As-is value with no functional bathrooms?

[shrubberyvaluation]

I completed an appraisal on a 2 bed 1 bath home that is undergoing renovation and the bathroom is currently gutted and clearly unusable. I made the value subject to completion of the renovation. However, it has come back because the lender wants the as-is value with cost to cure. Fine, but wouldn't a home with no functional bathroom become a C6? I have no problem adding the cost to cure adjustment on the side by side, but I'm at a loss on the functional obsolescence if as-is with no bathroom.

Thoughts on how to resolve this revision?

Tell them its a higher fee, more complex to appraise a home with no full bath. Its going to be investors that would be interested if the house was in need of renovation but just for a bath would probably not entice someone unless they could get a big discount. Could have trouble getting financing which would drop the value unless financing is not typical in your area.

 

[Texpraiser10]

The first step in the appraisal process is to identify the appraisal problem. In this case, a major part of that would be proper identification of the intended use. Is the intended use to provide a market value for a GSE loan? Is the intended use to provide a value for a property in a REO portfolio? Is the intended use something else entirely? You need to communicate with the client to have that question answered.

As for the "as is" value, knowing the cost to cure is a good step - but the more important step is figuring how how the typical buyer of the home would react to that cost. Would the typical buyer reduce the price offered by only the cost to renovate the bath, or would the discount (adjustment) be something different? It is not as simple as just deducting the cost from the "as repaired" value.

Agreed, the biggest question I have is this: should I decline to report an as-is value on a home that has no as-is functional utility. I have no qualms about making the adjustments, just want to make sure to include proper explanation of my conclusions regarding the lack of a functional bathroom in the as-is value.

I could be overthinking this, I can be a little overly cerebral at times.

 

[shrubberyvaluation]

From what I read only the bathroom is left to be finished. No need to complace it its a easy "AS IS" cost to finish bathroom and be done.

So you know the market will just pay cost for a home without a functioning full bath? You do realize many people and lenders want a functioning home.

 

[Texpraiser10]

Tell them its a higher fee, more complex to appraise a home with no full bath. Its going to be investors that would be interested if the house was in need of renovation but just for a bath would probably not entice someone unless they could get a big discount. Could have trouble getting financing which would drop the value unless financing is not typical in your area.

This is in fact an investor refinance. The guy has been calling me every day asking when it will be in.... tried to directly influence my OOV too. SMH

 

[shrubberyvaluation]

Agreed, the biggest question I have is this: should I decline to report an as-is value on a home that has no as-is functional utility. I have no qualms about making the adjustments, just want to make sure to include proper explanation of my conclusions regarding the lack of a functional bathroom in the as-is value.

I could be overthinking this, I can be a little overly cerebral at times.

Having no functional bath could be a huge functional obsolescence if the typical buyer is for a primary home. Maybe for a vacation home in a resort area it could be different.

 

[shrubberyvaluation]

This is in fact an investor refinance. The guy has been calling me every day asking when it will be in.... tried to directly influence my OOV too. SMH

IF the typical buyer is an investor it probably won't have as much of an impact on value than if a typical buyer is to occupy it.

 

[Terrel L. Shields]

I could be overthinking this, I can be a little overly cerebral at times.

So who is the report going to? If an in-house "non-conforming" loan, the bank needs an "as is" value, period.

Having no functional bath could be a huge functional obsolescence if the typical buyer is for a primary home.

In this market of short supply, the buyer will snap it up and pay Rebath whatever it takes....That's my bet. I don't have any evidence that a large discount is justified, just the cost to cure. And how many similar properties exist to extract an adjustment. 1? 2? - Is that a sufficient amount of data to extract anything from? To get that kind of evidence I would have to go back thru 5 years of data and make the adjustment based on a percentage of something...

I do these all day long, virtually none of my assignments are anything but "as is"... even when I do a "as complete" report because regulated banks are required to develop a value "as is"...

 

[residentialguy]

You should have a ton of comps for that... NOT

 

[residentialguy]

I don't see how you can do this without making it subject to repair. You would have to rely on the cost approach. And as Danny said, you need a bathroom. If they aren't willing to go subject to repair, I would pass... hard pass.

 

[Terrel L. Shields]

I don't see how you can do this without making it subject to repair.

You are thinking like secondary market - agains banks have to have "as is" value, not "as if"... But you have no data to support an adjustment larger than the cost to cure plus the time value of money...therefore, no one has the data to prove that there would be a further discount, and in this market, an investor or a party desperate to get a house bought will "just do it" then fix the bathroom. Rebath will get it done is a few days...couple of weeks at most.