A Report Made 'subject To' Condition On Grid Should Be 'as Is' C5 Or In The Condition After Repairs?

[Vic Stanionis]

I have an urgent question that needs to be answered by senior appraiser's on this Forum. Thanks in advance for your insight, and replies.

First let me give you some background, the subject an expanded cape built in 1949, aluminum sided, concrete block construction, is in C5 condition (due to deferred / lack of routine maintenance, upkeep, general repair, etc. with a semi-modern kitchen (suffers from excessive wear and tear from pets), dated half bath, partially updated master bath (w/ marble tiling) but dated sink topped vanity, and partially updated hall full bath with fixtures that were updated several years ago (10+yrs) but retained semi-modern ceramic tiles (dark green), plus there was a flood years ago in the partially finished walkup basement w/ a wet bar (all surfaces were affected, and most finishes were removed, hanging wires (not secured), etc. There was an addition added in the '70s, expanding the master bedroom, master bath (.75 shower only), and enlarged dining room/kitchen area and there is an attached two car garage and one car port. Note the lender/client provided appraiser with an estimate from a general contractor, (extensive list), for a total of $81,000 (which this appraisal report is relying on for 'cost estimates' for these repairs)..

Here is a short list of the repairs needed:
This addition has a flat roof in need of repair, nearing end of its useful life, pitched roof appears average condition.
New furnace to be installed, kitchen updated/refinished, update the baths (first floor hall full bath, and second floor hall half bath (new tile), hardwood floors refinished throughout, install new carpeting in the three upstairs bedrooms, hallway, walk in closet, remove wallpaper, repaint(interior/exterior (pressure wash as needed), Two windows were broken need to be replaced, replace shutters, renovation of the former partially finished walk up basement with a former wet bar, and repair/replacement of number of garage doors, ceiling and drop stairs to storage attic above garage, exterior amenities (decks, shed, fencing), trim over grown vegetation/shrubs/trees.

I've made this report 'subject to' :
This appraisal report is made 'subject to' the following repairs or alterations on the basis of a hypothetical condition that the repairs or alterations have been completed. Referring to the provided contractor's estimate for the complete list of repairs to be performed.

The lender is asking me for revision, and further explanation on this report:
"Since the subject is being appraised “subject to” please reflect what the subject’s condition rating would be after the needed repairs have been completed in the market grid with an after improved appraised value (instead of the condition that the subject is in currently). "

Should the condition on the 1004 grid and in the market approach addendum for the subject show the current 'as is' C5 condition or should it reflect the after repaired condition of possibly C3 or C4, however the appraiser would have to inspect the completed work to see the extent and overall condition of the subject has changed significantly to raise it beyond a C3. I just don't think its wise to provide an after repaired condition since as the appraiser I'm not sure what it will eventually be, without seeing the quality of the renovation/updating being performed. Should I comply with their request for an after improved appraised value, (instead of the 'as is' condition the subject is currently in)?

Will a separate addendum or form be required to be included in the revised 1004, showing the after repaired value estimate or if its determined to be necessary should I just include it within the Final Reconciliation section.

I'm a bit confused and would like this to be clarified for me, because there are so many repairs/updates/deffered general maintenance issues with the subject that I want to be sure I get this right, so I won't have to readdress it
again later. Thank you.

Regards,

Vic Stanionis

 

[Jim Bartley]

What is the condition after repairs?

If C3 or C4, then use C3 or C4 comps, and make it subject to. But be sure to describe the current condition.
You might add a comment like "Current condition is C5, The C3/4 rating in the report reflects the subject's condition after repairs are made".

 

[nstanbru]

Basically, you can't have it both ways. Once you've stated your opv is "subject to" then the condition rating would be after repairs.

 

[The Warrior Monk]

The report has to be consistent with the conditions. An appraisal (i.e., value opinion) made "subject to" would reflect the state of the subject property after the items were completed.

 

[Vic Stanionis]

Thanks for the replies, but I'd like to clarify, should page 1 and 2 of 1004 condition reflect the 'as is' current C5 condition, or should it be either C3 or C4 (depending upon the completed repairs) in these sections, or should the after repaired condition be written in another area (such as Final Reconciliation section) or on a separate addendum or form?

I just want it to be clear, that making this report 'Subject to' - This appraisal report is made 'subject to' the following repairs or alterations on the basis of a hypothetical condition that the repairs or alterations have been completed. Referring to the provided contractor's estimate for the complete list of repairs to be performed. Does it require the appraiser to revise the report to reflect the after repaired condition throughout the 1004, and provide the 'after repaired value', but not the current C5 condition and 'as is' value at all.

Hope this is clear, but that is what I'm trying to determine which is the proper reporting of the subject in this instance.

Thank you again for your replies on this issue.
Vic Stanions

 

[The Warrior Monk]

If the report is subject to, then the description of the property throughout the report should be consistent with state of the property after the repairs are made. It's no different than if you're appraising proposed construction; the description throughout the form describes the improvements as if they are completed.

However, the state of the property as of the date of inspection should also be described for clarification. I describe this in a Text Addendum.

 

[Mr Rex]

Thanks for the replies, but I'd like to clarify, should page 1 and 2 of 1004 condition reflect the 'as is' current C5 condition, or should it be either C3 or C4 (depending upon the completed repairs) in these sections, or should the after repaired condition be written in another area (such as Final Reconciliation section) or on a separate addendum or form?

I just want it to be clear, that making this report 'Subject to' - This appraisal report is made 'subject to' the following repairs or alterations on the basis of a hypothetical condition that the repairs or alterations have been completed. Referring to the provided contractor's estimate for the complete list of repairs to be performed. Does it require the appraiser to revise the report to reflect the after repaired condition throughout the 1004, and provide the 'after repaired value', but not the current C5 condition and 'as is' value at all.

Hope this is clear, but that is what I'm trying to determine which is the proper reporting of the subject in this instance.

Thank you again for your replies on this issue.
Vic Stanions

If subject to, he whole enchilada is subject to. Narrative explanation of current condition and why the appraisal is subject to are naturally required for clarity.

 

[Deleted member 134708]

C3. Every word should be consistent with C3 throughout whole report.

I personally wouldn't write down anything C5 in the addendum. Not even why it's as-is C5 but subject to C3. I believe this confuses everyone. I wouldn't knock you for it, I just personally wouldn't do it.

If check subject to, I appraise 100% hypothetical. As-is doesn't even exist, so why talk about it.

 

[Deleted member 128537]

C3. Every word should be consistent with C3 throughout whole report.

I personally wouldn't write down anything C5 in the addendum. Not even why it's as-is C5 but subject to C3. I believe this confuses everyone. I wouldn't knock you for it, I just personally wouldn't do it.

If check subject to, I appraise 100% hypothetical. As-is doesn't even exist, so why talk about it.

You have to talk about the condition of the property "as is" and what the needed repairs are to bring it to C3. It's in the description of the property of the 1004. How can you not do that? And besides you have to take pictures of the deferred maintenance! And THEN you better explain the photos. I agree throughout the report you describe the property as though all the repairs have taken place. But most lenders will want some estimate of cost etc to bring it to C3. Now that may take a contractor's bid if it's significant, but I know of no lenders that don't want some kind of cuts to cure.

 

[jay trotta]

You have to talk about the condition of the property "as is" and what the needed repairs are to bring it to C3. It's in the description of the property of the 1004. How can you not do that? And besides you have to take pictures of the deferred maintenance! And THEN you better explain the photos. I agree throughout the report you describe the property as though all the repairs have taken place. But most lenders will want some estimate of cost etc to bring it to C3. Now that may take a contractor's bid if it's significant, but I know of no lenders that don't want some kind of cuts to cure.

Agreed and before anyone gets their panties twisted, Yes he means Cost to Cure......