantage of short sales here depending on what a lender will accept, but that does not mean the short sale is always a market value. Investors buy short sales here and turn around and sell them with little improvements for "market value". This clearly shows what they bought the short sale for is not market value.

 

[Lloyd Bonafide]

Simply ask yourself this ...

There are two properties offered for sale. They are in the same neighborhood. They are the exact same model and in very similar condition. One is offered as a traditional sale at, say, $200,000. The other is a short sale and offered at, say, $185,000. Which one would you, as the buyer buy? Now, tell me what is market value?

This is a good question, but the answer can be complicated. If I'm the buyer, I will choose the one at $185,000, if I feel that the sale can be completed in a reasonable time period, or in a time period that meets my needs.

We are seeing a lot of MLS listings here of short sales that say "pre-approved", or "buyer fell out", or "lender will accept $zzz,000". In these cases it is very possible that a buyer can step in and close escrow in less than two months. On the other hand, if a lender or lenders have not approved a short sale yet, then some agents will steer their buyers away from that short sale listing.

 

[realbiz]

Quick short sale story with a family member. The same lender Chaxx had a first and second on the property. My nephew waited seven months for an approval, then finally got an approval on the first good for one week. Did not get an approval on the second (different department). When the second got an approval the first was expired and he had to get it approved again. When the first was approved the second time, the second loan approval had expired. Had to get an approval on the second again. Do I have to keep telling this storym2:

 

[residentialguy]

RG: The one at 185k is has baggage that needs to be adjusted.

"This is according to YOU. This is the whole problem with your approach, you assume every short sale or REO sale has to be automatically adjusted UP, which then assumes that that the MV is always a high benchmark, since you either adjust every lower REO and short sale up (or by your own admission, see below, you don't include these sales)"

No, this has always been your spin that we attached higher price to it. Once again, I call you on your deceitful spin. It doesn't matter if they are the lower priced sales or the higher priced sales. If the motivation is causing the sale price to be different from a typically motivated and no undue stimulus, you adjust it...whether it is up or down.











Once adjusted, they both are selling at 200k.

"This is again YOUR view, that the short sale should always be adjusted up to the higher traditional sale."

See my response above about your knowingly false, deceitful spin









I like to pick the sales that don't need as much adjustment as well as the sales where there is more clarity on the motivations.

"This is a very weak argument for not using short or REO sales in cases where they should be used ( I am not saying they should always be used, but you are stating you like to pick sales that don't need as much adjustment, aka only traditional sales, no matter what the market says). "

LOL...I use the best comps. I will use REOs if they are the best available.




This is a weak argument since the only reason that the REO and short sales get so much adjustment is that YOU decide to add an upward adjustment to every short and REO sale, no matter what the market conditions are.

If it causes the value to be higher, then you would adjust it down. Please stop with the your continual false price spin. You're not fooling anyone by falsely trying to misrepresent what I'm saying.






Does it ever occur to you that there are times when the market indicates that these sales should not be adjusted up?

See above response






As far as clarity of motivations and choosing sales because of it, this a weak argument, the motivations have been discusses at great length in other threads on the topic, It is your personal view that REO or short sale motivations are murky and unclear ... inf fact they are pretty straightforwad and often more transparent than many private owner motivations ( and besides, we are not appraising motivations of sellers, we are appraising their effect on price as seen in the market, therefore, the argument that we need to know every nuance behind a lender's motivation to sell is false).

LOL...yeah...did the agent tell you that? Oh wait, let me guess, you talked to the pres of BOA and got that from him.





Short sales are popular, and many buyers are willing to put up with a delay or aggravaiton to save 15k. It is rare these days for a short sale approval to take 10 months. That used to be so, but most banks have streamlined the process and many agents specialize in short sales.

In that case, they can sell for the same price. If their is no price variance, then none would be given. But if there is a price difference, then that assumption is BS.

 

[JSmith43]

That used to be so, but most banks have streamlined the process and many agents specialize in short sales.

A loan servicing department that streamlined the short sale process still has quirks. Additionally, there is often two mortgages. Try getting both to play together & see how streamlines it is then.

Short sales are at high risk of being tainted. Confirming the variables is tantamount to spy work, beyond what peers would do, beyond customary practice. But, we give it a shot. Some can be confirmed. I know the variables with respect to my neighbor's short sales, but I'm not sharing that inside information with appraisers.

 

[residentialguy]

Simply ask yourself this ...

There are two properties offered for sale. They are in the same neighborhood. They are the exact same model and in very similar condition. One is offered as a traditional sale at, say, $200,000. The other is a short sale and offered at, say, $185,000. Which one would you, as the buyer buy? Now, tell me what is market value?

First you need to answer this:
There are two properties offered for sale. They are in the same neighborhood. They are the exact same model and in very similar condition. One is offered as a traditional sale at, say, $200,000. The other is a short sale and also offered at $200,000. Which one would you, as the buyer buy?

 

[Mike Garrett RAA]

First you need to answer this:
There are two properties offered for sale. They are in the same neighborhood. They are the exact same model and in very similar condition. One is offered as a traditional sale at, say, $200,000. The other is a short sale and also offered at $200,000. Which one would you, as the buyer buy?

That would most likely depend on the agent advising the buyer and, as a buyer, my motivation and time requirements.