condemnation appraisal

[Anonymous]

Received an order for a full URAR/REO on a vacant converted SFH to
2 family. Went to the site, found yellow tape and a red "condemned" sign stapled to the door.

Went to the code officer who said the structure is sound, but it was boarded up by borough because of complaints by residents that kids were using the place as a party house. OK, got my flashlight walked where I could, did my inspection and now, I have found 3 other condemned properties that'll work as comps, but only one is a arm's length.

(This home is located in the lower end of town, distressed to say the least. I wouldn't put any money in to recover funds.)

Getting back to the main story, Other two sales are banks getting out, but the transactions are not that much below other bottom feeder's buys on the market. Any suggestions appreciated.

 

[Fred]

Is there really such a thing as "arm's length" market for such properties? What is wrong with "bottom feeder value" for one of these babies?

 

[xmrdfghap]

What is the purpose of the appraisal? Is it for asset evaluation, quick sale price, ???????

If you are able to enter the property (and apparently kids are too) then the lack of security indicates it is about to be written off. I would look closely at the value of vacant lots and calculate cost of demolition. Then look closely at the cost to cure.....to bring it up to modern habitable standards, the least weight I would give would be the market approach and/or income.......but address them both.......and if the figures come up negative let it stand. One thing I would mention in the report is the lack of security and the liability that is inherent......if a kid gets hurt, a girl gets raped, someone dies from an overdose, etc., there is a real chance of the bank getting sued for negligence.

They need an honest value....not something they can get a 125% loan on.

Greg

 

[bradellis]

Frank,

REO- remember that first. Who is the most probable buyer? Is the condition such that an owner/occupant may buy it and fix it up? If not, will an investor buy it, rehab it, and resell it? Can they make a profit doing this? Your market will tell you.

For the basics on REO appraising, see my article in the NAIFA e-gram which you can find on the home page of NAIFA at www.naifa.com.

Brad

 

[Fred]

Good answer, Brad, and nice plug. Frank, you might check out my article too. The beginning talks about how the client's intentions affect the definition of value, which includes, as Brad points out, who is "the most probable buyer".
http://www.naifa.com./gram/2002jan/cover.html

 

[Anonymous]

In some areas, once a property is officially condemned, then it must be brought up to current building and zoning codes in order to get a new certificate of occupancy. Due to zoning changes in set-back requirements, parking spaces, etc... many older properties just can't be made to conform to the new codes. It may take months of reviews of proposed blueprints by many agencies before a determination if any variances will be given to allow the property to be rehab'd, or if it must be torn down. A lot of politics often taints this process. Purchase of a condemned property involves some risks. ..... Something to think about.

 

[Anonymous]

I do a lot of appraisals in Camden, N.J., the second poorest city in the country. In many neighborhoods the only sales are repos and distress sales, thats the market. I explain the situation in my report and use the distress sales.
Walt Kirk

 

[Anonymous]

thanks to all who contributed to my thread--received a ton of good
infor!!