Definition of "Average Condition"

[Farm Gal]

Robert:

The definition I have heard provided in most appraisal classes is that 'average' condition is defined by the immediate sub-market competition, that is neighboring homes in the immediate area.

I have also 'heard' that to be accurate one should use comparable homes in the larger marketing area IF the home is atypical of immediately surrounding properties.

Professional classes and references state a number of views, and methodologies, and Fannie doesn't make this issue perfectly clear.

In practice I agree with vargasteve that to describe an upmarket home as 'average' is to open onself to abuse. If I use the term average on such a home it is carefully spelled out that the subject is 'average' only within its limited upscale market and would be considered superior to the 'typical' home in the larger marketing area.

By the same token a home in poor condition and repair surrounded by homes of simialr nature is also average, but as Greg said may need repairs.

My personal take on the matter is to first describe the subject relative to the surrounding properties, and only if it is highly atypical to look beyond the homes on the street/subdivision. Significant additional narrative is required if going beyond what is observed in the immediate area.

 

[Mike Garrett RAA]

We all know that average is just, ahhhhhhh....average!

I have added two additional classifications which I describe in my addendum that nobody ever reads.

Good

Above Average

Average

Below Average

Fair

Poor

This allows me to make adjustments for condition without using fair or poor which drive underwriters crazy. It also allows for smaller adjustments then just having four classifications. Fannie Mae says Fair is acceptable but most lenders don't agree.

 

[Terrel L. Shields]

When I am referring to the condition of the improvements, when the effective age and the actual age are one, say 10 years EA / 10 years AA, then that is "average". If the EA is 5 and AA is 10, then that is good and if EA is 15 and AA is 10, that is fair....or some other intermediate. If I find a house with average EA/AA but some slight problem (like floor cover needs replaced but everything else is OK) I might use Average -, and inversely Average +

I preferr the terms "typical" for neighborhood, landscaping, lot etc. or "normal" for functional utility.

 

[Bill_FL]

Personally, here is average condition, as defined by me.

Average condition means that condition which would be normal for the age of the property, with normal maintenance and upkeep. If you have a 30 year old home with minimal updates, normal wear and tear, but no deferred maintenance, that is probably average condition. If the 30 year old home had been completely updated and renovated it might be in good condition. IF the 30year old home had no normal maintenance, needed repairs, etc, it would be in a condition below average.

 

[Mike Garrett RAA]

Bill, that is exactly why I have two additional classifications (Above Average and Below Average) to more accurately reflect the condition based on effective age. I felt these were necessary because, according to Fannie recommendations, Fair falls below average and this is a condition which is unacceptable to most lenders even though Fannie says it is acceptable to them.

 

[Mountain Man]

Ditto with Mike. It helps the readers and UW's by being a little more descriptive. Assuming the subject is average: one comp may have some improvements, like new paint and carpet, but is not really in good condition like a gut remodeled or new home. Also true in reverse, when one comp could use some new paint or updating, but are not really deferred maintaince issues.

Obviously it boils down to your data source and research. When I see nothing but "average" or "equal" through out a report, that's my first clue that the research was very limited, or someone is trying to hide a condition/repair problem.

 

[Bill_FL]

MIke,

I agree, that is why I too use like this.

Good
Avg-Good
Avg
Avg-Fair
Fair
Poor

 

[Mike Garrett RAA]

same thing....more classifications! Sorta like bait. Large, larger, small, smaller.