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dazed and confused.

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alphamale

Thread Starter
Freshman Member
Joined
Feb 10, 2002
I'm not sure if this is something you can help me with, but here goes!
I found a house that I am interested in puchacing;however, I have a question about the appraisal. The house is a two story traditional style built in 2000 with about 3952 sq. ft. on 5.21 acres. The seller was transfered out of state after living in the home for only 6 months. The first floor is about 2300 sq. ft. and is completely finished. The second floor is 1600 sq. ft. and unfinished. The electrical, plumbing, rough frame work in completed. It still requires HVAC unit, insulation, drywall, fixtures, flooring and finish. Overall the house appears to be of excellent quality and above average construction. I plan on completing the second floor myself.

My questions are:
1. How does the unfinished second floor affect the overall appraisal and subsequent sale price?
2. Can the second floor be considered "living space" as there is no heating or airconditioning, running water, or lavatory?
3. Should I expect the seller to price the unfinished sq. footage differently from the finished sq. footage or should this be taken into account by the overall $ per sq. ft?
4. How strong a barganing chip do I have in negotiating the sale price?
5. Could the fact that the home is unfinished upstairs be a sore spot for a lender?

Any assistance or advice would be greatly appreciated. Thanks.
 

Tim Hicks (Texas)

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Texas
If the upstairs in unfinished then it is not living area. If the liveability of the home is affected by the finishing of the upstairs, then a lender will probably require the "finish" of the upstairs. Other factors that could come in to place are: The second floor is needed to be considered typical for the market area. Ex. There is only one bedroom and one bath down stairs and the market is typically 3/2 homes. Ex. The second floor can not be shut off from the first floor, such as a large open area to the second floor area.

The second floor does have value, but it is limited by the amount it is finished and the "cost to cure" (finish the unfinished area). You should contact your mortgage company and tell them the specifics about the home and have them explain what you would need to do to get financing. It may not be able to get financing "as is" and may only be financing "subject to" completion of the unfinished area. Pricing is up to you and your market conditions. You could leave it up to the mortgage companies appraiser, but you might get a better deal negotiating a smaller sales price.
 

Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
Good answer Tim.

He told it to you like it is. How is this second floor accessed? If it is up a stairway with a door, it probably will be considered an unfinished attic (assuming that there is not a utility problem with the house).

From the sales end:
As for your bargaining chip, it depends on your position VS the position of the sellers. This is a transfer, so did it go through a relo. company? Are there incentives for a quick closing? If you have already fallen in love with the house, you may not have any bargaining chips. Do your own research outside of what the sales agent gives you, or hire your own consultant/agent. Look at recent sales, but do NOT use the MLS sheets as your only source, ALL data must be confirmed. You may get a decent deal, but don't believe those late night commercials about buying house for "pennies on the dollar".

Mell.
 

Ray Ohler

Sophomore Member
Joined
Jan 15, 2002
Probably the best thing to do would be to go to a local non-commercial bank (savings association, state chartered S&L, credit union, etc.) and explain everything in detail. You may have to apply for a construction loan with the permanent financing tied to that lender (would probably get the best deal that way anyway). OR, you could find a local flim-flam mortgage broker with an appraiser in his "stable". :lol:
 

alphamale

Thread Starter
Freshman Member
Joined
Feb 10, 2002
:lol: Thank you all for your replies, they are greatly appreciated.

I plan to hire an appraiser for an independent evaluation of the property, I'm in no hurry and don't plan on rushing into anything.

Another question if I may.

If the second story is currently an "unfinished attic", how does the "value" compare to that of the finished home? Is there a percentage difference?

Fortunantly, the completion of the second floor / attic does not affect the livability of the home. I think I can convince the lender that I can do a better job than most in finishing the work. I feel like Rembrandt with a blank pallet!
 
Joined
Jan 13, 2002
Professional Status
Retired Appraiser
State
Florida
Alphamale,

There is no strict percentage difference. This is an 'it depends' situation that no appraiser can answer without an inspection and working up the figures for your market. There are a couple of different ways this could be handled within an appraisal. Much will depend on your lender and which way they want to handle it. 'As Is' is what most lenders want and that would obviously be less than 'As Complete'. Best suggestion I can give you is to make sure you have both an experienced loan officer and appraiser. For your negotiating purposes, an 'As Is' appraisal would be to your benefit and if you order one on your own for yourself it is yours do use as you wish - it's up to you if you choose to show it to anyone else. If the appraisal is ordered through a lender, the lender is the appraiser's client, the appraiser cannot discuss the appraisal with you and if you want a copy of it, you will have to ask the lender for it as the appraiser cannot legally give you a copy. Just thank our federal legislators for that.

Sounds like a fun project! Good luck!

Alphafemale (My company name is Alpha Real Estate Appraisal)
 

vblanche

Freshman Member
Joined
Jan 17, 2002
My husband and I purchased a new home with similar arrangements as the one you are referring to. The 1st floor had the master bedroom and full bath, hall bath, dining room, living room, kitchen and family room. The upstairs was studded out for two bedrooms, a bath and a bonus room above the garage. My being in this line of work told me that under normal circumstances, there would be no comps to a one bedroom home with 1800 square feet. The builder ended up having to complete one bedroom upstairs because the appraiser could not find comparables to the unfinished house with only one bedroom (main level approximately 1800 square feet). They were able to find sufficient comparables when adding the completed bedroom upstairs.

By the way, the builder completed that bedroom upstairs (15'x16') for an additional $1000 to the contract price.

:lol:
 
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