Straight from the horse's mouth! The appraisal says:
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DEFINITION OF LIQUIDATION VALUE
Liquidation value is the likely price of an asset when it is allowed insufficient time to sell on the open market, thereby reducing its exposure to potential buyers. Liquidation value is typically lower than fair market value. Unlike cash or securities, certain illiquid assets, like real estate, often require a period of several months in order to obtain their fair market value in a sale, and will generally sell for a significantly lower price if a sale is forced to occur in a shorter time period. Liquidation value may be either the result of a forced liquidation or an orderly liquidation. Either value assumes that the sale is consummated by a seller who is compelled to sell and assumes an exposure period which is less than market normal.
The most probable price that a specified interest in real property is likely to bring under all of the following conditions:
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Consummation of a sale will occur within a severely limited future marketing period specified by the client.
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The actual market conditions currently prevailing are those to which the appraised property interest is subject.
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The buyer is acting prudently and knowledgeably.
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The seller is under extreme compulsion to sell.
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The buyer is typically motivated.
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The buyer is acting in what he or she considers his or her best interest.
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A limited marketing effort and time will be allowed for the completion of a sale.
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Payment will be made in cash in U.S. dollars or in terms of financial arrangements comparable thereto.
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Where did this definition come from? An appraisal from a certified, licensed Appraiser. Right out of the Appraisal handbook.
So think about a SHORT SALE... does it meet the definition of a LIQUIDATION VALUE distressed property? Looks like it to me.
And while Realtors(R) and Real estate agents may be just now figuring out this definition, the banks (short sale lenders) already know this and use it to their advantage. They do a BPO and tell the real estate listing agent that they will need fair market value... BUT they are willing to accept MUCH LESS because it's a distressed property. And if the agent doesn't know the difference, then they shouldn't be playing the game -- the game of BIG BANK NEGOTIATIONS, that is!
Regina P. Brown
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