When a property is identified as a “real estate owned foreclosure,” it means that payments per agreement have defaulted, or the property has come under a lien—a mechanic's lien or other judgement. That is foreclosure. The “real estate owned” (REO) designation means that the lender has not been able to find a new buyer for the property while holding the property.
The specific procedure and timeliness of a lender's action to seize a defaulting property is controlled by Arizona law. The process can take from a few months to a year. The foreclosing lender is in the process of taking the property back from the borrower who has failed to make payments per agreement. The default will eventually result in the lender taking possession of the property, through eviction if necessary.
The appraiser involved in the appraisal process for a property in foreclosure proceedings or in REO possession must deal with several variables: A house in foreclosure may still be occupied by the original owner who may not cooperate in the required home inspection. Some foreclosed properties may have been abandoned and subject to vandalism or display other disrepair conditions.
If the property has already become Real Estate Owned, the appraisal will be for a property in disposition. This will require the appraiser to identify and rate the property as ‘Repaired,’ if repairs were merited and have been made. An appraisal may be made to reflect Market Value with repairs due to make the property marketable at full market value consistent with similar properties in the area. Or the property may be appraised ‘As-Is’—the value of the property being appraised without repairs done to facilitate a sale. In some cases the appraiser may conclude a market value in between, reflecting a minimal investment in repairs—probably to a buyer who will complete the repairs as a private investment prior to resale.
An appraisal of REO/Foreclosure property, in addition, must include competing listings, market appreciation/decline conditions as well as neighborhood trends. A Certified Residential Appraiser at AMS Appraisals is qualified to prepare the appraisal of an REO/Foreclosure property executed with professional expertise. AMS Appraisals provides a full range of appraisal services in Phoenix.