Do You Adjust Condition When Dirty?

[Steve Owen]

You mean Dirty? or DIRTY?

Terrel, I would ignore the trash in the front yard, with the possible exception of the tires; you always have to keep your eyes open for possible environmental issues. Most of the other stuff appears to be personal property, which can easily be cleaned up, and would be before the house was put on the market. (The same goes for general dirt or messiness... if you are taking an adjustment for kids clothes on the floor, you are making an error IMHO.)

On the other hand, Terrel's picture seems to show a possible problem with the roof. That is "condition" and should be adjusted. There are other hints from the picture that there may be maintenance issues. Of course, extreme bad house keeping can lead to poor condition, which should be adjusted. Terrel's picture doesn't show whether the carpet has been ruined or the interior walls need painting, but intuition says that might be the case.

If you were a Realtor showing two identical homes and one was all neat and clean and things put away, and the other looked a shambles, which one do you think your buyer would chose? Do you think they would pay the same for both?

You would lower value for things not being "put away?" You are treading dangerously close to letting your personal prejudices into the appraisal process. Yes... at the time of marketing, a house that is spic and span will show better, especially to some market participants. But, and this is a really big but... your comment seems to indicate that you would adjust for general messiness. My house is messy. But, if I was getting ready to show it for sale I could pick the stuff up and put it away. I might look like a slob on the day you appraise my house... but, any appraiser who would adjust for my messiness would look like a genuine fool. (On the other hand, my roof is old and my kitchen floor needs replacing... you should take my house down a notch or two for those things, because the market would.)

This is not an easy topic. Filth, especially filth that leads to infestation, mold, or other deferred maintenance issues can definitely have an impact on value. However, it is easy for an appraiser to go into a house that is "lived-in" and generally messy, but not so dirty it cannot be quickly cleaned up, and make the mistake of allowing themselves to be biased by that.

The key to this problem is cost to cure. The mess at my house could be cleaned up with half a day's work. Cost to cure $200 max. No one is good enough to adjust that finely. On the other hand, my roof and kitchen floor will take enough to fix that they need an adjustment. Similarly, if you go to a house where the degree of filth has resulted in a maintenance problem, then by all means adjust.

Still, it worries me some that a few of the comments here seem to show a willingness to be biased over something that might not really affect value at all. I have had HO's who wanted to put off making an appointment so they could clean up. As soon as I explained the difference between "messiness" and "condition" they usually let me come. I am a real estate appraiser; I would not adjust a house for any amount of personal property that was laying around unless it also affected condition or caused a cost to cure issue that could be quantified.

 

[DTB]

I disagree that it is a cost to cure issue. My experience in the market leads me to believe that buyer reaction is from 5-10 times the actual cost to cure. The higher the cost the lower the multiple of reaction. 500-2,000 cost to cure is around 5-15K market reaction.

 

[Richard Carlsen]

You may have a fairly valid point but I’d like to see you prove that supposition with market data.

 

[Farm Gal]

Steve:

I agree with yrou concern as to caution about personal preferences, however in MY market the showings of vacant homes in pretty similar strutural and updating cohorts in the following circumstances have readily observable market reactions!

Keep in mind the homes are vacant with no pp on site to influence ANYTHING.

Filthy
Obviously lived in, but fairly clean condition
Very clean, typical wear patterns (truely average)
new paint n carpets, even with cracks and flaws in the trim and surfaces...
New paint n carpets freshly planted flowers in the yard and fresh curtains
(not even ironed, creases stil on em!)

I can tell you that I have seen an extra 200 bucks in materials MAX result in top smackeroo at sale time in those last two categories. Simply an idiotic level of ROI. Like 4 grand or more :blink: on a house worth under 100K.

Which I refuse to warrent as reasonable. Incurring Hate and Discontent from all.

 

[Steve Owen]

I disagree that it is a cost to cure issue. My experience in the market leads me to believe that buyer reaction is from 5-10 times the actual cost to cure. The higher the cost the lower the multiple of reaction. 500-2,000 cost to cure is around 5-15K market reaction.

I think you just proved that it is a cost to cure issue... assuming your supposition is correct. Just as cost does not necessarily equal value, cost to cure does not necessarily equal market reaction.

However, my point was if it is just messy... a quick pick-up, clean-up matter, with very low (or zero) cost to cure, then it usually should not be adjusted at all. In my local market, $2,000 cost to cure might get you something more like a $5,000 market reaction... that could just be a difference in market area. But, a $2,000 cost to cure is not just a messy house or poor housekeeping... you have some "condition" or deferred maintenance issues with that kind of cost to cure. Also, don't you think your range is a bit wide? A $500 cost to cure would be a very different situation than a $2,000 cost to cure around here.

Regardless of your figures, or whether I am understanding them correctly, this is still primarily a cost to cure issue. If it will cost a lot to fix it, you will get a market reaction, if it costs little or nothing, then no adjustment is appropriate (in most cases).

 

[Randy Beigh]

I assume that we can all agree that a house that needs paint will sell for less than a house that doesn't need paint, and that a house that needs new floor coverings or counter tops will sell for less than one that doesn't, and that a house that is dirty will sell for less than a house that is clean. I am assuming that all of us have seen enough homes to know these are facts, although there are exceptions.

Why then would anyone assume the house will be painted, floors/counters replaced, or the place cleaned up, if it is put on the market. For the majority of appraisals, they are done as the date of inspection, so the assumption that they would clean it up seems moot to me. If the house is a dump on the date of inspection, photos will be taken and it will be taken into account in the value side.

 

[Steve Owen]

I can tell you that I have seen an extra 200 bucks in materials MAX result in top smackeroo at sale time in those last two categories. Simply an idiotic level of ROI. Like 4 grand or more on a house worth under 100K.

I have seen that too, Lee Ann. In most of the cases where I have seen it, there have been other factors at work... usually a flipper who bought the house from unsophisticated sellers, spent minimal money or rehab and then sold it at market, or in some cases, above market with the help of Skippy. How did I know the sellers were unsophisticated? Well, maybe that's not a good word for it... but if they were market savvy, why didn't they spend the $200 and reap the profit themselves?

The question at hand is when to adjust. My contention is that if it is just messy (the $200 example is a good one) then the lender will do that clean up before offering it on the market. I think you sould ignore general housekeeping. On the other hand, if poor condition or lack of maintenance is involved (and it often is) then an adjustment is appropriate.

 

[Steve Owen]

Why then would anyone assume the house will be painted, floors/counters replaced, or the place cleaned up, if it is put on the market.

I would never assume such things (unless the appraisal was "subject to" with a hypothetical condition). On the other hand, I would assume that the kids dirty clothes on the bedroom floor will not be there the day it sells (so I guess I would assume your "clean-up" item, since I've seen exactly that thing happen, not dozens, not hundreds, but thousands of times).

As I mentioned before, this is a difficult issue. You do not appraise personal property (unless you meet the USPAP requirements for doing so). Therefore, general housekeeping is usually not an issue. On the other hand, filth that has reached the point of damaging the real estate is an issue.

Of course, I live in the Ozarks. There is usually another house with a refrigerator on the back porch and junk in the front yard I can use for a comp. (Odds are good that the previous owners cleaned up similar items before selling and the new owners brought in their own.)

 

[DTB]

Steve,

You're right you can't get much in Chicago for 2K.