DALLAS -- In an effort to spur real estate sales, the staff of the federal Resolution Trust Corp. is recommending that government-owned properties be valued on the basis of a single appraisal, instead of the current average of three appraisals per property.
The recommendation, if accepted by the RTC oversight board, would eliminate part of the drawn-out sales process that has driven many buyers away from the RTC's $17 billion portfolio of properties. Those properties, the legacy of failed thrifts across the country, are costing the RTC about $1.5 billion a year to carry, according to RTC Deputy Director Lamar Kelly Jr.
Current RTC policy calls for an appraisal of a property's value at the time it is made available for sale. If the property hasn't been sold six months later, the RTC can trim the price by up to 15 percent, but further appraisals are required. Mr. Kelly said some commercial properties are appraised as many as six times, with each appraisal taking a minimum of 60 days. "It's very frustrating for our customers," Mr. Kelly said in a speech to the Greater Dallas Association of Realtors.
Mr. Kelly and other RTC staff members are recommending that a single appraisal be made of a property at the beginning of the sales process. From then on, the market would dictate the value of the property.
"The further you go in the marketing process, the less you rely on that appraisal," Mr. Kelly said.
Mr. Kelly said he doesn't believe the staff recommendation is at odds with congressional mandates that the RTC get the best price possible for the real estate it holds.
"The government is just not a good holder of real estate," he said. By getting the property into private hands, regardless of price, "in effect, we are maximizing the returns," he said.
Real estate sales accounted for just 4 percent of the $54 billion collected from sales of RTC assets in the second half of 1990, according to figures provided by Mr. Kelly. The RTC collected the largest amount of money, about $20 billion, from the sales of securities held by defunct thrifts.
In contrast, the $17 billion in real estate held by the agency represents 12 percent of its total assets. It holds another $19 billion in delinquent loans, representing 13 percent of its portfolio. Mr. Kelly said he expects 90 percent of those loans to be foreclosed, pushing that much more real estate into the RTC's portfolio.
Mr. Kelly said real estate sales have been slowed by the laborious appraisal process. Prospective buyers, he said, will often walk away from an RTC deal when repeated appraisals are required.
He said he jokingly suggests that members of the RTC sales staff members not inform buyers that another appraisal is required. "Tell them that your dog died, but for God's sake, don't tell them you have to get another appraisal," he said.
Mr. Kelly said the recommendation of a single-appraisal process will be made to the RTC oversight board March 26. If accepted, he said, the policy will go in effect "the next day."