The auditorium at one of the Monday morning sessions of the Five Star Default Servicing Conference and Expo gasped when Ron Nation, founder and CEO of JVI Solutions, LLC presented two very different looking images of an REO. ""Do your best to avoid the drive-by appraisal,"" said Nation, referring to the pictures.[IMAGE]
The first image was the home's exterior - a bright white colonial-style abode sitting on healthy, green lawn. The other was its interior - dark, stained, and vandalized. The contrasting images illustrated the panel's initiative: to dispense some insight on establishing a reliable valuation.
""It all starts with value,"" said Jeff Del Ray, senior director of strategic partnerships at PCV Murcor. ""Determining the value of an asset is the most important thing that an agent, broker or appraiser can do in the REO space. You get it right, you get lots of assets, you preserve neighborhoods, you build properties.""[COLUMN_BREAK]
In today's market, correctly getting ""it"" - the appraisal - is key. Del Ray said appraisals must be three things: supportable, defendable and credible. Agents and brokers are responsible for making the appraisal reliable by backing up claims with data-centric approaches. If an agent or broker believes the REO is in a bad neighborhood, simply saying so won't cut it.
""The days of shooting from the hip are over,"" said Del Ray. Agents and brokers must back up their commentary with detailed pictures of the property, as well as statistics from trusted sources - like unemployment rates from the U.S. Bureau of Labor Statistics. ""Explain, explain, explain,"" Del Ray said.
The panel also advised agents and brokers to present the clearest picture of their market available. This may involve finding bank-owned properties and REOs not listed in the MLS, which are also known as shadow properties.
""Ninety to 94 percent of properties in foreclosure or bank-owned are not listed on the MLS,"" said Ryan Lantz, cofounder and managing director of Claremont Information Systems, LLC.
Agents and brokers must be aware of the functional risk factors of a property, from zoning and land use to whether or not the area is subject to flooding, sink holes, or earthquakes.
The panel also noted the importance of keeping appraisers informed of situational trends of an area, which can include factory closures to mass layoffs. The panel also iterated the importance of accurate and dependable comp selections. ""Bad comps are garbage in, garbage out,"" said Del Ray.