Appraisal Of A "fixer Upper"

[glenn walker]

One thing the poster did not state is the property owner occupied or just a vacant investment because FHA-203K and other programs are for purchase or owner occupied needing upgrades - If this was purchased as a potential rental or flip then most likely Private- Hard Money or get a credit card with a big enough line to cover the costs. Kind of surprised most cash investors have a plan to get the property rehabbed !

 

[Mike Kennedy]

Prior to contacting ANY Lender,
1. make a list of the improvements EXTERIOR, INTERIOR, and AMENITIES) you think want to make to achieve: (i.e. what if ...............)
a. average quality, utility and condition
b. good quality, utility and condition or
c. very good quality, utility, and condition.

2. Contract with an Experienced Cert.Appraiser with renovation appraisal expertise IN YOUR property's local market area. Request approximate fees for "Subject to" appraisals based on all three (3) factors above.

Let the local market guide you (actions of actual typical local buyers of similar properties at all three improvement levels above).

3. the results will be 3 appraisal reports per the factors above.

Spend few hundred dollars to $1,500 +/- FIRST -

THEN you have current market data to help you make a wise business decision BEFORE U commit to having to repay THOUSANDS OR TENS OF THOUSANDS to a Lender.

 

[Meandering]

Look into an FHA 203k rehab loan.

Also inquire of local housing authorities any grants or loans they can recommend to rehab blighted properties. Some places have these, most don't, but you'll have to check.

.

 

[Don Clark]

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.

If you are a Veteran, the VA has a new rehab program similar to an FHA 203k but, in my opinion, easier to work with. Contact a lender who makes VA Loans if this helps.

 

[Deleted member 130081]

Its going to depend on the lender and the loan program they try to put you in. You have a lender question, not an appraisal question, as this is a case where you need to be very up-front with any lender and you need the lender to also be upfront with you about what they can and can not do for you - I would be as sure of this as you can before you pay the lender a single penny.

Typical refi require the home to be C5 or better (condition rating for homes C1-C6, where C1 is new and C6 is not whole), which means you need heat, a kitchen and a bath, at the very least. It sounds like your home might be C6, and guess what, not all appraisers will agree. Here is the condition rating thing for you that most lenders use, and always use if the loan is to be sold later:


Condition Ratings and Definitions


C1

The improvements have been recently constructed and have not been previously occupied. The entire structure and all components are new

and the dwelling features no physical depreciation.

Note: Newly constructed improvements that feature recycled or previously used materials and/or components can be considered new dwellings

provided that the dwelling is placed on a 100 percent new foundation and the recycled materials and the recycled components have been

rehabilitated/remanufactured into like-new condition. Improvements that have not been previously occupied are not considered “new” if they

have any significant physical depreciation (that is, newly constructed dwellings that have been vacant for an extended period of time without

adequate maintenance or upkeep).

C2

The improvements feature no deferred maintenance, little or no physical depreciation, and require no repairs. Virtually all building components

are new or have been recently repaired, refinished, or rehabilitated. All outdated components and finishes have been updated and/or replaced

with components that meet current standards. Dwellings in this category are either almost new or have been recently completely renovated and

are similar in condition to new construction.

Note: The improvements represent a relatively new property that is well maintained with no deferred maintenance and little or no physical

depreciation, or an older property that has been recently completely renovated.

C3

The improvements are well maintained and feature limited physical depreciation due to normal wear and tear. Some components, but not every

major building component, may be updated or recently rehabilitated. The structure has been well maintained.

Note: The improvement is in its first-cycle of replacing short-lived building components (appliances, floor coverings, HVAC, etc.) and is

being well maintained. Its estimated effective age is less than its actual age. It also may reflect a property in which the majority of

short-lived building components have been replaced but not to the level of a complete renovation.

C4

The improvements feature some minor deferred maintenance and physical deterioration due to normal wear and tear. The dwelling has been

adequately maintained and requires only minimal repairs to building components/mechanical systems and cosmetic repairs. All major building

components have been adequately maintained and are functionally adequate.

Note: The estimated effective age may be close to or equal to its actual age. It reflects a property in which some of the short-lived building

components have been replaced, and some short-lived building components are at or near the end of their physical life expectancy; however,

they still function adequately. Most minor repairs have been addressed on an ongoing basis resulting in an adequately maintained property.

C5

The improvements feature obvious deferred maintenance and are in need of some significant repairs. Some building components need repairs,

rehabilitation, or updating. The functional utility and overall livability is somewhat diminished due to condition, but the dwelling remains

useable and functional as a residence.

Note: Some significant repairs are needed to the improvements due to the lack of adequate maintenance. It reflects a property in which many

of its short-lived building components are at the end of or have exceeded their physical life expectancy but remain functional.

C6

The improvements have substantial damage or deferred maintenance with deficiencies or defects that are severe enough to affect the safety,

soundness, or structural integrity of the improvements. The improvements are in need of substantial repairs and rehabilitation, including many

or most major components.

Note: Substantial repairs are needed to the improvements due to the lack of adequate maintenance or property damage. It reflects a property

with conditions severe enough to affect the safety, soundness, or structural integrity of the improvements.