Property cannot be rebuilt - If damaged by fire

[Lee Lansford]

Yes. IMHO, a typical buyer could care less. How many buyers really think that their house will burn down. That only happens to other homeowners. What is the percentage on a national basis of houses burning down. I venture to say less than 1%.

Ron, I understand your contention...and you may be 100% correct in your assessment of the situation...but lacking market proof, how can one be certain as to the reaction of the market. Would you be "neutral" if you had an interest in purchasing the Subect with this zoning status? I don't think that I would be "neutral".

--Lee

 

[Ariba]

Ron, I understand your contention...and you may be 100% correct in your assessment of the situation...but lacking market proof, how can one be certain as to the reaction of the market. Would you be "neutral" if you had an interest in purchasing the Subect with this zoning status? I don't think that I would be "neutral".--Lee

Lacking market proof or market reaction you have to rely on good old common sense. Paired sales analysis, market reaction, etc, might not be available nor always proof adjustments. For example what if there is no market, one of a kind property, etc. you have to make some common sense assumption and make adjustments based on your appraisal experience. This however, needs to be explained in the addendum of the appraisal report.

Lastly, can you be certain of any adjustments you make in this real estate market. It changes on a daily basis.

 

[Couch Potato]

So are you saying that you analyze the insurance requirements for each appraisal you do and make adjustments? That is way beyond my expertise or SOW.

Property insurance rates are different for the same property and depend on many criteria, among them buyers credit score, credit card payment history, passed claims by buyers, claim history on the subject property, roof material, etc. No two people pay the same for similar policies on the same or similiar properties.

Not an appraisal promblem IMHO.

Not at all. I am not saying analyze insurance. I am saying appraisers need to be aware of financing that is available and property characteristics that might limit the availability of financing. The lack of availability of the typical range of financing possibilities usually has an adverse impact on value.

 

[Terrel L. Shields]

I have never run into a situation where it could be demonstrated that not being able to rebuild did impact value.

Nice to see that I am not the only person who has that issue. First, in most towns I know such grandfathered zonings are subject to change with a low cost application, posting a sign in the yard for a month and being rubberstamped by the city council. If surrounded by R-2, any new structure would likely be perfectly suitable for a zoning change. My nephew has a house that is R-O (Residential - Office) The house on each side is R-1. The houses across the street are R-O. Any one of either could easily convert to R-1, R-O or R-2 in our town. Zoning is a joke for the most part and is used punitively to punish your enemies. Same for regulations about lawn height. We have new houses where strapped builders have bushhogged their lawns only once this summer. Grass to the windows. Anyone make 'em mow it? Nah, they know whose been keeping them busy. But that prick Shields that keeps coming to the council meetings and asking when they intend to clean up the ROW they left in a mess 2 years ago...F*** 'im. He lives outside the city limits anyway.

 

[Joyce Potts]

Nice to see that I am not the only person who has that issue. First, in most towns I know such grandfathered zonings are subject to change with a low cost application, posting a sign in the yard for a month and being rubberstamped by the city council. If surrounded by R-2, any new structure would likely be perfectly suitable for a zoning change. My nephew has a house that is R-O (Residential - Office) The house on each side is R-1. The houses across the street are R-O. Any one of either could easily convert to R-1, R-O or R-2 in our town. Zoning is a joke for the most part and is used punitively to punish your enemies. Same for regulations about lawn height. We have new houses where strapped builders have bushhogged their lawns only once this summer. Grass to the windows. Anyone make 'em mow it? Nah, they know whose been keeping them busy. But that prick Shields that keeps coming to the council meetings and asking when they intend to clean up the ROW they left in a mess 2 years ago...F*** 'im. He lives outside the city limits anyway.

You probably ran into it, you just didn't recognize it.

Given two properties side by side, everything identical, but one is on a 75
wide lot and the other is on a 70 wide foot lot. 75' allows for rebuild, the 70' lot doesn't.

Which would you buy first and why?

 

[Terrel L. Shields]

In our town most 'lots' are either 1.5 lots or 2. The zoning is irrelevant because the town will change anything on a whim. They allowed an R - 3 (fourplex) on an R-O lot that was < 75' x 140'....barely room to park. No one objected. Our zoning laws are not strict enough to identify 5' as a practical matter. WHO is applying for the exemption or change has a lot more to do with it that WHAT is being changed.

 

[Joyce Potts]

In our town most 'lots' are either 1.5 lots or 2. The zoning is irrelevant because the town will change anything on a whim. They allowed an R - 3 (fourplex) on an R-O lot that was < 75' x 140'....barely room to park. No one objected. Our zoning laws are not strict enough to identify 5' as a practical matter. WHO is applying for the exemption or change has a lot more to do with it that WHAT is being changed.

You totally evaded the question.

 

[Joyce Potts]

In our town most 'lots' are either 1.5 lots or 2. The zoning is irrelevant because the town will change anything on a whim. They allowed an R - 3 (fourplex) on an R-O lot that was < 75' x 140'....barely room to park. No one objected. Our zoning laws are not strict enough to identify 5' as a practical matter. WHO is applying for the exemption or change has a lot more to do with it that WHAT is being changed.

We're not talking about your town or most lots or any variances. The question was:

Given two properties side by side, everything identical, but one is on a 75
wide lot and the other is on a 70 wide foot lot. 75' allows for rebuild, the 70' lot doesn't.

Which would you buy first and why?

 

[Renee Healion]

I don't see many buyers having the sophisitcation to consider the reasonable question Joyce poses.

With some exceptions mentioned here, it is likely that the lender can recover in the event of a catastrophic loss of the improvements. But reading here makes me wonder if the reason lenders wrestle with appraisers over rebuild questions has to do with them selling the notes to investors who expect to hold the loan for some time. A homeowner whose house is a total loss and who then faces permitting frustrations, may leave the property without rebuilding, without continuing as a mortgagor. Could this actually be a factor? Is this an investor matter?

 

[Rich Heyn]

A post from another thread;



Assuming that the lender requires property insurance for a minimum of the loan amount what exposure does the lender have in a situation like this? Why would the lender be concerned if the property cannot be rebuilt. The lender as no exposure since the loan amount is covered by property insurance.

Ron,
This doesn't answer both of your questions, but may shed a little light on the first one.

"For example, a home was built on a 10,000 sq. ft. site, which was permitted under the ordinance then in effect. Changes were later made to the ordinance that increased the required site size to 15,000 sq. ft. Existing homes became nonconforming but were still recognized as “legal.” They were “grandfathered” in under the new ordinance. Later, the dwelling suffered fire damage. The new ordinance specified that if a structure involved in a grandfathered use was damaged more than 50%, the grandfathered use would no longer be allowed. In this hypothetical case, the replacement value of the dwelling was $100,000, the land value $30,000 and the loan balance $85,000. Damage to the house was estimated at $55,000, or 55% of replacement value and the insurance company issued a check for that amount, payable to the homeowner and the lender. Per the new zoning ordinance, the dwelling can’t be rebuilt. The owner compared the check from the insurance company to the loan balance, then handed the check to the lender and walked away."

Taken from "Professionals Guide to the Uniform Residential Appraisal Report" Copyright 2005 Richard Heyn, Baroda, MI all rights reserved