Foundation Problems Effect On Value

[J Grant]

I left it as residential period , due to the possibility of using the foot print for a rebuild . The problem with saying as a vacant lot is that there are 3 different possible approaches that would make the property marketable... And this is a grey area for me , I assumed that residential usage as itself covered HBU due to zoning...like i said I feel this is a grey area due to my cost knowledge limits in all of these engineering and construction options, in other words I am not versed enough on cost to deal with absolutes.

If the house contributed more to value then cost to fix, maybe a HBU could be as exists rather than vacant, but how did it get approved for a loan if it had the serious foundation issue back then? That should have made it a c6 subject to repair to at least C 4.

 

[DARREN GODFREY]

If the house contributed more to value then cost to fix, maybe a HBU could be as exists rather than vacant, but how did it get approved for a loan if it had the serious foundation issue back then? That should have made it a c6 subject to repair to at least C 4.

The report I wrote strongly suggested that the value was in the lot , and evidence that other improvements were being torn down for new improvements...that and this is an inheritance property that I am assuming nothing was owed on made the loan to value numbers attractive to lenders. The homeowner informed me they took out a $300k loan on a property I valued at 797k with the foundation issue clearly disclosed.

 

[J Grant]

The report I wrote strongly suggested that the value was in the lot , and evidence that other improvements were being torn down for new improvements...that and this is an inheritance property that I am assuming nothing was owed on made the loan to value numbers attractive to lenders. The homeowner informed me they took out a $300k loan on a property I valued at 797k with the foundation issue clearly disclosed.

But if the foundation issue was clearly disclosed, if it was a URAR form/GSE loan, how wasn't the ire house rated a c 6? And if the report strongly suggested value was in the lot, maybe the HBU should have been site as vacant ?s

Now you are seeing the fallout 2 years later with borrower having sunk a lot of money trying to fix a foundation issue and still house sounds like from what you are saying feedback from RE agents, not worth any more than the land value.

 

[hastalavista]

We have a house with a known foundation problem; an attempted fix was made that didn't work. So now, we have a house with a foundation problem that at least one fix didn't fix. Unknown is how much it would cost to fix the foundation problem.
The owner wants to list the property (if I understand the dynamic correctly) and is unsatisfied because it hasn't sold and/or the listing agent wants to drop the price some more.

Can the value of the property, as-is, be determined to a reasonable level of credibility? Yes, of course it can.
Does that level of credibility significantly depend on the reliability of a report to determine how much it will cost to fix? Absolutely.
You don't have that reliable report. Can an appraisal be done with that caveat and still conclude an as-is value? Yes; but there will have to be a lot of discussion on the limitations. Unfortunately, this appraisal is likely not helpful to the client in trying to determine how much they should sell the house for.

Here is what can be done for your client: Value the subject as-if the cost to fix the foundation is not feasible. In other words, the cost to fix is not recaptured in the market by the value of the site with its fixed improvement. Offer to provide the client with the value of the site as a development project. You will need a hypothetical condition (although I can imagine an extraordinary assumption could be used as well; I'd just use an HC because it is easier and cuts to the chase); and this would be appropriate given the problem to be solved (what are my pricing options for this property) and the fact that it is being done for purposes of reasonable analysis.
With this, the client will know how much the site is worth. With this, they can make a determination of where to list the property with all its warts and blemishes; if they receive a price higher than the site value, that means someone sees some value in the improvements even though no one knows for sure if the fix is feasible or not. They should take that offer. Otherwise, they should sell the property based on its land value. This provides them with meaningful information that they can use to evaluate the pricing recommendations of their agent.

Unless they provide the report necessary to determine feasibility and you are willing to do the work necessary to conclude an as-is value with that report, this would be a reasonable alternative.

Good luck!

 

[J Grant]

So nothing has changed in 2 years except the owners have spent 69k trying to correct an unfix able issue...a cautionary tale if not appraiser is not sure of an issue make appraisal subject to inspection, st. I probably did a couple of stinkers in my career but they are long gone and forgotten...why go back a second time on a problem property...best outcome is if owners get a decent offer since land is high value.

 

[DARREN GODFREY]

So nothing has changed in 2 years except the owners have spent 69k trying to correct an unfix able issue...a cautionary tale if not appraiser is not sure of an issue make appraisal subject to inspection, st. I probably did a couple of stinkers in my career but they are long gone and forgotten...why go back a second time on a problem property...best outcome is if owners get a decent offer since land is high value.

Well we know what the issues are , this is a strength building exercise for me ....however I am dealing with it with great caution and appreciate all the feed back.
Secondary note , the foundation issue actually has been corrected and has a warranty , somehow the homeowner did not communicate that to me correctly. I received the paperwork for the repair... I am still wowed by how much it cost, another learning point for me. So basically the story is that the first floor problem will be corrected. The second floor however will still be of, truthfully I really didn't notice the second floor/master bedroom slope in either inspection. I will assume in this high dollar neighborhood that a home inspection will be performed and it will be noted for the purpose of this appraisal.

 

[Webbed Feet]

Well we know what the issues are , this is a strength building exercise for me ....however I am dealing with it with great caution and appreciate all the feed back.
Secondary note , the foundation issue actually has been corrected and has a warranty , somehow the homeowner did not communicate that to me correctly. I received the paperwork for the repair... I am still wowed by how much it cost, another learning point for me. So basically the story is that the first floor problem will be corrected.

A warranty from whom? Five guys and their pickup truck? There are these things that are warranties on paper only that are worthless once there is nobody to sue that has any money, and then there are such repairs backed by a purchased bond or insurance coverage with some entity with deep enough pockets to actually make the warranty have meaning. You see I get a bit concerned here when you post "that the first floor problem will be corrected." It's not corrected? Corrected when, how, by whom, and why isn't it already corrected? What happened? My point is, if YOU were a buyer for this property and such things were disclosed that repair attempts were made and entire sections of the house still were not leveled, what would your reaction be?

The second floor however will still be of, truthfully I really didn't notice the second floor/master bedroom slope in either inspection. I will assume in this high dollar neighborhood that a home inspection will be performed and it will be noted for the purpose of this appraisal.

"The house is not level on both the main and upper levels after supposedly successful and warrantied foundation repairs were made. The appraiser has absolutely no idea what the effect on value might be, but thought this note would be good nuff for the appraisal report. Mysteriously, the recent marketing has resulted in a series of price reductions with no sale generated to date."

Perhaps you were on to something two years ago when you opined what was basically a site value.