"As is" and "As repaired"

[Nicholas Runo]

One of the requirements from my lender goes like this:

Was a mix of As is and As repaired sales and listings included?

As is ,,,to me means a property ready and in marketable condition, which can attract the largest pool of buyers.

As Repaired,,,, property that needed some repairs or repaired to bring it to par with similar properties in the market.

My question is, should l ignore some good comps or active to look for the "as repaired" properties??

 

[ZZGAMAZZ]

It appears that the client is trying to apply appraisal verbiage incorrectly. Seems like she wants the subject property condition bracketed possibly to get a feel for privately- versus lender-owned sales, although as MK said in a recent post the ownership status of a REO has no definite correlation to its condition.

(this is just my opinion based upon limited experience.)

 

[Marcia Langley]

I agree with ZZ.

The question as it pertains to comps does not make sense. The terms "as is" and "as repaired" do not apply to comps. I too believe she must mean the comparative conditions of the comps.

 

[Scott R Marshall]

The request appears goofy to me. Are they asking for comparable homes considered to be in similar condition to your home? Did you appraise the home "subject to" and then included comparables in need of repair or did your subject need repair and adjustments were made to the comparables to reflect this?

In addition, I don't agree with your definition of "as-is" and "subject to". Whether a property is marketable in its current condition may have an effect on your estimate of value but an "as-is" value is just what it says. The property in its current state is valued at XXXX. An overbuilt property property has value but may be a difficult property to market to a large pool of buyers. I don't think you would appraise it "subject to" the home being more like other homes in the neighborhood so that the largest amount of potential buyers would be interseted in the property.

"Subject to" is subject to a condition or other necessary data that must be met in order for the estimate of value to be valid. An older home in a predominantly new neighborhood, or vice versa, would not necessarily have to be valued "subject to". To bring these comparables to an equal level to your subject would typically require condition adjustments, not a difference in whether to appraise "as-is" or "subject to". While I agree with you that "subject to" can be applied if repairs are needed or inspections required, I treat them as issues dealing directly with the subject of my appraisal and not in relation to what my comparables are like.

 

[c w d]

One of the requirements from my lender goes like this:

Was a mix of As is and As repaired sales and listings included?

As is ,,,to me means a property ready and in marketable condition, which can attract the largest pool of buyers.

As Repaired,,,, property that needed some repairs or repaired to bring it to par with similar properties in the market.

My question is, should l ignore some good comps or active to look for the "as repaired" properties??

In our MLS system one will frequently find homes for sale for below market value with remarks like "sold as is where is" indicating that the needed repair work will not be completed by the seller.

As for your lender's comments about "as repaired" comparables, that may mean a rehabbed house which may have previously sold in "as is" condition. They may just want to see the differences in pricing between the two. In our market, in a particular area that I did quite a bit of research and at the height of the market it was about a $40,000 difference between "as is" properties and those that were rehabbed. Not a lot of profit after repairs and fees but this area had a lot of rehab competition. The difference was easily observable.

But, before I did the work I would definitely talk to the lender to see if that is what they wanted. It's how I read it.

 

[Mike Kennedy]

One of the requirements from my lender goes like this:

Was a mix of As is and As repaired sales and listings included?

As is ,,,to me means a property ready and in marketable condition, which can attract the largest pool of buyers.

As Repaired,,,, property that needed some repairs or repaired to bring it to par with similar properties in the market.

My question is, should l ignore some good comps or active to look for the "as repaired" properties??

Depends on the Intended Use and the Definition of Market Value applicable to the assignment. IF on a Fannie form ........recommend reviewing the DMV.

Requirement appears to simply reiterate the need (when applicable) to effectively bracket the subjects' Condition when selecting comparables with supporting description and comments. :icon_idea:

 

[Nicholas Runo]

Very well, thanks for all the input, greatly appreciated.....as for the lender, here l come !!!!!

 

[Robert Hronek]

Does your property characteristic qualify if for secondary market financing? If it does then compare it to other properties that also qualify for secondary market financing. Hopefully you have been able to bracket condition.

I would not use comps that sold to investors for rehab. This is a different buyer profile.

 

[Richard Carlsen]

As is ,,,to me means a property ready and in marketable condition, which can attract the largest pool of buyers.

I suggest you go back and study the English language one more time. You are reading things into words that are not there. (Been listening to Bill Clinton too much?)

"As is" means something like the property as it is at the time of inspection. Not spiffied up for sale. Not repaired. Not remodeled. It means in the condition that you found it when you inspected it. If a property is not in marketable condition and you appraise is as though it were in marketable condition, you have in essence made a report with a value based on a Hypothetical Condition. If you have not told the this to the client, you have violated USPAP and you have also violated the assignment conditions (formally known as Supplemental Standards) as the 1004 reporting form does not permit any HC's other than those printed. Read the definition of Market Value and you will not see any conditions mentioned nor requirements for HC's that the property that is the subject of the Market Sale described in the definition has been made ready for marketing. One definition of "As is condition" in the mortgage industry is:
A stipulation that a property or item is sold in its current physical state, with no warranties.


This certainly sounds to me like what the client is wanting to know when they order an "as is" appraisal. They want to know its value in its "As Is Condition".