Condition rating

[Dscan]

Appraised a 22 year old ranch style home, very good condition (about 10 effective)...except...the homeowner has decided to redo the basement. Drywall is in, unpainted. Fireplace frame for electric fireplace is in place. No flooring, no light fixtures installed yet...receptacles not covered. There is a completed full bath. I rated this a C5, subject to repairs, due to the incomplete items and the exposed wiring. Asked to make it a C4, as is, with a cost to cure. If I understand the ratings , C4 is more minor cosmetics (wear and tear). Opinions???

 

[residentialguy]

If it is subject to repairs, than your condition rating is what it would be after repairs...which would probably be C4 or better. And exposed wiring is a safety hazard, which automatically makes the whole house a C6. I just did one with some hazard issues. I rated it C4 with subject to repairs. Here's the comment I added.

"Upon inspection, some safety hazards were noted; Therefore the as-is condition is considered C6 rating, which must be made subject to repair. This report reflects the as repaired status of the subject which falls within the C4 rating range"

 

[Lisle]

I would evaluate the living area separately from the basement area (saftey issues aside). If I'm inspecting a house with recent and significant updating to kitchen and baths but has a half finished rec room in the basement, I will most likely give a C3 rating. Unless I am seeing some kind of physical damage, I am not very concerned with the condition of garages, attics and basements. Again, safety issues aside.

 

[residentialguy]

I understand what you are saying Lisle. Reality with OP is that they can't put safety issues aside...it's C6 as-is, therefore must be made subject to repair of those issues. Obviously he can only call the bath finished.

 

[residentialguy]

1234567890

 

[redfish]

Question is then to the OP

If you are completing the appraisal subject to the completion of the basement does your valuation reflect a finished basement?

Hypothetical conditions and extraordinary assumptions must be discussed with the client prior to making them. From now on I would report to the client the issues and proceed only after both you and client are comfortable with HC or EA being employed.

 

[Dscan]

Residentialguy...Thanks for the reply...and yes, you are correct regarding the C6 rating. The reason for my line of thinking is this tidbit from a class earlier this year. Fannie Mae only requires a "subject to" appraisal assignment if there are incomplete items or conditions that affect the safety, soundness or structural integrity of the improvements. Fannie Mae allows an "as is" appraisal for C5 rated properties if the conditions noted in the report do NOT affect the safety, soundness or structural integrity and are NOT incomplete items. I take from this that a property in a C5 rating can have safety issues and must be "subject to" for incomplete items OR safety issues. If C6 is the only way a safety issue can be addressed, why are safety issues being referred to along with the C5 rating in this guideline? In my opinion a C6 rating should be reserved for a dilapidated dwelling (I know, my 20+ years in this profession means nothing). I hesitate to rate a home like this as a C6 because it does not require substantial repairs. This rating system needs an overhaul :new_multi:

 

[Rich Heyn]

Residentialguy...Thanks for the reply...and yes, you are correct regarding the C6 rating. The reason for my line of thinking is this tidbit from a class earlier this year. Fannie Mae only requires a "subject to" appraisal assignment if there are incomplete items or conditions that affect the safety, soundness or structural integrity of the improvements. Fannie Mae allows an "as is" appraisal for C5 rated properties if the conditions noted in the report do NOT affect the safety, soundness or structural integrity and are NOT incomplete items. I take from this that a property in a C5 rating can have safety issues and must be "subject to" for incomplete items OR safety issues. If C6 is the only way a safety issue can be addressed, why are safety issues being referred to along with the C5 rating in this guideline? In my opinion a C6 rating should be reserved for a dilapidated dwelling (I know, my 20+ years in this profession means nothing). I hesitate to rate a home like this as a C6 because it does not require substantial repairs. This rating system needs an overhaul :new_multi:

C6 is not for dilapidated dwellings. It's for dwellings that have issues related to safety, soundness and/or structural integrity. C6 is a special case. If a dwelling has issues related to safety, soundness and/or structural integrity it's a C6 no matter how good it might otherwise be. If a dwelling does not have issues related to safety, soundness and/or structural integrity, it's not a C6, no matter how bad of shape it's in.

So you have to decide it there really are issues related to safety, soundness and/or structural integrity. Exposed wiring is not always a safety hazard. If the wiring is not yet connected to the load center it can't be energized.

 

[RSW]

I don't see the subject as a C6. Here is the Fannie Mae definition of a C6:

The improvements have substantial damage or deferred maintenance with deficiencies or defects that are severe enough to effect 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.

I take this to mean a dwelling that is pretty much falling down or unsafe to occupy.

 

[Dscan]

Thanks all for your responses. I know that it really does not matter what we think, but more what Fannie Mae says. I just think there is a huge gray area with these ratings and Rich's comment regarding the exposed wiring is a case in point. This appraisal is an example of spending too much time worrying about the condition rating and if it's going to come back to bite me....Thanks again