1. Welcome to AppraisersForum.com, the premiere online community for the discussion of real estate appraisal. Register a free account to be able to post and unlock additional forums and features.

Old House Completely Remodeled

Discussion in 'Ask an Appraiser' started by JR417, Oct 6, 2011.

Thread Status:
Not open for further replies.
  1. JR417

    JR417 New Member

    0
    Oct 6, 2011
    Professional Status:
    General Public
    State:
    Georgia
    I own a house originally built in 1900. We completely remodeled (90%) of the house back in 2005, replacing all the electrical, plumbing, sheetrock, siding, flooring, arch features, etc. The original construction loan was $200K, and was backed by the original appraisal. Since then, every appraisal we've had done is around $80K, due to falling home prices and the market. We are trying to refinance since interest rates are incredible.

    The appraiser states a 1900 house has to be listed as a 1900 house. So although it's rebuilt, the house is still compared to old houses without any work done. Is it possible to have an old remolded house appraised at replacement value instead of comparables? What should we do? Hire an appraiser that specializes in old homes and give the bank appraiser a copy? At what point does an old house become a spec home (i.e. we took this to the bones and rebuilt everything except outside siding)?

    Any help is greatly appreciated.
     
  2. Smokey Bear

    Smokey Bear Elite Member

    0
    Dec 8, 2004
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    For a loan, the lender has to hire the appraiser. Hopefully they'll find one who knows the difference between actual age and effective age. In my area, sometimes even the city will list the two dates for year built - 1900/2000. Effective age is what needs to be compared, not age of the shell.
     
  3. residentialguy

    residentialguy Elite Member

    20
    Mar 24, 2009
    Professional Status:
    Certified Residential Appraiser
    State:
    Minnesota
    There is a new standardized format with appraisals now (called UAD) and the appraiser must list the actual age in the sales comparison grid. Don't let that alarm you. The appraiser should take into account that it has been renovated and should compare similar condition and effective age sales with it. They should explain that in the sales approach section of the additional comments. That is what you want to look for on the appraisal - that s/he indeed did that.
     
  4. JR417

    JR417 New Member

    0
    Oct 6, 2011
    Professional Status:
    General Public
    State:
    Georgia
    Thanks for your comments. If I jack up the house, pour a permanent foundation, does this alter the effective age? What I want is to be able to update the 1900 year and have it listed as a brand new house, or as you commented, have two year dates listed. Any suggestions on increasing the effective age?
     
  5. residentialguy

    residentialguy Elite Member

    20
    Mar 24, 2009
    Professional Status:
    Certified Residential Appraiser
    State:
    Minnesota
    You need to check with the city...they determine what it takes to make it a new construction. But it will probably be incurable...meaning you will pay more to change it than what you will get back out of it.

    There is nothing wrong with a renovated old home. New homes don't necessarily sell for more. Some of the most expensive homes I've appraised were built in the late 1800's and early 1900's.
     
  6. George Hatch

    George Hatch Elite Member

    22
    Jan 15, 2002
    Professional Status:
    Certified General Appraiser
    State:
    California
    I agree that the quality and condition of the improvements is a critical issue and should be comprehensively addressed in an appraisal. I completely disagree with the idea of comparing a home with a dated design as being equal to a newer home with a more current design. Floorplans are usually different. Room sizes are usually different. Ceiling heights are often different. The core structural components are often different. Enclosed parking structures and their convenience to the interior are often different. Depending on the regional preferences even the use of siding vs a stucco or masonry finish may be of effect.

    A 100-yr old home that has been completely rehabbed and remodeled still retains some obsolescence, otherwise the new homes that get built would look just like the old ones.

    Appraisers have a cliche for costs: Cost does not equal value. That's how common such problems are. On a component basis rehab costs tend to run a lot higher than new construction costs. On an economic basis (only) you might have been better off demolishing the original structure and building a new one.

    With all that said, fairly identifying the market's reaction to the much superior condition of all the finishes for this doubtlessly very appealing home would not be easy under any circumstances. A smart appraiser would likely have been seeking out other rehabbed properties as a means of identifying that market reaction.

    How that would work would be finding the closed sales of several rehabbed properties, even if located in a different area or during a different time frame, and comparing each of them to other non-rehabbed sales close by as a means of isolating the difference in price that is attributable to the superior condition. Then we would quantify that difference - most likely as a percentage of the whole - and apply that percentage as a condition adjustment to the available direct comparable properties in the subject's neighborhood that are reasonably similar except for the condition factor.

    Ideally an appraiser would search to find several rehab sales and run those comparisons with their respective proximate-but-inferior-condition sales. We would prefer to be able to find enough examples of such data so as to enable us to identify the trend rather than relying on just one or two isolated examples that may or may not be indicative of the rule as opposed to the exception to the rule.

    Needless to say, such an analysis would require substantially more time and effort to complete the requisite research and analysis. And as they say, time is money. I would expect the fee to the appraiser for such an assignment to be a lot higher than normal.
     
  7. NorthTexValuation

    NorthTexValuation Senior Member

    0
    Sep 17, 2011
    Professional Status:
    Certified Residential Appraiser
    State:
    Texas
    The only way to make your house a new house is to tear it down to the foundation and rebuild everything from the ground up. Pouring a concrete foundation does not accomplish that. Your house should be compared with houses of similar year built (1900) as possible with as similar remodeling as possible. The arch. style of your house is probably very dissimilar to a house built even 50 years ago and would appeal to a different buyer/market.
     
  8. JR417

    JR417 New Member

    0
    Oct 6, 2011
    Professional Status:
    General Public
    State:
    Georgia
    I appreciate all the great responses from the pros. The house has a lot of the original character remaining, with a modern update. Why are the banks using inexperienced random appraisers from a data base pool? We have more than a couple of properties, and it's becoming a racket, bank takes 3/4 of the appraisal fee, and a 1/4 goes to the appraiser, chosen at random, regardless of experience level.
     
  9. David Wimpelberg

    David Wimpelberg Moderator Staff Member Moderator

    18
    Mar 30, 2005
    Professional Status:
    Certified General Appraiser
    State:
    New York
    With regard to the valuation of the property, a local expert should be hired. These types of homes can have more, less, or the same value as newer homes. The nuances of the particular market have to be known to determine this.

    With regard to the appraiser, at your level of funding, most of the loans in GSEs (Fannie Mae, Freddie Mac, etc.). The lenders that deal with these types of loan often pass of the appraiser selection to an Appraisal Management Company (AMC). To make a long story short, they don't necessary select the most competent appraiser available, since those types of appraiser tend not to be cheap nor fast.
     
  10. Lee in L.A.

    Lee in L.A. Elite Member

    20
    Jan 24, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    You aks good questions for a GP member. :leeann2:

    The best comps would be similar old remodeled homes just like yours. If such exists. If they don't exist, that's when you start searching for dated, distant, and dissimilar comps. Life is much easier with good comps.

    As for the banks, they get what they pay for (cheap junk!) in that senario. :sad:
     
Thread Status:
Not open for further replies.

Share This Page