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Ack!! Mentor on vacation!!

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Keri

Thread Starter
Freshman Member
Joined
Jan 27, 2002
Professional Status
Certified Residential Appraiser
State
Oklahoma
My mentor is on vacation, so once again I'm relying on you guys!!!

(Please bear with me)

Received a request for a conventional sale on a HUD repo. Found 2 HUD sales (conventional) and 1 typical conventional in neighborhood. Also, these are the only 3 sales in the neighborhood and oddly enough, they bracket and all closed in July 2002. How do I go about noting the condition of the interior/exterior of subject? It has holes in drywall, stained carpet, missing shingles, exposed plumbing pipes in garage, missing window...etc, etc, etc. You get the picture. Since 2 of my sales are in similar condition, is this considered average? I wouldn't feel comfortable leaving out any information about its true condtion, but I just need to know the correct way to do it.

Other question, how do you figure the adjustment amount between good condtion and average condition? I've been taught one way, but interested in seeing how others do it.

Thank you in advance!!!
Keri
 

Judy Whitehead (Florida)

Senior Member
Joined
Jan 20, 2002
Professional Status
Certified Residential Appraiser
State
Florida
It it were me, I would call it "fair" or "poor" based upon my observation.

My Henry Harrison Guide to the URAR says:

The Condition line includes the appraiser's opinion of the subject property's condition (whether good, average, fair or poor), comparison ratings (superior, equal or inferior) for the comparables and adjustments made as indicated by the market.

The Condition adjustment should be limited to items that have not already been included in the Age adjustment. It would be a mistake to increase the effective age of a residence because of its condition and also make adjustment here for the same condition factors.....

His suggestion is to include curable items of depreciation in the condition grid and incurable items in the age grid.

So, what I would do is call the subject "fair" or "poor" and then judge the condition of the comparables. It sounds like two of them would be "equal"
and one would be "superior" from what you described.

Regarding your question about adjustments between "good" and "average" I don't make an adjustment typically between good and average, as I would between average and fair or poor. At least I have never had the occasion where I felt like I needed to. Usually the quality of construction and age or effective age in this market covers that issue. When I have a subject that I think is "good" in condition, so far I have always found support in the market with similar comps. Most of the time I'm comparing average to average, however.
 

Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
How do I go about noting the condition of the interior/exterior of subject? It has holes in drywall, stained carpet, missing shingles, exposed plumbing pipes in garage, missing window...etc, etc, etc. You get the picture.

Describe it like that and include the Pictures! After all, a picture can say wayyyy more than you can write.

Since 2 of my sales are in similar condition, is this considered average?

I would call it less than average, or more likely fair. To me (and in our market), average is the typical, inhabitable home, that may need some cosmetic repairs, but is not in too bad of condition. Fair is a typical foreclosure that needs many repairs, mostly cosmetic and some mechanical.

As for the adjustments, paired sales or market data is needed. Compare the foreclosures to typical market sales to get an idea of the difference. If you don't have that data, maybe consider the cost of repairs, plus marketing cost, plus profit. Remember that an investor is going to plan on spending money on repairs, and make a profit. So the adjustments may not be just the cost of repairs. This method takes a bit of experience to estimate correctly, don't just make up a number. I have estimated repairs before, but that is because I buy foreclosures and know how much it cost me to do a remodeling job.

Overall, I would say do the best you can, and then wait until your mentor gets back to review the work. Do NOT give out any numbers until he/she goes over it, no matter how much the client whines....just give me a range.
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
I'm with judy all hte way to this point:

I don't make an adjustment typically between good and average, as I would between average and fair or poor. At least I have never had the occasion where I felt like I needed to. Usually the quality of construction and age or effective age in this market covers that issue.

Some times you just can't FIND the comps in reasonable proximity, or timeframe to support a equivalent rating for a subject with extensive updating, in a manner similar to the 'rode hard and put away wet' REO on which no one seems to have a problem adjusting for extensive damages!

However it should be noted that the adjustment (if any!!!) for superior condition to the typical and avaiable comps needs to be supported in the market, NOT PFA or a dollar for dollar representation of the upgrades :roll: (as the sales agent is likely to tell you)!
 

Judy Whitehead (Florida)

Senior Member
Joined
Jan 20, 2002
Professional Status
Certified Residential Appraiser
State
Florida
Absoutely - I agree with you. However, to be honest with you, my idea of "average" condition may be a lot broader than some. In other words, there are the "average" houses that are "lived in" and there are the average houses where someone vacuums after you walk through the room (I have a brother-in-law like that!). Also my view of average condition of surfaces perhaps has a greater range than others. As long as the carpeting doesn't smell, isn't matted, doesn't have stains or severe pet hair, then I don't make an adjustment for a "new" carpet as opposed to an older one. To me, they are both in average condition. Also, some things in the house may be "good" - like the new carpet, but average in all other cases. In that case to me it is generally in average condition.

The primary time I have used "Good" as condition, was with new homes and usually cannot find three new homes to use as comps. In that case, I try to find the newest I can and it is a fine line whether the comps would be considered good or average.

Does this make any sense? TGIF - it's hard to think this morning :roll:
 

airphoto

Senior Member
Joined
Jan 15, 2002
Professional Status
Retired Appraiser
State
Pennsylvania
Two more pennies:

Most homes offered 'For Sale' are somewhat prettied up for showing purposes. I use the term "normally marketable condition" to evaluate whether a property is an 'average' property, as most of the comparable sales are rendered in "normally marketable condition" at the time of offering 'For Sale.."
 

Frederick R. Ruffell

Senior Member
Joined
Jan 21, 2002
Professional Status
Certified General Appraiser
State
California
In my market (southern CA) I am more in line with Bill, There is what I call "average marketable condition" and y'all would call it poor or fair. These properties are bought and sometimes bulldozed or completely rehabbed by the owner and not for resale! It is all about scarcity. 55,000 new legal faces in S.D. and only 23,000 new housing units in 2000 -2001. I know what you are thinking, Alot of the 55k are 3 or 4 member families well your wrong, Majority is a combo of DINKS (dual income no kids), Singles, and Retirees.
 

Richard Carlsen

Elite Member
Joined
Jan 15, 2002
Professional Status
Licensed Appraiser
State
Michigan
For questions of Condition (Good, Average, Fair or Poor) you can pretend that you are a buyer and consider what your reaction would be if you were looking at this house as a possible purchase. That will give you a simulated "market reaction" to the house and tell you just about what the condition is. My 18+ years selling real estate really comes in handy for situations like this. I can almost hear the buyer speaking to me as I view a house for the first time. Try this approach sometime (when your mentor is back). I think it works.
 

Keri

Thread Starter
Freshman Member
Joined
Jan 27, 2002
Professional Status
Certified Residential Appraiser
State
Oklahoma
Hey, guys!

Thank you so much for posting. Was much more comfortable finishing that report after reading through your replies. Plus, lots of good tips that can go into my Frequently Referenced Forum File.


Thanks again,

Keri
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Good stuff, guys.

Good - Better than most other homes in the neighborhood

Average - Like most homes in the neighborhood

Fair - Not as nice as most homes in the neighborhood

Poor - Well below the condition of most homes in the neighborhood.

All ratings are acceptable to Fannie Mae...some lenders believe you can't sell a loan with less than average but that is not true.

Notice the key word in all of the above...."in the neighborhood". Don't use your personal preferences, don't compare with other locations, and most of all be factual. One picture will convey the condition better than a thousand words.

Dollar adjustments? Depends on YOUR MARKET. Over the years, I have found increments of say $3,000 work well in most median priced housing. What ever you use, base it on Market Reaction to the condition and support it with pairs analysis.

I hope you find this helpful....thus sayth the old guy!
 
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