Fair Market .... or to be more precise the way the term has been co-opted. I don't like it at all.

Seems to me what companies like Chase and others are asking for really is owner occupied resales, not fair market. If your market is dominated by REO sales then REO sales are your fair market. If your owner occupied resales are selling at similar prices to REO property then that is your fair market.

If I have got ten sales between 25,000 and 35,000 and they are owner occupied resales, shorts, and REO and I have one additional sale at $50,000 which is an owner occupied resale how can you justify for me that the $50,000 sale is fair market while the other ten are not an accurate reflection of the market?

This is what I came up with:
The Internal Revenue Service defines fair market value as:

Fair market value (FMV) is the price that property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts. If you put a restriction on the use of property you donate, the FMV must reflect that restriction." IRS Publication 561

Code of Federal Regulations Title 12, Volume 5, Sec. 564.2
(g) Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

(1) Buyer and seller are typically motivated;

(2) Both parties are well informed or well advised, and acting in what they consider their own best interests;

(3) A reasonable time is allowed for exposure in the open market;

(4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and

(5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

If all things were equal in all ten subjects than you cannot justify 50K as FMV. But were all things equal? Did the one for 50K sell for more because it was far superior? I agree that if in say a half mile radius 9 of 10 houses sold for 25K to 35K and they were equal and one sold for 50K your FMV would be the lower number.

The mafia's definition of FMV is vague at best. They, like most others in the capital, use a lot of words and say nothing of substance with those words.

By the mafia’s definition; owner occupied re-sales which are occurring because of job transfers would not be considered fair market though I can guarantee you that the majority of agents would consider it fair market as long as it doesn't have BANK OWNED or SHORT SALE next to it. Incidentally, how often is the motivation of the seller disclosed in the MLS? Also consider a builder with ten homes in various stages of construction and is highly leveraged (many of them are). That builder is “required to act”. If he doesn’t, he won’t be in business long. By the mafia’s definition, these sales should also not be considered FMV but how many of us have done it?

Then there is the vague word "reasonable". What the hell is "reasonable" in terms of exposure? "Reasonable" does not necessarily mean average DOM. What if the average DOM was 120 days? Is that “reasonable”? What about the hot markets that used to exist where you’d put a house on the market and it was sold in 5 days? No duress but was five days (or less) reasonable time for exposure to the market or did it sell before enough people could look at it? Could the price have been higher with fifteen days more exposure? Could you consider the sale fair market?

Then there is that definition of “open market”. The market isn’t open if you’ve got state and local municipalities enforcing point of sale inspections with required escrows for violations. In many markets in my area, the POS defines the value of the home more than any other factor because the escrows are so huge and the demands by the inspectors are steep. If they don’t like you, those escrows get even worse. Number five on the list seems to allude to the only interested parties being the buyer, seller, agents, title, and lender. That just isn’t true.

My beef is that I am well aware that the big boys and many of the puppy mills want the values to go in a specific direction. They will give you guidelines which will steer the value towards that end without actually coming out and saying it. The non-specific definitions and the blatant abuse of vocabulary to me is infuriating. While I know this issue is not simply related to real estate, it is a trend that is very disturbing.

If you are buying a house do you really care who owns it? Say there are two identical houses for sale and both are exactly what you want, one is bank owned and one is a standard owner, the bank owned house is priced at $99,900 and the standard house is priced at $94,900. Which house are you going to buy?

Now let's say both houses sell for around the same price eventually and I get a BPO for a very similar property in the same neighborhood, why must I be forced to omit one of these excellent comps in favor of a less desirable comp simply because of who happened to own it when it sold?

I agree with the original poster. The idea that some more favorable comps will be avoided because the BPO agent must choose to use either all REO or all "FMV" is ridiculous and only causes confusion and less accurate price opinions.

We will always have good BPO agents and bad ones, all the additional guidelines which are supposed to help the bad agents perform better will not help them improve and only serves to frustrate the good agents and generate less accurate opinions overall.

I think they forget, they are asking for my opinion. If you don't like my opinion get another one.