• Welcome to AppraisersForum.com, the premier online  community for the discussion of real estate appraisal. Register a free account to be able to post and unlock additional forums and features.

Functional Obsolescence

Status
Not open for further replies.

cathy0405

Thread Starter
Sophomore Member
Joined
May 27, 2008
Professional Status
Certified Residential Appraiser
State
Florida
I did an appraisal on a house with 2 upstairs bedrooms and no bathroom and stated this as a functional obsolescence. The loan officer just emailed me and informed me that "underwriter will not accept this loan as report says its a functional obsolescence. I realize that the home does not have a bathroom upstairs, but would that make the property functionally obsolescent". I am correct in stating that the lack of bathroom upstairs is considered a functional obsolescence, right? How should I respond to the loan officer?
 

Don Clark

Elite Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Virginia
I did an appraisal on a house with 2 upstairs bedrooms and no bathroom and stated this as a functional obsolescence. The loan officer just emailed me and informed me that "underwriter will not accept this loan as report says its a functional obsolescence. I realize that the home does not have a bathroom upstairs, but would that make the property functionally obsolescent". I am correct in stating that the lack of bathroom upstairs is considered a functional obsolescence, right? How should I respond to the loan officer?

Whether or not it is a functional obsolescense depends on when it was built, and whether or not it was customary for homes of that era to have a bathroom on the second floor. I would search other homes of similar age to see if it is typical of that era.

If it is a cape style, built over 30 years ago, the situation you describe is very typical in my market.
 

Ray Miller

Elite Member
Joined
Feb 20, 2002
Professional Status
Licensed Appraiser
State
Wisconsin
What Don said.

Very common in our area in older rural town homes and older rural homes on acreage.

I would have compared it to the same for sales.
 

Metamorphic

Senior Member
Joined
Mar 15, 2008
Professional Status
Certified Residential Appraiser
State
California
Dont you have to make a distinction between FO that is unacceptable to the lions share of the market and FO that is less than ideal, and brings lower prices, but is acceptable
enough to enough people to not be a total loss?
 

Randolph Kinney

Elite Member
Joined
Apr 7, 2005
Professional Status
Retired Appraiser
State
North Carolina
curable functional obsolescence
An element of depreciation; a curable defect caused by a flaw in the structure, materials, or design.

functional inutility
Impairment of the functional capacity of a property or building according to market tastes and standards; equivalent to functional obsolescence because ongoing change renders layouts and features obsolete.
 

stefan olafson

Senior Member
Joined
Apr 2, 2003
Professional Status
Certified General Appraiser
State
North Dakota
How did you make an adjustment for Functional Obsol???? Did you research the market and find similar homes with second floor bathrooms and do a matched pair analysis with sales of homes without that second bath???

Sounds like you pulled the adjustment out of thin air? We never do that, do we???

As Don Clark said, check the market, are all other sales similar to yours equipped with second floor baths? Then maybe you are on to something.....
 

Lost Cause

Senior Member
Joined
Sep 17, 2004
Professional Status
Certified General Appraiser
State
New York
The OP didn't mention anything about making adjustments. If she did, I hope she had market support for them.

What strikes me as odd is the extreme reaction of the lender. The presence of functional obsolescence in a residence doesn't mean it is necessarily unmarketable.
 

RSW

Elite Member
Joined
Feb 18, 2002
Professional Status
Certified Residential Appraiser
State
Tennessee
Maybe a comment that the functional obsloescence of the lack of a bathroom on the second floor does not appear to have any negative effect on the marketability of the subject would have been a good thing to put in the original appraisal report.
 

Mike Kennedy

Elite Member
Joined
Sep 28, 2003
Professional Status
Certified Residential Appraiser
State
New York
cathy: "I did an appraisal on a house with 2 upstairs bedrooms and no bathroom and stated this as a functional obsolescence."

Based on ?????????

"I realize that the home does not have a bathroom upstairs, but would that make the property functionally obsolescent".

Suggest that if unsure - delaying report report until confirmed would have been appropriate UNLESS supported and explained in the report.:shrug:

Depends on what the market tells you. ZERO actives, contracts, closed current sales, closed 1yr+ sales of 2 BR 0 bath? What did the range of comparables utilized report?

"I am correct in stating that the lack of bathroom upstairs is considered a functional obsolescence, right?"

See comment above.:)

"How should I respond to the loan officer?"

Loan officer or Mortgage Broker? Suggest not responding "off the cuff" - do the due diligence above ......then ..........either amplify your conclusion in the report with solid research and confirmed lack of either existence or, or lack of any actives, contracts, or closed sales (citing research parameters)

OR revising the report with additional comparables from which market reaction to lack of a second floor bath can be extracted (either no value impact or adjustment to other comparables with a second floor bath).

I.E. whether F.O. or not, if you believe it (one way or the other) prove it IN the report.
 
Status
Not open for further replies.
Find a Real Estate Appraiser - Enter Zip Code

Copyright © 2000-, AppraisersForum.com, All Rights Reserved
AppraisersForum.com is proudly hosted by the folks at
AppraiserSites.com
Top

AdBlock Detected

We get it, advertisements are annoying!

Sure, ad-blocking software does a great job at blocking ads, but it also blocks useful features of our website. For the best site experience please disable your AdBlocker.

I've Disabled AdBlock
No Thanks