Estimating Cost of Repairs?

[chad hampton]

It’s part of the skill you develop during your experience portion of training. I’m sure parea will cover that in one of its modules.

while we aren’t contractors, 10-20 years of going out to properties talking to owners about their renovation projects and costs, etc., you develop some sort of idea on a ballpark figure for estimating Construction costs.

 

[Zoe]

I use estimated depreciated cost sometimes in condition adjustments sometimes in sales comparison approach. So if subject is bad on something and comps are very different, I use depreciated cost between the subject and comps. The subject or comps may have same item, but one is near end of economic and/or useful life and other is recently remodeled and completely new on finish.

Remember I am estimating when I use cost estimates in the appraisal. Estimated cost is an indicator of value.

 

[J Grant]

It’s part of the skill you develop during your experience portion of training. I’m sure parea will cover that in one of its modules.

while we aren’t contractors, 10-20 years of going out to properties talking to owners about their renovation projects and costs, etc., you develop some sort of idea on a ballpark figure for estimating Construction costs.

That's the idea behind fieldwork - to gain knowledge.

The profiteers at the GSEs want to strip the appraiser of that experience-building knowledge by having "data collectors" take our place at inspections.

 

[Mark K]

The problem with including a cost to repair or cure (C2C) is that some very minor looking defects often lead to major problems hidden beyond immediate view. Hole in the drywall leads to finding out that the wall studs are rotten because of current or previous water leak or termite damage, resulting in the discovery of a 'small' roof lead or extensive termite infestation, that leads to ....well...you get the idea. Its like finding a pinhole size rust spot on an old car and next thing you know you're replacing the fender and then you have to paint the entire car.

As others have said, include plenty of CYA language that includes something like..."an estimate by a contractor is recommended to determine a more accurate C2C."

Also, if for an 'as-is' report, I'd estimate the repair cost and then multiply it by maybe 150% for the effect on the market value; buyers want to get paid for the trouble of getting the work done.

If simply a repair cost for the lender (escrow for repairs, etc.), I'd give them what I thought was a credible number for the repair only. Most lenders I worked with would then multiply by 150-200% for the escrow amount to ensure the work would get done.

 

[Zoe]

I have one right now that I have scheduled later in week. Borrower just got appraisal like a month ago for one lender and lender A said the repairs are extensive. They will have to be repaired before we can do the loan. The borrower scheduled again with VA this month and different lender.

Borrower tells me all the repairs needed and they don't have the money to repair them. They tell me a little on their financial situation.

I immediately notify my contact with lender and VA yesterday of the situation. I said I have scheduled the appraisal. So you will owe me $175 if you cancel now.

You will owe me $325 (50%) if you cancel after inspection. You need to talk to the veteran and see if you can make these repairs work because they will definitely be MPR items on the subject property. VA will make sure they are MPR items.

I will need no cost estimates because my appraisal if they go through will be "subject to". Get the picture?

I let lender know I let the veteran know they will be MPR items with VA. They will have to be repaired.

 

[Zoe]

Vice President of Lender copied my email to the point of contact and said address this quick.

I was more detailed with VA and lender B than I shared here. I don't mind finishing appraisal for $650.

Borrowers are a great source of information. You just have to be kind and humble. They are not your client and you have to tell them that sometimes.

If you are a lender, I should not have had to tell you the situation. It pisses me off really. I don't care. I'll do it if you want me to.

 

[Terrel L. Shields]

a cost to repair or cure (C2C) is that some very minor looking defects often lead to major problems hidden beyond immediate view. Hole in the drywall leads to finding out that the wall studs are rotten because of current or previous water leak or termite damage

A contractor risks the same problem, but they also have the benefit of caveating the repairs with something about "may uncover other issues at the time of repair" or some language basically making it an open bid.

 

[Zoe]

A contractor risks the same problem, but they also have the benefit of caveating the repairs with something about "may uncover other issues at the time of repair" or some language basically making it an open bid.

Yeah, in that situation, the contract could have many different turns and twists. Who is paying for what and all kinds of things.

 

[Zoe]

One old MAI that I worked with ( I already had CG) used to put a statement on his limiting conditions disclosures of something like:

In the event of an unknown disclosure, the appraiser is limited to the amount of the appraisal fee. I was like okay. Let's do it. He had many more in that statement of limiting conditions on appraiser.

I think his daughter may have been possible first female MAI in USA.

The story gets better. The only time he was ever sued by a party is when he had like 16 residential appraisers working under him and the subject was in a flood zone.

Trainee did not disclose it.

His lawyer wrote the disclosure for him to put in commercial narrative appraisals.

 

[Steve Pendleton]

I can attest, I frequently get asked for repair costs. Without getting contractors to look at it (why would they) you just have to go with your gut, put in a ridiculous estimate and put in lots of "I'm not an expert" language. Internet can be a little helpful but the basis for the calculations is usually sketchy. If you really want to pay for it, there are builder/ contractor software subscription services.