FAIR condition

[advappr07]

MO Certified Residential Appraiser

I have a question I have always been embarrassed to ask. I received subpar training and now am having to learn things for myself.

My question is:

In my market there are some $20,000-$30,000 little bungalow 1000 SF homes that are in my opinion, in fair condition. I am repeatedly asked to give a cost to cure for this to state what improvements would need to be made to make the home in "Average" condition. To me, when I am appraising this $20k FAIR condition homes, I am comparing it to other fair condition homes. Do I have to provide them a cost to cure??? I can see if I am saying it is in FAIR condition, lesser than other homes in that price range. But if I am calling subject and all comps in fair condition......does that mean that the condition is actually considered to be AVERAGE for homes in that price range?

Make sense? Thanks for any input / advice. I am hooked to this forum already!

 

[Tina]

This is what we typically include in our reports to help clarify our condition assessments....


Marshall & Swift Condition Assessment (page E-6)

Excellent Condition - All items that can normally be repaired or refinished have recently been corrected, such as new roofing, paint, furnace overhaul, state-of-the-art components, etc. With no functional inadequacies of any consequence and all major short-lived components in like-new condition, the overall effective age has been substantially reduced upon complete revitalization of the structure regardless of the actual chronological age.

Very Good Condition - All items well maintained, many having been overhauled and repaired as they've showed signs of wear, increasing the life expectancy and lowering the effective age with little deterioration or obsolescence evident with a high degree of utility.

Good Condition - no obvious maintenance required but neither is everything new. Appearance and utility are above the standard, and the overall effective age will be lower than the typical property.

Average Condition - Some evidence of deferred maintenance and normal obsolescence with age in that a few minor repairs are needed, along with some refinishing. But with all major components still functional and contributing toward an extended life expectancy, effective age and utility is standard for like properties of its class and usage.

Fair Condition (Badly Worn) - Much repair needed. Many items need refinishing or overhauling, deferred maintenance obvious, inadequate building utility and services all shortening the life expectancy and increasing the effective age.

Poor Condition (Worn Out) - Repair and overhaul needed on painted surfaces, roofing, plumbing, heating, numerous functional inadequacies, substandard utilities etc. (found only in extraordinary circumstances). Excessive deferred maintenance and abuse, limited value-in-use, approaching abandonment or major reconstruction, reuse or change in occupancy is imminent. Effective age is near the end of the scale regardless of the actual chronological age.

It is the appraisers' opinion that the Subject condition is somewhere between average and fair, due to its' age. If the appraisal is subject to the Fannie Mae guidelines; note that, since the 04-04 Announcement Letter, "The appraiser must report the condition of the improvements in factual, specific terms". The condition is not supposed to be reported in terms of condition relative to other properties in the neighborhood.

Hope this is some help!

TB

 

[advappr07]

That does help clarify, thank you very much.

 

[Lobo Fan]

Most lenders will not make a loan unless the subject is in average condition. They want you to tell them what needs to be done so they can decide whether or not to proceed. This is fairly common and yes it is part of the job. If ir needs a new roof, or the floors are buckling then you may want to request formal inspections. If it is more cosmetic in nature, like worn carpets then you should be able to come up with a cost to cure. Although cosmetic issues usually won't take a property from average to fair.

 

[advappr07]

I RARELY do mark a subject in fair condition unless it is a repo etc. I apprecaite the input. After reviewing the Marshall & Swift definitions then, this house should have been marked Average based on the age. It really just needed new paint, screens, floor covering.

 

[Ted Martin]

Keep in mind that Lowe's doesn't stock "Average condition paint" that is already soiled and slightly worn. The point is that rather than giving them a cost to cure that will elevate the subject to average condition you are going to improve the subject to good or better condition.

 

[Mr Rex]

A coat of paint doesn't carry a house from Fair to Good, contrary to what Mr Sheets says in those tapes. If its only paint etc, its already in average condition.

 

[Otis Key]

Hey Tina - can you enlarge that some - I'm having a hard time seeing that small print!

 

[Chris Colston]

MODERATOR SPEAKING:

Ask an Appraiser on AppraisersForum.com. For members of the public to ask general appraisal questions. . Please keep in mind that answers are for general informational purposes only and are not official, and are answered through the generosity of forum members.

Moving this thread elsewhere

 

[Mike Garrett RAA]

Is your subject "average" for the neighborhood?

A $40,000 home could be "average", a $150,000 home could be "average", and a million dollar home could be "average" when compared to other homes in the neighborhood.

Good, Average, Fair, Poor...are the recommended classifications per Fannie Mae guidelines. Some appraisers feel it necessary to "fine tune" those to include, say, Above Average and Below Average.

Consider that most homes will have some deferred maintenance regardless of the price range. The important thing is for the appraiser to be able to "compare" the comparables to the subject and adjust for condition.

Most buyers (parties to a transaction) think in terms of $1,000 when deciding what might need to be done to bring a property to average condition or when making an offer. It is not uncommon for a buyer to think..."hmmm, this house needs new carpeting, ahhh, that would cost about $3,000". Or, "this house needs paint inside and out...that would be, ahhhh, $5,000". The adjustment should be a reflection of market perception of value rather than an actual cost to cure. I prefer to keep my adjustments for condition in increments of, say, $1,000, $3,000, $5,000, or $8,000 depending on how far the comp deviates from subject. Be cautious of REALTOR® comments like "immaculate" or "perfect condition".

Hope this helps.