Did you know that in Amarillo, Texas, there are almost 250 foreclosure/real estate owned (REO) properties on the market? The lowest-priced single-family REO property in Amarillo is currently listed for a mere $12,000. But before you break out your checkbook, there’s some important information you should be aware of: on February 6, 2014, new regulations took effect regarding the appraisal of REO properties.
Prior to 2/6/14In the past, REO buyers utilizing Federal Housing Administration financing were able to use the appraisal that had been originally ordered by HUD, meaning a new appraisal was rarely necessary. In situations where an “as-repaired” appraisal was being used, when a borrower was applying for a 203(l) loan, a new appraisal was not necessary.
Going ForwardFollowing the changes, in situations where a direct endorsement underwriter decides there is a deficiency in the original HUD appraisal, new appraisals will be required. This also applies to the “as-repaired” situations. Additional circumstances requiring new appraisals include when an REO contract isn’t signed within 120 days of the HUD appraisal’s effective date, and when a HUD appraisal is no longer valid.
The new guidelines also stipulate that when a contract sales price is higher than the HUD appraisal, the FHA loan is to be based on the lower sales price, the initial listing price, or the new appraisal. Finally, while other foreclosures can’t be used as a basis for appraisal, appraisers are to consider short sales as well as the motivations of buyers and sellers. As in the past, REO properties are appraised “as-is”—as the value exists on the date of appraisal.
Does this Affect You?If your REO property was purchased and/or appraised before 2/6/14, you can stop reading here—you’re not affected. If your REO was purchased after, and there was no “as-repaired” situation, or you’re still within the 120 days of the original appraisal, you’re also not affected by the changes.
If you’re not sure, you’re overwhelmed, or you simply have no idea what these changes mean to you, don’t worry. As a Texas panhandle appraiser with over 35 years of experience, I can help you navigate the past, present, and future guidelines. Contact me with any questions—I’m happy to help.