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FHA Pre-foreclosure: To Many Repairs To List. What To Do?

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JoeB

Member
Joined
Jun 1, 2006
Professional Status
Certified Residential Appraiser
State
New York
This FHA appraisal is to determine market value "as is" and not for loan purposes. Pre foreclosure. Upon entering the dwelling, it was a complete mess. No copper (stolen), no furnaces, kitchen ripped out, every wall in the home has bubbled, flaking paint, enormous amount of drywall work, electrical wires hanging, windows rotted, flooring either has very soiled rugs or damaged hardwood. Utilities turned off..this is okay under their criteria. Condition is not livable. Exterior was okay tho. The appraisal is not to be made subject to, and must be "as is"

My questions: How am i to itemize costs, both MPR and non MPR repairs? Produce cost to cure list? The appraiser is not a building contractor and can not accurately give this information without a professional rehabilitation contractor to estimate all these repairs and deficiencies.

What do you you when performing this type of appraisal?
 

Mr Rex

Elite Member
Joined
Jan 12, 2004
Professional Status
Certified Residential Appraiser
State
North Carolina
Find comparables that were similarly vandalized etc.

This is the pre-printed verbiage on the REO addenda:

Provide an itemized list of repairs recommended to bring the property into marketable condition. Cost estimates should be based on reliable published cost sources and/or local cost resources. The appraiser is not an expert in the field of building construction and actual costs may vary from those provided. Repair costs and opinions reported herein are subject to future revision based on new repair estimates and evaluations by a licensed building contractor.
 

JoeB

Member
Joined
Jun 1, 2006
Professional Status
Certified Residential Appraiser
State
New York
Yes, I have a similar paragraph which I include within the addendum under repairs. I guess i will just list what is visible upon inspection and not limited to additional findings by a professional building contractor.
 

Sid Holderly

Senior Member
Gold Supporting Member
Joined
Jun 16, 2005
Professional Status
Certified Residential Appraiser
State
Indiana
Start a spreadsheet and itemize what is needed. Menards, Home Depot, Carters, Lowes (add your local ones) and other large box supply source flyers give some local costs. Marshall & Swift Cost Books have cost sections for most categories. On-line sources like [www.homewyse.com] have many categories and list material and labor separately along with a price range and quality adjustments.

If you set up a good spreadsheet the next time you do an REO just drop in the new square footage or quantity numbers. Update the cost per unit every year or two depending on the economy.

I generally add a little extra for unknows, it is an estimate, not a professional quote. On REO I include a statement that states the value will continue to decline until the actual date of transfer. A few years ago many of the REO's were not listed for sale and sold until many months 6 to 18 after the appraisal was completed.

I regularly have coffee with a couple of retired carpenters and they are a good source of rough estimate methods. One that is easy for rough estimates is that new construction is 1 unit labor to 2 units material and remodel is 2 units labor for every unit of material and when demolition is required add another unit of labor. Permits and inspections are included in the labor part It is surprising how close this is to the completed itemized list.
 

Mr Rex

Elite Member
Joined
Jan 12, 2004
Professional Status
Certified Residential Appraiser
State
North Carolina
Yes, I have a similar paragraph which I include within the addendum under repairs. I guess i will just list what is visible upon inspection and not limited to additional findings by a professional building contractor.

That language is already pre-printed on the REO addenda.
 
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