Supplemental REO Addendum

[JSmith43]

The buying/selling behavior of market participants most closely operating under the idealized conditions specified in the definition of MV on the pre-printed F & F forms offer the best evidence of MV.

It is obvious to me the motivations/intentions of a REO holder is more accurately reflected in the quoted disposition value definition. But, if they are really backed into a corner and need it sold, like right now, the referenced definition of Liquidation Value is certainly the better definition of the type of value opinion needed by the client.

This must be tough for appraisers with file drawers full of REO appraisals with fire sale time frame requirements and no USPAP "hat tipping" toward the appropriate value definition noted in the report.

I suggest the powers to be offer blanket amnesty and bring these poor folks back in from the cold

 

[J Grant]

Just because an appraiser provides a MVO, doesn't mean the client will use the exact MVO amount to price their property. Maybe the client discounts the MVO down 10% for a faster sale, as an example. Or maybe they add to it to give them negotiating room. Whatever they do re marketing the property after we hand in the report is their business

):
What is REO spelled backwards? EOR...what does that mean? Nothing. Now add a Y after the E...EYOR....who remembers Eyor?

 

[JSmith43]

I didn't take the time to comment on a prior post, but now I will

The theory has been posted that "market value is a range" and therefore even with the restricted exposure time the appraiser can use the MV definition.

That's like giving someone that wants Phoenix as their destination a map to Tucson, because, "WTH", it'll get them to Arizona

 

[J Grant]

The buying/selling behavior of market participants most closely operating under the idealized conditions specified in the definition of MV on the pre-printed F & F forms offer the best evidence of MV.

Are the conditions of the MV def on the forms idealized, or typical? This goes back to the heart of the REO debate, which has been discussed often.. Stating that the MV terms are "ideal" in the MV definition implies a seller with plenty of time to sell, whose main motivation is to wait for the highest offer, etc. (this used to be how the MV def was explained by teachers a decade plus ago, .however it is actually not specified in the definition (which states typically motivated, not ideally motivaed, and the def does not define what is typicaly motivated. )

The relevant specific word is "undue stimulus", and that has been debated as well, with AF and AI coming out with advisory opinions that REO sales can be used as comps, with appropriate adjustments where warranted.

It is obvious to me the motivations/intentions of a REO holder is more accurately reflected in the quoted disposition value definition.

It may be obvious to you, but it is not in the MV def or engagement letter. Our personal bias and views can't be substituted for what is on engagement letter and the def used in report.

But, if they are really backed into a corner and need it sold, like right now, the referenced definition of Liquidation Value is certainly the better definition of the type of value opinion needed by the client.

You are making that assumption, if the client wants it sold now, where is the directions for such in the engagement letter?

IF a client wants /needs it sold right now, and it is specified /in engagement letter, then yes, LV is the better definition. But if you use LV, would it not need a different form?

This must be tough for appraisers with file drawers full of REO appraisals with fire sale time frame requirements and no USPAP "hat tipping" toward the appropriate value definition noted in the report.

Not sure of this last statement...

I suggest the powers to be offer blanket amnesty and bring these poor folks back in from the cold

I like blankets lol!

 

[J Grant]

I didn't take the time to comment on a prior post, but now I will

The theory has been posted that "market value is a range"

There is always a range of prices of sales in the market, that's where we get our data from. The same home can sell at diff price points depending on exposure , that's one of the reasons there is a possible range of prices, or values, for a home.

and therefore even with the restricted exposure time the appraiser can use the MV definition.

The MV def in modified on the REO addendum to a specific # of days. Imo, the appraiser has to see that the restricted number of days is still reasonable, for some MV to be developped, even if that is on the low end. Otherwise, decline the assignment (or use a diff value def, but imo that would need a different form)

That's like giving someone that wants Phoenix as their destination a map to Tucson, because, "WTH", it'll get them to Arizona

See above.

 

[JSmith43]

Jgrant, I'll try and clarify a few things for you & other readers. I used the term, "idealized" to describe the MV definition conditions, but could also have used the term, "hypothetical conditions."

Appraisers should be familiar with the concept. It takes idealized conditions to produce sufficient paired sales to extract a reliable adjustment for an element of comparison. Appraisers fill out comparison grids every day and may be tempted to do back flips when they have anything approaching ideal data. They have to deal with the shortcomings, but in dealing with the data problem, one thing they (hopefully) don't do is tell themselves, oh, I guess that difference between the subject & comps isn't so important after all, since I don't have ideal data to extract an adjustment."

Using MV definition like it is a shotgun open choke solution for all valuation problems is less than ideal:icon_lol:

BTW, the form certs can be clarified and/or supplemented as long as they do not conflict. Also, the REO addendum poses multiple valuation problems. There is no reason why multiple report formats cannot be utilized, with their own separate conditions. The problem, of course, is that clients aren't always possible to negotiate with since it is often a mystery, who is actually a decision maker with proper authority. Another idealized condition (negotiating SOW) that appraisers must deal with in a practical manner!

I think it would be interesting to put forth several scenarios of clients with a valuation problem & a few definitions of value & ask appraisers to identify which definition best describes the type of value the client wants. There would be more choices than MV from the 1004 form set. More than the Disposition & Liquidation value definitions; probably the IRS version, perhaps a None of the Above answer.

Of course, it could never be successfully graded on the AF. It would amount to endless debate. I wish the polling function were robust enough to handle this well. A sample poll might be of some use, but it sure would be short on depth.

Maybe I'll post one later.

 

[J Grant]

I agree with your last post, JSmith!

I think it would be interesting to put forth several scenarios of clients with a valuation problem & a few definitions of value & ask appraisers to identify which definition best describes the type of value the client wants. There would be more choices than MV from the 1004 form set. More than the Disposition & Liquidation value definitions; probably the IRS version, perhaps a None of the Above answer.

100% agree with this statement . I do want to comment on your MV def comments, not as a disagreement, but in spirit of debate, and learning (For those who see it that way and not as an argument).

 

[J Grant]

Jgrant, I'll try and clarify a few things for you & other readers. I used the term, "idealized" to describe the MV definition conditions, but could also have used the term, "hypothetical conditions."

Exactly. The MV def references hypothetical sales terms conditions of subject to which we compare comps to. However, calling these terms "ideal", can lend an unintended bias to the definition. The MV def references a typically motivated buyer/seller. The definition does not specify WHO the typically motivated buyer is. Should an appraiser insert the "ideal" bias into the definition...for example, that a buyer who is not an owner occupant or family type person, is not "typical"? In some markets, the typical buyer is an investor. The definition does not specifically define who/what is "typical"...because it will vary by market and conditions.


Appraisers should be familiar with the concept. It takes idealized conditions to produce sufficient paired sales to extract a reliable adjustment for an element of comparison. Appraisers fill out comparison grids every day and may be tempted to do back flips when they have anything approaching ideal data. They have to deal with the shortcomings, but in dealing with the data problem, one thing they (hopefully) don't do is tell themselves, oh, I guess that difference between the subject & comps isn't so important after all, since I don't have ideal data to extract an adjustment

Right. The sales and market data is rarely "ideal". That is why we adjust them to the hypothetical MV sales terms. The issues arise in changing or changed markets.....what is a "typically motivated"buyer/seller, when half the sales are short and REO sales? What is a "reasonable" marketing time, when marketing times are all over the place?

 

[JSmith43]

Did you hear the one about the former appraiser? She lost her new job at Baskin Robbins.

Apparently, whatever the customer wanted, she just gave them a double scoop of vanilla. :laugh:


Well, it is Ice Creme. There is a range of Ice Cream, you know.

 

[J Grant]

JSmith, whatcha been smokin? A post about ice cream! Okay...serve it up! ):