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Appraisals vs. BPOs to set REO asking prices - Commercial Perspective
There has been a lot of conversation about Appraisals vs. BPOs. I don't know how it works for existing home sales and residential REOs, although the perspective of residential agents seems vastly different than the comparison I see for commercial REO properties. There are 2 primary drivers when valuing commercial property that do not appear to be as relevent for home sales. First, is the impact of an appraisal on a lender's reserves, and second is impact on price and salability. My experience suggests the proplems are reversed when an appraisal is used to determine sale price of an REOrather than confirm it. When a Lender orders an appraisal to value a commercial property and the valuation is markedly below the value when the loan was written, it may well trigger a requirement for the lender to set aside additional reserves. Add a bunch of those up in a portfolio and it can have serious implications for the Lender. Generally a BPO is quicker, cheaper, and will not trigger an increase in reserves while giving the Lender the info they need to make decisions. This brings us to the second impact; price and salability. Appraisals are a view of the past, ... more

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