Cost to cure 'as is' question

[Terrel L. Shields]

If it is as-is you are appraising it in its current condition.

Actually you can but again, it is territory for something that is "contrary to what exists" - so it is an HC.

 

[J Grant]

Right on. Thats what i told them, but they keep saying Cost to cure 'as is' means it is 'average' since it is aknowldeged & subtracted from comps as they don't have it. There are Zero similar comps. Only 1 listing that says needs rehab.

your lender client is instructing you how to do the appraisal and that is wrong.

Cost to cure is an estimate by the appraiser what it would cost to repair defects and replace or update. But it does not describe the condition. The condition, average, good, poor , fair - you described it as poor, which usually means significant repair and deferred maintenance.

Sometimes you have to go further out to find a comp, though the listing sounds like one. Some poor condition homes are tear downs, others usually appeal to an investor/flipper and that determines teh lower price - look for higher priced flipped similar houses and see their prior sale price in poor or fair condition.

If you are using any superior condition comps, then you adjust for market reaction which is seen in prices. That might be more than, less than, or equivalent/equal to the cost to cure.

 

[Civic]

your lender client is instructing you how to do the appraisal and that is wrong.

Cost to cure is an estimate by the appraiser what it would cost to repair defects and replace or update. But it does not describe the condition. The condition, average, good, poor , fair - you described it as poor, which usually means significant repair and deferred maintenance.

Sometimes you have to go further out to find a comp, though the listing sounds like one. Some poor condition homes are tear downs, others usually appeal to an investor/flipper and that determines teh lower price - look for higher priced flipped similar houses and see their prior sale price in poor or fair condition.

If you are using any superior condition comps, then you adjust for market reaction which is seen in prices. That might be more than, less than, or equivalent/equal to the cost to cure.

I thought so too, if it is Poor then i should leave it as poor. But they say then why do i adjust for both condition & cost to cure. Comp 1 is Fair cond i deducted for cond there as well, & as mentiioned earloer also deducted 30k for cost to cure as this comp is not that bad of cond as subject. But they saying, if after cost to cure subj will be Avg, then it should say Avg on grid.

 

[J Grant]

I thought so too, if it is Poor then i should leave it as poor. But they say then why do i adjust for both condition & cost to cure. Comp 1 is Fair cond i deducted for cond there as well, & as mentiioned earloer also deducted 30k for cost to cure as this comp is not that bad of cond as subject. But they saying, if after cost to cure subj will be Avg, then it should say Avg on grid.

They are correct in that if you are adjusting for both condition and cost to cure, that is wrong -I hate to say this but maybe you are not competent for this assignment ?

I rarely adjust for cost to cure and if I do it is usually for a low cost replacement such as an AC or the like - For enough repair cost affecting the condition, I would only adjust for condition - there are some appraisers who always adjust it as a cost to cure, but then they are not also doing another adjustment for condition- if they are I have no idea what to say other than imo, it is not good practice .

 

[Civic]

They are correct in that if you are adjusting for both condition and cost to cure, that is wrong -I hate to say this but maybe you are not competent for this assignment ?

I rarely adjust for cost to cure and if I do it is usually for a low cost replacement such as an AC or the like - For enough repair cost affecting the condition, I would only adjust for condition - there are some appraisers who always adjust it as a cost to cure, but then they are not also doing another adjustment for condition- if they are I have no idea what to say other than imo, it is not good practice .

You are correct, but to be profiecnt in such matter we need experience-) This gave me good experience for future similar cases, as i mostly did regular 'subject to'. So basicly, i will on Comp grid state Cond for Subj Avg(see aaddendum) then adjust cost to cure & explain that Avg is hypothetical after Cost to Cure is accounted for .

 

[sputnam]

As Is with cost to cure? Or subject to repairs? What does your assignment call for? If you can't figure that out, then you need to contact the Client and ask which way they want it.

 

[Civic]

As Is with cost to cure? Or subject to repairs? What does your assignment call for? If you can't figure that out, then you need to contact the Client and ask which way they want it.

Yes, As is with cost to cure.

 

[sputnam]

Yes, As is with cost to cure.

You missed the point. It's your Client's decision as to which way to go with it. Not an independent appraiser decision. If your engagement specified as is market value... then that is what you do. If they want the cost to cure, then estimate it. If they didn't ask for a cost to cure, keep it to yourself.

 

[J Grant]

You are correct, but to be profiecnt in such matter we need experience-) This gave me good experience for future similar cases, as i mostly did regular 'subject to'. So basicly, i will on Comp grid state Cond for Subj Avg(see aaddendum) then adjust cost to cure & explain that Avg is hypothetical after Cost to Cure is accounted for .

NO!!! You still do not get it - "AS IS" means there is no hypothetical that it is average!! The whole point of "AS IS" means the subject property as it exists on date you inspected - if it is in poor condition, then it goes on teh grid in poor condition. Your comps ideally are in similar poor condition, but if you cant' find any, then find comps in fair or average condition and adjust down for condition.

The cost to cure is for client purpose just to get an estimate of what it might cost to make the repairs noted. It is not adjusted for - but if you want to adjust for cost to cure instead of for condition, then do so, but "AS IS" still means the subject is on grid in its existing poor condition.

If client wants two values one value in, " as is -poor condition" and a second value "as repaired to hypothetical average condition" then you can give them two different values.

 

[Vermonter]

If "as-is" there is no adjusting for a cost to cure. It's provided as an estimate for the lender.

Recommend only using a cost to cure for small repair items. Like missing siding or deck rails, nothing that will impact the overall condition or quality rating. They're basically asking you to cost estimate a rehab or remodel.

Also I would use an online or local source for estimates and provide a RANGE, not a fixed number. I typically use Homewyse and give the hi/lo as a range.