Deferred Maintenance Adjustment

[RSW]

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.

Exactly! I hate it when I see appraiser's make an adjustment for a cost to cure in the SCA that is equal to what is costs to do the work. Who in their right mind would expect the same return on their money. No one would.

 

[hastalavista]

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!

In my experience, the most common method of identifying the impairment is (a) in the overall condition or (b) as a separate line item.
For example, a accumulated deferred maintenance is probably best handled in the overall condition rating.
A specific item like a roof, however, may be best handled as its own line-item.

One thing that the current UAD protocol does is make separating deferred maintenance items from condition problematical. If I rate something as a C3 because it was updated 12-years ago and has been well maintained since, but its roof is shot and I line-item that, another appraiser may rate it C4 at the higher end.

Another thing about the typical residential assignment: While in theory, there would be nothing wrong with valuing the property in the grid without consideration of the deferred maintenance items, and then make that adjustment afterward, in practice that would send the UAD form-checker into meltdown.

Residential mortgage clients, as a rule, expect to see all adjustments applied to the subject in the grid (an exception might be excess land). Therefore, I would recommend the deferred maintenance, if you are going to adjust for it by a specific dollar amount, be applied in the grid. Some try to avoid making the so-called "across the board" adjustments and with good reason; some client's automatically question it. But deferred maintenance, by definition, is something that is expected to be taken care of as needed and in the subject's case has been deferred. Sometimes, the comps have not deferred their maintenance or replacement schedules. The best reason why an across-the-board adjustment would be appropriate.

 

[Deleted member 128537]

Fannie allows for adjustments even when same condition at the condition area. Just explain why and how derived. Sometimes I make adjustment at the age line if that makes sense; such as C3 for both houses but one is older. In both cases I do on basis of effective age comparison. Never have a problem with UWs.

 

[Deleted member 130081]

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!

The most common way to address deferred maintenance adjustments is to avoid making them in the first place if possible, by using comps in a similar physical condition. If you must make an adjustment, the most common place to do it would be on the Condition line, which is referring to physical condition.