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Cost To Cure Question

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jhornet88

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Working on a report for an older home (90+ yrs old, historic district). Buyers/flippers purchasing to renovate. Non- FHA. Home obviously needs some work- visable amount of water in basement being main issue to write up subject to repairs/cost to cure/inspection by foundation specialist or contractor repair/fix. In addition to that there is zero insulation in between the floor joists. ie basement ceiling exposed to above.. completely unfinished basement. Thoughts on requiring insulation to be added vs recommending? Insulation in floor obviously not a code issue back in 1920 but should I require it to be added now? Thoughts.
 

hastalavista

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If this is a flip-house in need of significant repair, and someone is trying to get a loan for the purchase, why is it not being valued in its as-is condition?
 

jhornet88

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Lender wont accept C5 condition homes. There in lies the rub. ive done similar properties where the intent after purchase is for whole house renovation and there was basically a hole in the roof and the roof had to atleast be fixed to prevent further damage before its acceptable to lender. From their end they dont want to take on a loan for a flipper that's totally falling apart and then have the flipper run out of money due to who knows what and then not fix the subject property as intended. Then the bank is left with a property under water in more ways than one. They want subject to x, y , z repairs to get to a C4.
 

hastalavista

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Thanks for the clarification.

Here is your original question:
Thoughts on requiring insulation to be added vs recommending? Insulation in floor obviously not a code issue back in 1920 but should I require it to be added now? Thoughts.​

Unless it is required by code or its lack of existence creates a health/safety issue, I would not include it as a must-have.
However, since it is the bank that seems to be setting the standard here, I'd call them and ask just to make sure.

Requiring to have it (insulation) is one thing.
Its absence and how that impacts value is another.


Good luck!
 

hastalavista

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BTW, a lender can set its lending criteria almost anyway it wants. So a lender requiring a minimum property condition of X is fine.
If I were working for this lender, I'd make it clear in my report that the things I'm making my report subject-to are items specifically identified by the lender as items that need to be addressed for its lending purposes.
That way it is they (the lender) who is requiring all of this... not me.
 

Riick

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Aug 14, 2007
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Delaware
One thing to remember in a historic home is whether to use replacement or reproduction costs.
There was no way anyone is going to reproduce parts some homes.
House c.1835 - Know anyone who can reproduce horsehair plaster? How about red-pine floors?
You do!? If so, at what cost?
Reproduce a joist, please find me a *true* (not nominal) 3" x 12" x 22 ft joist
 

Terrel L. Shields

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Arkansas
if a regulated bank, an as is value is required. And I would not estimate C2C on my own if the amount is large. Some flippers can do cosmetic repairs for a fraction of a serious bid which means the flipper is borrowing money up front far in excess of what they spend.
 

jhornet88

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Thanks for the replies! Much appreciated. My original questions I guess was should the lack of floor insulation be added to the "subject to repair" list along with water in basement...ie have licensed contractor and or foundation specialist inspect property, identifiy cause of water and have situation fixed.

I would consider issues that I would want repaired to get from c5 to c4 to be damaged roof open to elements, broken window open to elements, missing steps or railing, holes in subflooring to crawl or basement, major foundation cracks, visable water leaks etc. Missing kitchen appliances, ceiling fans or fixtures that dont work, damaged trim or flooring im ok with in this situation as a C4. Was just wondering if missing floor insulation should be considered criteria to get from c5 to c4. I rarely if ever have ever seen missing floor insulation no matter what age the home is.
 

hastalavista

Elite Member
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Certified General Appraiser
State
California
if a regulated bank, an as is value is required.

True in some cases, but not in all cases.
If a regulated bank is using a loan program that is exempt from the IAEG (like a Fannie Mae program) then it doesn't need an as-is value under certain circumstances.
 

jhornet88

Freshman Member
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Apr 26, 2014
Professional Status
General Public
State
North Carolina
if a regulated bank, an as is value is required. And I would not estimate C2C on my own if the amount is large. Some flippers can do cosmetic repairs for a fraction of a serious bid which means the flipper is borrowing money up front far in excess of what they spend.

Correct. Not going to quote a # . Too obscure of a situation,,.. could be a $200 fix or $10,000 repair. Subject to repairs on basis of a hypothetical condition that the repairs have been completed (no matter what the costs). Once remedied I can come back and do a final- 1004D As is. Too big of an unknown at this point.
 
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