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Distressed Luxury

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Rick Phillips

Thread Starter
Member
Joined
Jul 2, 2004
Professional Status
Certified Residential Appraiser
State
District of Columbia
Before you chastise me for not already having the best answer to this question, know that I am signed up for AI's Appraisal of Foreclosure class :)

Received an assignment today with no warning of any impending doom--sometimes agents feel that if they don't talk about the damage, well, then it's almost as if it never happened. The listing noted that the property was "as-is," but never bothered to mention the water damage, graffiti, warped floor, broken windows, missing kitchen, and, oh yeah, save the best for last, mold.

Contrasting with the neglect and deferred maintenance are some really nice details: custom benches, expensive windows, guest house, a spiral staircase (in addition to the regular staircase) an outdoor pool, an indoor pool, stone fireplaces, slate patios, marble bathroom floors, and closets bigger than my office.

It's in a neighborhood among the nicest Northern VA has to offer. It sits on a plot that covers the larger size of the neighborhood range. It's large itself, and, if fixed, quite appealing.

In the past, when I've had to deal with "fixer-uppers," I was always able to find some proximate, similar fixer-uppers. This is the kind of neighborhood, however, where most folks, judging by the number of service vans/construction trucks I saw anyway, tend to fix stuff before it gets to this point. There aren't any million dollar houses down the street that need work.

So... in addition to developing a solid cost approach and strong support for site value, and in addition to estimating costs to cure (which, btw, could all be thrown out the window if a mold inspection comes back as incurable), and in addition to examining a likely price once all fixed up, is there another necessary step (like find this entire example in a similar neighborhood elsewhere on the map?) ... or may I simply explain that I am taking the sales comparison "as if fixed" minus the cost to cure?

-R
 
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Mztk1

Senior Member
Joined
Dec 3, 2006
Professional Status
Certified Residential Appraiser
State
Florida
Scour all competitive markets for similar sales. Call agents, get estimates on the repairs that were necessary on those sales. Look at interior photos in the MLS, if available, and see if those estimates make sense. Agents go on caravans and often see the inside of numerous houses. Ask any agent you speak with if they know of a listing, pending or recently closed, similar sale that was in a major state of disrepair.
 
Joined
May 2, 2006
Professional Status
Certified Residential Appraiser
State
Ohio
Rick,

I do not think I would spend any time on that assignment until a home inspector or qualified contractor indicated it could be repaired. You mentioned the possible mold issue, and significant water damage could undermine the structural integrity of the dwelling (also, termites like moisture). I'd say wait for the inspection and see what's up. ('cause it could end up being a tear down (factoring demolition costs) and whatever the land value is.)
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
The water issue really worries me. I hit one that water was coming in down the walls due to poor construction. Really need some professional help on that one. Mold is always curable. Removal of sheetrock, treatment with bleach. Just messy and expensive.
 

Rick Phillips

Thread Starter
Member
Joined
Jul 2, 2004
Professional Status
Certified Residential Appraiser
State
District of Columbia
Mold is always curable. Removal of sheetrock, treatment with bleach. Just messy and expensive.

Didn't know that. Thanks.

I finished the assignment and subject to the extraordinary assumption that it was curable, and I recommended a home inspection (which I'm pretty sure they had anyway).
 

Richard Carlsen

Elite Member
Joined
Jan 15, 2002
Professional Status
Licensed Appraiser
State
Michigan
Contact the Client immediately and describe the condition of the property as you saw it during the inspection. Tell the client that in your opinion, the property is not habitable and may not be up to code. It therefore does not meet the requirements for a property for the secondary market. Also, due to the amount of work to be done, this has become a Complex Assignment due to extensive Cost to Cure etc. and will require a higher fee if it is to be done. It should also have to be completed as "subject to" since any appraisal for an "as is" (current condition) will require the report either to be "subject to" inspections for water damage and for compliance for occupancy or you will need the results of these inspections prior to doing the analysis in order to give an "as is" value.

In other words, don't be pushed into doing something half-arsed. Make the client understand the condition and what you as the appraiser face in the subject.
 
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