Deferred Maintenance Adjustment

[undergroundPOP]

Hi everyone,

I have a question regarding adjustments for deferred maintenance items on a single-family residence. I don't have much experience with residential appraisals and URAR forms, as most of my training has been centered around commercial work. Typically, for commercial properties, we (my supervisor and I) address deferred maintenance items in a below-the-line adjustment after developing the value estimate. For residential properties, and more specifically on the 1004 form, what is the most common way to address deferred maintenance items? Is it through a physical conditions adjustment? effective age differences?

Thanks for your help!

 

[Howard Klahr]

Are you appraising the property "as is" or "subject to" repairs?

 

[undergroundPOP]

Are you appraising the property "as is" or "subject to" repairs?

As-Is

 

[glenn walker]

Look At Your Fannie Guide C-1 Through C-6 Most but not all residential properties with common or typical deferred maintenance are C-4 BUT NO offense you should not be doing residential unless your mentor does residential and understands what the definitions are.

 

[Howard Klahr]

As-Is

Then there would likely be a condition adjustment, assuming that your comparables don't suffer from the same degree of deferred maintenance. You could adjust in the reconciliation process but 1) then your comps would need to not suffer from similar deferred maintenance and 2) your adjustments/analysis would be based on the as repaired condition. Your choice on how you wish to proceed.

 

[Amy Perkins]

You could do an overall condition adjustment, but if there is a specific repair, you can estimate a cost to cure and do an across the board adjustment. Unless you have a sale with a number of repairs.

 

[Amy Perkins]

For a roof that shows signs of leakage, you would recommend a two year roof certification. If you had lots of exterior damage to the wood siding you might do a cost to cure for 10K, say you had some flooring repairs you could do it at $4 per sf, say, 4K. Then some paint at 4K... Now you would have an adjustment of 18K across the board.

 

[Amy Perkins]

I'm just throwing out some numbers for a smaller house, it depends on the market, quality, size...

 

[Mr Rex]

The adjustment is intended to reflect market reaction to the deferred maintenance not the cost to cure. Most market participants would have a reaction greater than the cost to cure due to the hassle of having to arrange for the repairs and the potential for further unseen issues etc.

 

[Restrain]

Minor maintenance can be analyzed on the basis of market reaction. If doing a cost-to-cure analysis, you will often have both the cost-to-cure and the market resistance to having t spend X on the repairs. Again you should be able to extract from the market.