Appraisal Of A "fixer Upper"

[Russell Beaty]

I have a question regarding an appraisal for a "fixer upper" I purchased two years ago. The property was purchased in cash, but I am now looking to significantly renovate the house, and need to obtain a loan. Looking at my options, the best solution would be a cash-out refinance; however, this requires an appraiser to value the house/property at a good value (300k). Now, the area is up-and-coming, and many houses with similar bed/bath options are selling for above the 300k range, but my issue is the current state of the house.

The previous owners had started a kitchen and bathroom reno, but left it incomplete. Its also very old house, so I would expect that there were several other items that are problems I haven't even noticed.

In order to qualify for the cash-out refinance, the house needs to be deemed 'livable', so my question is - how liberal can this definition be? In the strictest sense, it has heating/cooling, running water, toilet and shower, so I would say someone could technically live there (although not comfortably) but I don't know if there are particular standards or things that constitute a house livable.

Any information would be greatly appreciated.

 

[Joe Flacco]

Most banks will require your property condition to be minimum this description to be eligible for a regular mortgage.

 

[Joe Flacco]

You don't have a kitchen then it will not qualify.

 

[hastalavista]

I have a question regarding an appraisal for a "fixer upper" I purchased two years ago. The property was purchased in cash, but I am now looking to significantly renovate the house, and need to obtain a loan. Looking at my options, the best solution would be a cash-out refinance; however, this requires an appraiser to value the house/property at a good value (300k). Now, the area is up-and-coming, and many houses with similar bed/bath options are selling for above the 300k range, but my issue is the current state of the house.

The previous owners had started a kitchen and bathroom reno, but left it incomplete. Its also very old house, so I would expect that there were several other items that are problems I haven't even noticed.

In order to qualify for the cash-out refinance, the house needs to be deemed 'livable', so my question is - how liberal can this definition be? In the strictest sense, it has heating/cooling, running water, toilet and shower, so I would say someone could technically live there (although not comfortably) but I don't know if there are particular standards or things that constitute a house livable.

Any information would be greatly appreciated.

I can appreciate the question. However, the answer isn't what you hope it to be and I sense that you somewhat know that.
If it doesn't function as a habitable residence (no kitchen, no bath, stuff torn out, etc.), then while technically someone can occupy it but is anyone going to buy it to live in it like it is? Of course not.

You should look into the FHA rehab program. That is specifically designed for renovation projects such as you describe. An alternative is to go to a commercial bank and get a construction loan.
What I would advise against is trying to get a loan that is designed for residential properties that are habitable and ready for occupancy (not a fixer like you describe) for a property that is a fixer like you describe.

Good luck!

 

[timd354]

I can appreciate the question. However, the answer isn't what you hope it to be and I sense that you somewhat know that.
If it doesn't function as a habitable residence (no kitchen, no bath, stuff torn out, etc.), then while technically someone can occupy it but is anyone going to buy it to live in it like it is? Of course not.

You should look into the FHA rehab program. That is specifically designed for renovation projects such as you describe. An alternative is to go to a commercial bank and get a construction loan.
What I would advise against is trying to get a loan that is designed for residential properties that are habitable and ready for occupancy (not a fixer like you describe) for a property that is a fixer like you describe.

Good luck!

The fees on the FHA 203(k) rehab loan are pretty exorbitant....I would also suggest looking into a conventional residential rehab loan like the Fannie Mae HomeStyle Renovation Mortgage that is offered by many lenders.

 

[Mark K]

Contact a local bank and discuss it with them. You'll likely have no luck with a national lender, big-box-bank place.

Local banks can do things the big banks won't do. I've done a lot of appraisals over the years for fixer-uppers; the loans are similar to a construction loan for a new home. The house is appraised as-if it was fixed up and the money is disbursed by the bank as the improvements proceed with inspections along the way.

 

[The Bob]

https://www.biggerpockets.com/hardmoneylenders/georgia

 

[timd354]

https://www.biggerpockets.com/hardmoneylenders/georgia

Hard money lenders will typically not do a loan on an owner occupied property

 

[Adios]

I have a question regarding an appraisal for a "fixer upper" I purchased two years ago. The property was purchased in cash, but I am now looking to significantly renovate the house, and need to obtain a loan. Looking at my options, the best solution would be a cash-out refinance; however, this requires an appraiser to value the house/property at a good value (300k). Now, the area is up-and-coming, and many houses with similar bed/bath options are selling for above the 300k range, but my issue is the current state of the house.

The previous owners had started a kitchen and bathroom reno, but left it incomplete. Its also very old house, so I would expect that there were several other items that are problems I haven't even noticed.

In order to qualify for the cash-out refinance, the house needs to be deemed 'livable', so my question is - how liberal can this definition be? In the strictest sense, it has heating/cooling, running water, toilet and shower, so I would say someone could technically live there (although not comfortably) but I don't know if there are particular standards or things that constitute a house livable.

Any information would be greatly appreciated.

This is a tough one. Buying a house for cash is not always a good option especially when you will need cash to renovate. But too late for that. I am assuming you have no cash left for renovations? I agree with the comments about contacting a local community bank. They can be a lot more lenient in the rules if the loan isn't be sold to Fannie or Freddie.

Are the surrounding homes selling for $300K with renovated kitchen and baths? You may want to engage an appraiser before you proceed. I don't know how big the kitchen and baths are but you can spend $100K on that project alone before you get into the unknowns.

 

[DonRico]

I have a question regarding an appraisal for a "fixer upper" I purchased two years ago. The property was purchased in cash, but I am now looking to significantly renovate the house, and need to obtain a loan. Looking at my options, the best solution would be a cash-out refinance; however, this requires an appraiser to value the house/property at a good value (300k).

Now, the area is up-and-coming, and many houses with similar bed/bath options are selling for above the 300k range, but my issue is the current state of the house.

It's been quite a while since I've heard some "good value" pleadings. What we have here is not an Appraisal Problem. What we have here is a Cash Flow Problem. You'd be in a much better position if you had a working kitchen, and a functional indoor toilet -- you don't have a Credit Card with a $20K Limit to get this done ??

You don't need an Appraiser......you need a Fortune Teller to guess what this Fixer Upper in an up-and-comer will be worth when it's finally habitable.
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