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Effect Of Recent Flood

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Joe Sloan

Sophomore Member
Joined
Feb 17, 2002
Professional Status
Certified Residential Appraiser
State
Texas
Investor owns ten homes. Each home flooded November 15, 2002. Adjusters came out and itemized repairs, for insurance purposes. All repairs are complete and each home has similar floors, walls, etc. as before flood, with NEW condition on the repaired items.

Investor wants me to appraise properties effective November 14, 2002 and 2nd appraisal on repaired home. I am comfortable with gathering the information necessary for the two different effective dates. My question is this. Can I appraise a property with an effective date six months earlier, and include the extraordinary assumptions, and hypothetical conditions in the report, reflecting this? I will have copies of the adjusters repairs reflecting items needing to be replaced as a result of the flooding.

The investor believes, and I have not confirmed, the stigma attached to the homes has created a decrease in value. These homes flooded four years earlier, and likely will flood again. If I show by appraisal the first and second value, is there any problem with appraising the properties with an effective date of November 14, 2002, and documenting in the report?

I know we do reviews, and make assumptions regarding the original appraisers information is true and correct, but just curious any possible alligators I am stepping on with an effective date of six months earlier.

Thanks for your responses.

Joe
 

David S. Roberson

Senior Member
Gold Supporting Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Tennessee
I think if the stigma is based on flooding, and these properties flooded four years earlier, then the value as of November 14, 2002 should reflect the same % adjustment for stigma as you have after the most recent repairs. In other words, the stigma after the November 15, 2002 flood was already there on November 14, 2002 if they had flooded four years earlier.

(edited to clarify dates)
 

Chris Harrison

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Utah
Joe,

Doing a forensic appraisal is done all the time for estate settlements and insurance claims. It sounds like you will have the advantage of having a list of damage for each home and can incorporate that into your report. Also look for other homes in the area that have sold after flood damage. Real estate agents and insurance adjusters may be a good source. The effective date on the appraisal is not always the date of inspection, just make it clear in your appraisal about your assumptions and source of information.

Chris
 

rtubbs

Junior Member
Joined
Jan 15, 2002
Joe, it sounds like the investor may be pursuing information needed to report a casualty loss to the IRS. If so, you may need to get Form 4684 and Instructioins.
 

Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
My question is this. Can I appraise a property with an effective date six months earlier, and include the extraordinary assumptions, and hypothetical conditions in the report, reflecting this?
Yes, it's possible, but it may not be easy. Charge a bunch more than a typical report.

In our flood of 1994, we did a market survey of the flooded homes over a period of several years. Gotta say we found similar market reaction to what David mentioned. In the cases we studied, the homes flooded were tee-totaly gut, re-habbed. They were all like brand new. The only discount or concession expected by the market, that we could prove with market data, was one years worth of flood insurace premium. Not much of a discount, but that's all the market cared about.
 

Jeff Horton

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Alabama
I second Mr Leggets comment. No problem. Charge more too. I have done retrospective Appraisals and I enjoy them. I am doing a flooded house now and it's just a lot of work to do it right. So charge appropriately and take you time to cover all the bases.
 

Roger

Junior Member
Joined
Jan 24, 2002
Professional Status
Certified General Appraiser
State
Missouri
Much of the value is based in what FEMA decides to do.

After our floods of '93 & '95. the feds offered to buy out the homeowners in several areas, at values as close to the pre flood values.

This was with the understanding that they would no longer issue flood insurance in these areas, for those that did not wish to sell.


At this time, the flood had no effect on value. After the buy out period, those that did not sell out saw their value drop to nil, due to the lack of flood insurance.
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
There is an area that floods regularly and cannot get financing for improvements or purchases due to the repeated flooding. You say that this area has flooded twice in less than 10 years. The question becomes as to whether this is regular or extremely unusual with no previous flooding. That will help direct your processes.
 

Joe Sloan

Sophomore Member
Joined
Feb 17, 2002
Professional Status
Certified Residential Appraiser
State
Texas
Thanks for the information. Looking forward to digging in to the particulars.

Joe
 
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