Supplemental REO Addendum

[Lee Lansford]

For those of you who are familiar with--and have used--the "Supplemental REO Appraisal Addm.", you are aware of the requirement for multiple opinions of "value". It is to the additional opinions of "value" that I am looking for your input.

2 of the 4 opinions of value are Market Value; the definition of MV is incorporated into the Fannie/Freddie appraisal report form to which this addendum is attached.

The other opinions of value include the following directive: "...estimate of market value based on a client-imposed restricted market exposure time..."

The "client-imposed restricted market exposure time" is clearly not incorporated in the definition of MV in the Fannie/Freddie form.

USPAP requires (Std. Rule 2-2; a,b,c; v) that the appraiser "state the type and definition of value and cite the source of definition".

I ask: Do you consider this to be a problem (or, challenge) for the USPAP-compliant appraiser? Why or why not?

 

[Mr Rex]

Not if you provide narrative that explains the client imposed restricted exposure values do not meet the definition of market value as pre-printed on the form, and are in fact liquidation value.

 

[Lee Lansford]

Not if you provide narrative that explains the client imposed restricted exposure values do not meet the definition of market value as pre-printed on the form, and are in fact liquidation value.

So...if it (the 2 other opinions of value) be LV, is there then not the need to include the definition of LV?

 

[Mr Rex]

Yes, as you noted, it is a USPAP requirement to provide the definition and source of the definition.

Here is one:
http://www.appraisalinstitute.org/education/downloads/form801.03.pdf

 

[J Grant]

One can not assume that a limited marketing time always means liquidation value. If a client supplied marketing time is 90 days and 90 days is typical of area, it is not LV, but MV. In these cases, the value opinion on REO addendum won't differ from main report.

If a number of sales sell in 60 days at slightly lower prices than sales selling in over 60 days, is it LV, or just an efficiently marketed property selling at MV, albiet on th e lower end of MV?

Depends on what typical marketing time is in area s compared to the time frame you use for the 2nd value opinions on REO addendum.
30 days or less seems like a severely limited time frame and closer to LV definition. If you feel the client imposed marketing time of X days meets the standard of "severly limited" market exposure, then you could include def of LV . But, if the client imposed marketing time is typical for most competitive properties to subject, then it is MV . Depends on market area and # of days of marketing time imposed by client.

Esp in the cases of REO's, which seem to often sell in shorter marketing times than other properties, hard to distinguish between LV and MV exposure times...the lower the price, the more it becomes a self fulfilling definition, sure, price it low enough, and it will sell in 10 days.

I've seen diretions from clients in developing shorter marketing time frames for REO's not to under price the property, (nor overprice it). Look at the typical discount or range of prices for comps selling in aprox time frame of the marketing time you are looking at .

 

[Lee Lansford]

One can not assume that a limited marketing time always means liquidation value.
...

How to address--if the wording in the REO Addendum is insufficient to satisfy the requirement that the appraiser include the definition of "value" and cite the source--the issue of the definition of value which the appraiser is opining to?

 

[J Grant]

I just looked on an REO addendum...it is pre printed, estimate of MARKET VALUE in client imposed restricted marketing time.

In other words, they are looking at market value, but at what range of MV would it take to sell in X days. I have always been able to find a lower range of MV, or equivalent price range for 60-90 day marketing times. I did not accept work after awhile from a company that started asking for 30 day values as that did not jibe with enough time to get a MV.

If you feel your client imposed marketing time meets the standard of "severly restricted", and that it becomes LV, you might have a problem, as the certs on a 1004, which an REO addendum is part of, prohibit changing pre printed definitions.

 

[J Grant]

How to address--if the wording in the REO Addendum is insufficient to satisfy the requirement that the appraiser include the definition of "value" and cite the source--the issue of the definition of value which the appraiser is opining to?

Lee, look at an REO addendum, the wording is right there for client imposed marketing times. "estimate of Market value".

 

[residentialguy]

One can not assume that a limited marketing time always means liquidation value.

I agree. You should ask the client to make it clear as to what they mean.

I just looked on an REO addendum...it is pre printed, estimate of MARKET VALUE in client imposed restricted marketing time. In other words, they are looking at market value, but at what range of MV would it take to sell in X days.

When you change the conditions of MV defined on the 1004, you no longer seek MV, as defined on the 1004. Again, you need the lender to clairify. You can't assume here.

 

[J Grant]

I agree. You should ask the client to make it clear as to what they mean.



When you change the conditions of MV defined on the 1004, you no longer seek MV, as defined on the 1004. Again, you need the lender to clairify. You can't assume here.

Agree, but it's more than the lender...the market defines the typical time needed to get MV for a property.

If typ marketing time is 90 days and client imposed time is 90 days, the value opinions would be the same on the 1004 as on the REO addenedum.

If an appraiser deviates from MV and switched to LV, m are they violating the certs that state that no pre printed definitions on the form were changed?