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Cost to Cure & Depreciation when Subject To

Honey West

Thread Starter
Freshman Member
Joined
Nov 20, 2016
Professional Status
Certified Residential Appraiser
State
California
Please help! I'm having a brain fade...Subject has significant issues, Lender wants an appraisal Subject To, and that will get it to a C4 Condition. In the Cost Approach, my reference sources say use the New Condition for the Effective Age; or the Effective Age after improvements that are Subject To. Then where does the "Cost to Cure" go?
I thnk I have analysis paralysis, so please......Hit me! Thank you.
 

alebrewer

Member
Gold Supporting Member
Joined
Mar 11, 2008
Professional Status
Certified Residential Appraiser
State
Texas
Then where does the "Cost to Cure" go?
If the appraisal is 'subject to' remediation of the 'significant' issues, then there is no cost to cure in the cost approach. You are invoking a HC that the 'significant issues' have already been re mediated. Your client may ask you for a cost to cure (usually because they'll do an escrow holdback to remedy the issues), but that would be in your narrative, not the CA or the SCA.
 

CANative

Elite Member
Joined
Jun 18, 2003
Professional Status
Certified Residential Appraiser
State
California
Agree with ale.

There are cost services and publications to estimate repair costs. I don't own or subscribe. I don't care enough.

If they insist, add up the cost on your fingers and give them a wide range $20k to $40k.

If you read the free residential cost handbooks available from the CA Board of Equalizations website (AH531 for 2019) you can figure out a lot of the costs. Or you can cost things out from retail places on the web like Home Depot or such. Estimate the time to repair in man hours and multiple by a reasonable $/hour... blah, blah, blah.

It's a requirement for FHA.
 

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
C2C should be limited to curable obsolescences otherwise, your cure exceeds the value of the cost. And I agree above that if more than a few thousand bucks, I want the lender to provide the cost estimate from a contractor as well as identity the issues.
This has a list of FHA required repairs.

FNMA limits such repairs to no more than 10% of the value.
 

Honey West

Thread Starter
Freshman Member
Joined
Nov 20, 2016
Professional Status
Certified Residential Appraiser
State
California
If the appraisal is 'subject to' remediation of the 'significant' issues, then there is no cost to cure in the cost approach. You are invoking a HC that the 'significant issues' have already been re mediated. Your client may ask you for a cost to cure (usually because they'll do an escrow holdback to remedy the issues), but that would be in your narrative, not the CA or the SCA.
Thank you Ale!! Of course! Don’t know why but I got stuck in a rut there. Much appreciation!
 

Honey West

Thread Starter
Freshman Member
Joined
Nov 20, 2016
Professional Status
Certified Residential Appraiser
State
California
C2C should be limited to curable obsolescences otherwise, your cure exceeds the value of the cost. And I agree above that if more than a few thousand bucks, I want the lender to provide the cost estimate from a contractor as well as identity the issues.
This has a list of FHA required repairs.

FNMA limits such repairs to no more than 10% of the value.
Awesome, thank you for the resource!
 

alebrewer

Member
Gold Supporting Member
Joined
Mar 11, 2008
Professional Status
Certified Residential Appraiser
State
Texas
Thank you Ale!! Of course! Don’t know why but I got stuck in a rut there. Much appreciation!
Happens to me all the time. Nice to have this resource available - always good to have others to bounce stuff off of.
 
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