Finally some evidence the banks are slashing repo prices

[temeculaguy]

Cool Video, most of the repos I compared were just outside of Temecula in an unicorporated area called Morgan Hill. It still has about six or seven tracts selling and was developed during the boom years so it is ripe for foreclosure. It was overpriced to begin with and had the highest taxes in the area, exceeding 2% so that is where I initially looked for a wave of foreclosures and wrote about it a few months ago on this site. This link is an L.A. NBC news story on how the residents are angry at all the brown lawns and want the H.O.A. to take care of the landscaping, they also complain that is hurting their ability to sell, causing a downward spiral in pricing. The news story even names the development and I think it shows video of some of the ones I compared but I swear I just saw it, they copied me, not the other way around.

http://video.knbc.com/player/?id=120347

[Bugs]

In answer to your question about what happens when performing appraisals in a market that’s heavy with foreclosure and short sales, the answer is that it depends.

If there are only a couple of those types of sales and they don’t have much impact on what the typical buyers and sellers are doing then we ignore them. Once the numbers of these sales increase to the point where a typical buyer can pretty much count on finding one upon demand they comprise their own market and start influencing the liquidity of the higher non-stressed market. Once there are enough of them that the non-stressed sales are directly competing, the REOs drive the market.

It’s all about trends. Appraisers aren’t supposed to be picking the 3 highest or 3 lowest sales, but the sales that best represent the dominant trend. In the market’s your describing, these stressed sales are becoming common enough that they are the trend so that makes them the most representative sales to use in an appraisal.

Put another way, if a lender were to have problems with a loan, what could they expect to get back from the sale of their collateral?

[Bugs]

In answer to your question about what happens when performing appraisals in a market that’s heavy with foreclosure and short sales, the answer is that it depends.

If there are only a couple of those types of sales and they don’t have much impact on what the typical buyers and sellers are doing then we ignore them. Once the numbers of these sales increase to the point where a typical buyer can pretty much count on finding one upon demand they comprise their own market and start influencing the liquidity of the higher non-stressed market. Once there are enough of them that the non-stressed sales are directly competing, the REOs drive the market.

It’s all about trends. Appraisers aren’t supposed to be picking the 3 highest or 3 lowest sales, but the sales that best represent the dominant trend. In the market’s your describing, these stressed sales are becoming common enough that they are the trend so that makes them the most representative sales to use in an appraisal.

Put another way, if a lender were to have problems with a loan, what could they expect to get back from the sale of their collateral?

[temeculaguy]

Thanks Bugs, I think that these are beginning to drive the market in that particular tract, the local news didn’t go there because there was two or three, they are close to half of the listings and dominating the sales. I think if I were a lender i would thing twice about loaning someone 700k knowing I will have a hard time getting 500k back if it was repo’d. Do all appraisers drive through the neighborhood and visit the house in person or do some appraise using computer data only? I drove through and there are a lot more brown lawns that aren’t on the market yet, the heat of summer is very revealing.

[temeculaguy]

Thanks Bugs, I think that these are beginning to drive the market in that particular tract, the local news didn’t go there because there was two or three, they are close to half of the listings and dominating the sales. I think if I were a lender i would thing twice about loaning someone 700k knowing I will have a hard time getting 500k back if it was repo’d. Do all appraisers drive through the neighborhood and visit the house in person or do some appraise using computer data only? I drove through and there are a lot more brown lawns that aren’t on the market yet, the heat of summer is very revealing.

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