David Saks: Does the Need for An Appraisal Exist at a Foreclosure Sale?

David Saks - Real Estate Broker - The Real Estate Mart of Tennessee, Inc. - 4040 North Watkins-Suite #4 - Memphis, Tennessee 38127 - Phone (901) 357-4663

Does the Need for An Appraisal Exist at a Foreclosure Sale?



Does the need for an appraisal exists in a foreclosure auction, tax sale or other lien or default associated consequence which brought the sale about? When would a foreclosure require an appraisal? Wouldn't a broker price opinion satisfy a basic need to determine a reserve price by narrowing comparative sales data? I understand that sales comparison, cost approach and income approach are all important and that the three approaches may serve as checks against each other. Since the condition of sale is affected because of foreclosure, which is a principal factor for making an adjustment in value under the sales comparison approach, why would the lender use an appraisal instead of a broker price opinion if financing is not a fundamental exponent of the sale and no lender is involved with a buyer? Wouldn't the lender only be concerned with an auction reserve since the court is involved with the buyer? The court only accepts a cashiers check for the full amount at the time of purchase. The court doesn't work with Wachovia, Wells Fargo or Sun Trust and the court doesn't ask for an appraisal either on the court house steps. I believe that a broker price opinion could work for the buyer or investor since the purchase is not contingent upon financing. Not that I'm comparing a podiatrist to an orthopedic surgeon, but I believe each opinion of value has an important and critical function and the degree of increasing or diminishing return would best be suited for the appraiser. Comparative sales for the broker, in a foreclosure or REO prior to auction. I know there are grey areas. I'd like to see more thought on Active Rain as regards this important issue. Many thanks for the input of all of our honorable members.

David Saks

Time&Temp Memphis

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Comment balloon 5 commentsDavid Saks • March 23 2008 11:24AM


I think the apprasial from the standpoiont of the purchaser knowing what kind of deal he got is important. I find that even though the price is good there is a bunch opf work that needs to be done and money spent . So balance that with an appraisal is a good thing. Yes the BPO is kind of like a CMA for the buyer but I mioght go the extra step
Posted by Charlie Ragonesi, Homes - Big Canoe, Jasper, North Georgia Pros (AllMountainRealty.com) over 12 years ago
David: you raise an important question. I do think that a Letter of Opinion or BPO should satisfy the Lender in the case of a Short Sale, tax sale or in this case Foreclosure Auction, foreclosure or REO. You are right: one cannot take away the expertise of an Experienced Appraiser. The grey area is that a Broker Price Opinion could be done only by a Real Estate Agent or Broker who has a serious knowledge of the area he/she is giving his/her price opinion on a Foreclosure Auction. Appraisers go through years of tremendous training (not that all are good and some are just semi employees of certain Banks) and if an agent is allowed to offer a BPO for a Foreclosure Auction, that Agent should also have worked at least 3 years in that area before being allowed to offer their Price Opinion and have had at least 30 listings on the MLS or be a selling Broker and have had a minimum of 20 listings on his/her name and at least one year of experience in that area.
Posted by LLoyd Nichols, Southwest Florida Homes By The Sea (Premier Florida Realty of SWFL) over 12 years ago

I agree with you.  An appraisal might be a little redundant.  In this market, it is obvious that the market has gone down.  Right now is when the prices are low.  An agent knows what the prices are and can always estimate accurately what the appraisal would be anyways.

Posted by Dennis Sanchez (Coldwell Banker Tenafly) over 12 years ago
Interesting subject.  I think an appraisal is still needed when I am working with a buyer because it is expected and they want the appraisal.
Posted by Stella Barbour, Principal Broker, Serving Virginia and Maryland (NoVa Brokers LLC) over 12 years ago

I am not sure when a BPO became synonymous with VALUE. I have always thought of a BPO as an opinion of a reasonable sale PRICE, hence Broker PRICE Opinion. There is a difference between PRICE and VALUE. The issue I have with using a BPO in these situations is the intent of the buyers usage of the report. It appears that many try to consider a BPO as an adequate substitute for an appraisal, especially when cost is an issue. It is agreeable that a BPO will consist of comparable sales which support the brokers opinion of reasonable price but it should be known that the original purpose of a BPO was to estimate a reasonable price to list the property under the assumption that they get the listing. This may not equate to VALUE under these situations.

Also keep in mind that in certain states, ONLY an appraiser can provide professional opinions of VALUE.

To answer your original question David, NO, and appraisal is not required for a foreclosure sale. It is never required for any transaction unless one of the parties does require it (usually a lender). But I would recommend it.

Posted by Benjamin Smith, Atlanta Area Appraiser (Apex Appraisals & Consulting) over 12 years ago

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