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Basement Caving In

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Dee Ann Casey

Sophomore Member
Joined
May 29, 2002
I went out on an inspection of a 3 bedroom, 1000 square foot, brick ranch with a full basement. It was a nice house until I got to the nightmare basement! The owner told me that they widened the road 2 years ago and put in new storm drains and it really shook the houses up. She said it felt like an earthquake. Shortly after that some of the owners in the area all noticed their houses started to crack.

The owner of the subject property noticed her basement window started to slant inward and her basement ceiling tiles started to fold inward. She is an older lady in her 70's and is widowed. Without any help from her grand children who passed the buck, she called a company and they tore up her finished basement to put up steel beams on all walls and on the ceiling. They also tore up the concrete floor and put in drains. Now the floor is cracking again and the basement walls are also cracked. It looks like an earthquake came through the area.

My question is: If the lender decides to go ahead with the appraisal, how do I address this issue in the report? How do I cover my behind?

They ordered a 1004 and it is a refinance. The loan amount is about $45,000 and the approximate value of the home if there were no structural propblems would be in the $140,000's. How would I address this issue in the cost approach and the sales comparison grid and still come up with a "fair/accurate Value"? How would I disclose this info in the report?

If I was a buyer I would not purchase this home in fear it would fall apart. How can I honestly and fairly appraise this house?

Please help!

Thank you,

Dee Ann Casey
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
Dee Ann:

Sorry to suggest this but: Don't make the call, Pass the BUCK!

IF the cracks are fairly minor on the floor, probably no big deal! (unless it is a Radon area)... The wall supports were either designed correctly or not and you are no expert. Tell the lender to consult an expert. Suggest the lender consult a licensed engineer, but don't require one.

Buyers are astoundingly stupid, and in most areas do not show great concern with foundations, your area may vary: find out if any other homes have sold with similar issues and see if they sold at any discount.

USUALLY buyers have a belief that if it is 'fixed' that it was fixed correctly, and will be as good as or nearly as good as a house with an intact basment (not true by the way- but not your problem: your job is to estimate how the market will react to the house)...
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Otions for reporting are:

Perform appriasal 'as is' with the use of an Extraordinary Assumption that "it is sufficiently sound as to be acceptable by the market (which you have no reason not to beleive)" Use this only if you really think the thing will sell as is with no further issues.

OR 'As is' but discounted...If you determine in your own mind that it is NOT going to be fully accepted by your market: figure out the discount that the typical buyer would make for the damage.

OR if it is really bad, make the report 'subject to' inspection by a qualified foundation person or engineer....again using an E.O.

The latter will send everyone involved up in flames but there you go: if that is what is needed, DO it!

Good luck
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
:lol: which time zone? mountain? 1:30~!
 

Dee Ann Casey

Sophomore Member
Joined
May 29, 2002
Lee Ann,

Thanks for your response. So far the lender has not made a decision on whether to do the loan or not. I hope they cancel it!

Dee Ann
 

Jeff Horton

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Alabama
I agree that you need an inspection from someone qualified on this. As appraisers we can't make that call. If the damage is bad enough the costs to repair can exceed the value of the house making it worthless. Probably not the case in yours.

I rarely get upset or overly concerned with problems in house as far as appraising one. This one would scare me. I personally would not do this with out something in writting stating what is wrong and what it will cost to fix it. Otherwise I think you are sticking your neck out a bit to much on that one. PASS THAT BUCK!!
 
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