Garage is currently being converted to an ADU

[Surf Cat]

The op has stated that they informed the client and the client is informed and wants an as is report.

It's also been established that the borrowers have all the proper paperwork in order. Most importantly for the OP, the cost to convert the garage to an Adu.

Since it's highly unlikely that the OP will find a competitive sale that sold under construction, he's going to have to do a cost to cure or in this case, a cost to complete.

The borrowers are moving forward, not backwards. A cost of from what another poster said of 7 to 8K to convert it back to its original use in this case doesn't make sense to me.

Since the project is only 10% done, 90% of the cost to build this Adu is your cost to cure. I would have those costs as a PDF in my report for sure. It's going to be, most likely, an over 10% across the board, line item adjustment.

Lots of commentary, cya stuff, permit info, etc.

It sounds as if the borrows just need a little more cash on hand to finish this project. Once it's done, you'll be back out reappraising the subject, including competitive sales with adu's.

 

[Surf Cat]

Oh yeah.... don't forget to add that entrepreneurial incentive percentage that's typical in your neck of the woods in the cost to cure.

 

[J Grant]

The op has stated that they informed the client and the client is informed and wants an as is report.

It's also been established that the borrowers have all the proper paperwork in order. Most importantly for the OP, the cost to convert the garage to an Adu.

Since it's highly unlikely that the OP will find a competitive sale that sold under construction, he's going to have to do a cost to cure or in this case, a cost to complete.

The borrowers are moving forward, not backwards. A cost of from what another poster said of 7 to 8K to convert it back to its original use in this case doesn't make sense to me.

Since the project is only 10% done, 90% of the cost to build this Adu is your cost to cure. I would have those costs as a PDF in my report for sure. It's going to be, most likely, an over 10% across the board, line item adjustment.

Lots of commentary, cya stuff, permit info, etc.

It sounds as if the borrows just need a little more cash on hand to finish this project. Once it's done, you'll be back out reappraising the subject, including competitive sales with adu's.

But even though it is a refinance, the appraisal is based on a hypothetical "sale" - the sale based on a model typically motivated buyer ( not the homeowner )


If this house was placed on the market today, s, how will the typically motivated borrower see this? As a garage that is now half finished and needs to be restored to full garage utility? As a conversion, they need to finish to make it an ADU or an enlarged house sf room?

It might appeal to both buyers ( the likely buyer pool is represented by the typically motivated buyer ). It also might attract investors, wow here is a screwed-up mess I can buy cheaper and finish. The DOM market exposure estimate comes into play - a project house needing finishing usually takes longer to sell than a move in ready house. Ask area RE agents for their perspective
agree due to the unique nature of this cost to cure to either retrofit back to the garage or make it an ADU see what each one is and the range might be some mid point idk.

 

[J Grant]

Oh yeah.... don't forget to add that entrepreneurial incentive percentage that's typical in your neck of the woods in the cost to cure.

agree. Unless it is a very hot market, which this no longer is, then buyers expect an additional discount over straight cost to cure due to the PITA of having to deal with hiring contractors, permits, inspection living with noise and mess during construction. They don't even have a driveway now and have to park on the street - what every suburban buyer wants ( not) If it is an investor buyer then they expect EI profit on top of cost to cure .

 

[Surf Cat]

Lol....I here you J. This should be subject to.

Seeing that its as is, the lender is informed, I would hit it...and hit it hard with verifiable documentation.

ADU's are hot right now. No flipper or investor in their right mind is going to toss aside all the permit fees, processes and leg work that went into this to convert it back to a garage.

Additionally, if the bank takes it back, the market is going to want more of a discount than 7 to 8k to take it on...

 

[J Grant]

Lol....I here you J. This should be subject to.

Seeing that its as is, the lender is informed, I would hit it...and hit it hard with verifiable documentation.

ADU's are hot right now. No flipper or investor in their right mind is going to toss aside all the permit fees, processes and leg work that went into this to convert it back to a garage.

Additionally, if the bank takes it back, the market is going to want more of a discount than 7 to 8k to take it on...

Is a flipper or investor the most likely buyer? Very possibly, though the client might not like it because an investor expects a steeper discount than an owner-occupant buyer who wants to take on a project. Ask are RE agents who are buying project houses.

 

[Surf Cat]

Is a flipper or investor the most likely buyer? Very possibly, though the client might not like it because an investor expects a steeper discount than an owner-occupant buyer who wants to take on a project. Ask are RE agents who are buying project houses.

No, I don't think so. I'm sure there are Savvy buyers out there who see the potential of the Adu for the mother-in-law, college grad, etc. They would probably pay more than the typical investor, flipper and take on the project. Also, the op stated the main dwelling is a cream puff.

Anyways, that's the way I would do it. After the report makes its way through the underwriting process the report very well could come back to the appraiser....."please make report subject to".

 

[Fernando]

How are you going to find a similar comp with an unfinished garage.
Most lenders won't lend on such a condition thus less demand and market price will be lower.
From my experience, many typical buyers don't want to deal and buy such an unfinished garage.
The buyers who will be interested are contractors and they will buy it the property at a discount.

 

[bnmappraisal]

How are you going to find a similar comp with an unfinished garage.

This usually takes a lot of extra time to research, looking through countless photos, speaking with agents, etc

 

[bnmappraisal]

The buyers who will be interested are contractors and they will buy it the property at a discount.

This is another avenue to research
Again ... it's not going to be a quick/easy "adjustment" to figure out
Appraiser needs to do his/her due diligence