Functional Obsolescence

[Willie]

Julie, I think you get the idea. Good example. Even if there were no codes issue, there could be a functional issue, as in your example

 

[Otis Key]

Julie, ignoring William's attempt to get you to stir up Tim's BP, I agree with him. You're on the right track. Also consider going back and reading your introductory to residential appraisal book and your dictionary of real estate terms. You'll find definitions and examples (not in the dictionary) of some forms of FO. Don't forget that FO can also include over improvements (i.e., a neighborhood where the homes are typically 1,000 to 1,400 sf and there is just one or two homes that are 2,000 to 3,000 sf).

Solar, pools, hot tubs, saunas, sunrooms, etc. can be some examples of FO or can actually be examples of typical stuff. What is typical for your market. I would bet that you've done homes with FO but didn't realize it at the time.

Good Luck


Psst - turn the cap lock off - it's not considered nice on the internet - it means you're yelling.

 

[Ariba]

My appraiser and I were just talking this a.m. about a property we appraised that was built in the 1920's and it had 6.0' ceiling height in the basement. That would be incurable functional obsolescence because code is 8.0'

I very much doubt that there were 8'0 ceiling codes in 1920. Also, the comparable you would use would have the same issue.

Ron
http://www.AppraiserPlus.com

 

[Mary Tiernan]

Well, I can tell none of you are from Michigan (I know, you can't tell I'm from Michigan either - sorry, just have a problem with giving my location so freely, hubby's a truck driver).

Round here, a 6' high ceiling in a basement is typical, called "michigan" basements. Partial basements, cold storage, furnace, etc are kept there. I have even seen them with plastered ceilings (little Keebler elfs must have come around to do the job). I usually refer to this as a cellar in my reports cuz I know you have no idea what "Michigan" under basement description means, although you will see it on MLS sheets a lot!

Watch out for that functional obsolescence, Debra. And watch out what you read in your book regarding it, do not take the book word for word.

Remember, everything in the appraisal world is based on market reaction. What would a typical buyer in the market consider deficient? The book will detail how a 4 bedroom house with only 1 bathroom has functional obsolescence, or how a kitchen placed near the sleeping quarters will be functional obsolescence. If houses with 4 bedrooms and 1 bath are selling at a comparative $ amount to 4 bedrooms with 2 baths, there is no obsolescence, just a market reaction to the "extra" bathroom. However, if you see 4 bedroom 1 bath houses are selling for considerably lower, then you have the beginnings of an investigation into functional obsolescence. I need to put that word in some sort of a list on my computer so I don't have to type in anymore. LOL

 

[Anthem]

I recently did an appraisal on a home that 2000 square feet with 4 bedrooms and 1 bathroom. You had to go through one of the bedrooms to get to the bathroom.

Also had one recently that was a 3 b 2 b but you had to go through bedroom #2 to get to bedroom #3. I have been taught to add an interior sketch with such problems.

 

[Tim The Enchanter]

Solar, pools, hot tubs, saunas, sunrooms, etc. can be some examples of FO or can actually be examples of typical stuff.

Good examples of functional ob. Pool does not recover it's cost in the market.

Mary T, your Michigan Basements sound a lot like our California basements. Except for the the cold storage part.

Partial, unfinished basement, good only for storing water heater, furnace, and your old appraisal files. B)

 

[JULIEWEBB]

I just inspected a property on Friday that had a master bathroom with a toilet and a shower, but the sink is located in the master bedroom.

Mary - I would have to find out if the buyers deducted from the sales price because of this feature for it to be F.O. in this market?

 

[Mary Tiernan]

I'm afraid it is not as easy as you make it sound Julie.

The market is more than just the buyer of the property. The market reaction can only be determined once you have done a detailed paired sales analysis of similar sales in your market area.

You have to find out the $ difference between what the typical buyer would have paid, and determine if it is a market reaction or a reaction based on the deficiency in floor plan. Sometimes a realtor will state there is 1.75 baths, could this be similar to what your subject has?

If there are absolutely no recent sales of similar houses with less that two FULL baths, you may have FO.

Please see another post regarding a similar situation, called bedroom or dining room?. You can find it by going through Today's Active Topics and clicking on the subject.

Wish I knew how to post the link to it for you here, but I am still learning the ins and outs of this forum.

As you will see in the post I recommended, functional obsolescence is not an easy issue.