As-is value with no functional bathrooms?

[Texpraiser10]

I completed an appraisal on a 2 bed 1 bath home that is undergoing renovation and the bathroom is currently gutted and clearly unusable. I made the value subject to completion of the renovation. However, it has come back because the lender wants the as-is value with cost to cure. Fine, but wouldn't a home with no functional bathroom become a C6? I have no problem adding the cost to cure adjustment on the side by side, but I'm at a loss on the functional obsolescence if as-is with no bathroom.

Thoughts on how to resolve this revision?

 

[glenn walker]

I completed an appraisal on a 2 bed 1 bath home that is undergoing renovation and the bathroom is currently gutted and clearly unusable. I made the value subject to completion of the renovation. However, it has come back because the lender wants the as-is value with cost to cure. Fine, but wouldn't a home with no functional bathroom become a C6? I have no problem adding the cost to cure adjustment on the side by side, but I'm at a loss on the functional obsolescence if as-is with no bathroom.

Thoughts on how to resolve this revision?

There is no functional obsolesce as the bathroom will be completed its treated lie a repair and your C-Ratings are on a the entire homes physical condition not on one bathroom. Think about it like this lets say the home was 5 years old and in say C-3 or C-4 overall condition but bathroom was being renovated thats its overall rating and the cost to cure for a new bathroom. Lets say $15,000 is adjusted for. So you do it "As Is" with a cost to install the bathroom . If it being renovated ask the owner or contractor what its going to cost them
***A C-5 or C-6- House is a property thats entire structure in very poor condition. All you have is a cost to install new bathroom .

 

[DWiley]

The first step in the appraisal process is to identify the appraisal problem. In this case, a major part of that would be proper identification of the intended use. Is the intended use to provide a market value for a GSE loan? Is the intended use to provide a value for a property in a REO portfolio? Is the intended use something else entirely? You need to communicate with the client to have that question answered.

As for the "as is" value, knowing the cost to cure is a good step - but the more important step is figuring how how the typical buyer of the home would react to that cost. Would the typical buyer reduce the price offered by only the cost to renovate the bath, or would the discount (adjustment) be something different? It is not as simple as just deducting the cost from the "as repaired" value.

 

[Texpraiser10]

There is no functional obsolesce as the bathroom will be completed its treated lie a repair and your C-Ratings are on a the entire homes physical condition not on one bathroom. Think about it like this lets say the home was 5 years old and in say C-3 or C-4 overall condition but bathroom was being renovated thats its overall rating and the cost to cure for a new bathroom. Lets say $15,000 is adjusted for. So you do it "As Is" with a cost to install the bathroom . If it being renovated ask the owner or contractor what its going to cost them
***A C-5 or C-6- House is a property thats entire structure in very poor condition. All you have is a cost to install new bathroom .

That's what I have done with previous reports that had cost to cure, but this one had me thinking more about the no functional bathroom situation. I feel like that complicates it? I guess I am overthinking it?

 

[DWiley]

There is no functional obsolesce as the bathroom will be completed its treated lie a repair and your C-Ratings are on a the entire homes physical condition not on one bathroom. Think about it like this lets say the home was 5 years old and in say C-3 or C-4 overall condition but bathroom was being renovated thats its overall rating and the cost to cure for a new bathroom. Lets say $15,000 is adjusted for. So you do it "As Is" with a cost to install the bathroom . If it being renovated ask the owner or contractor what its going to cost them
***A C-5 or C-6- House is a property thats entire structure in very poor condition. All you have is a cost to install new bathroom .

I think you missed the part about them wanting an "as is" appraisal - not one subject to repair. For the "as is" the bathroom would certainly be an issue

 

[glenn walker]

The first step in the appraisal process is to identify the appraisal problem. In this case, a major part of that would be proper identification of the intended use. Is the intended use to provide a market value for a GSE loan? Is the intended use to provide a value for a property in a REO portfolio? Is the intended use something else entirely? You need to communicate with the client to have that question answered.

As for the "as is" value, knowing the cost to cure is a good step - but the more important step is figuring how how the typical buyer of the home would react to that cost. Would the typical buyer reduce the price offered by only the cost to renovate the bath, or would the discount (adjustment) be something different? It is not as simple as just deducting the cost from the "as repaired" value.

The home has been renovated and bathroom is going to be completed

 

[DWiley]

..... and bathroom is going to be completed

Perhaps it is, but it is currently gutted, and the lender wants an "as is" appraisal

 

[glenn walker]

Perhaps it is, but it is currently gutted, and the lender wants an "as is" appraisal

From what I read only the bathroom is left to be finished. No need to complace it its a easy "AS IS" cost to finish bathroom and be done.

 

[JTip]

Owner: "We don't have a functional bath."

Appraiser: "I'll be back in two weeks."

 

[DWiley]

From what I read only the bathroom is left to be finished. No need to complace it its a easy "AS IS" cost to finish bathroom and be done.

You seem to be suggesting that the "as is" value is simply a math problem - "as repaired" minus cost to repair.

I am suggesting that the market reaction (the adjustment) may be something different from just the cost. I have seen cases where the market reaction was roughly equal to the cost, and I have seen cases where the market reaction was double the cost.