House damaged by fire

[Austin Martin]

I have been asked to appraise a house that was damaged by fire. It did not burn to the ground. The contractor will have to rebuild the roof, replace any ruined studs, rebuild the master suite on the second floor, new drywall up and down, paint interior, refinished the hardwood floors, replaces windows ect.. My question is what if any extraordinary assumptions should the appraisal report contain for a situation like this? This is for an in house loan at a local bank. I have never done an appraisal for a home that was damaged by fire and want to be sure to cover all the bases. I completed an interior and exterior viewing of the home this morning and will try to post some photos next week when I am back in the office. Any help is appreciated. Thanks in advance.

 

[Em Tee]

Are you doing it "as is" or "subject to" completion of repairs?

 

[Mike Boyd]

Are you doing it "as is" or "subject to" completion of repairs?

I would think "subject to."

I would require a professional inspection. Ya never know about the wiring and circuit breakers, appliances, furnace and water heater. I have done several through the years and unless you can actually go into the attic, you may not be able to tell what could be damaged. See if you can get the fire department's report on the cause.

 

[VolcanoLvr]

"Subject to" professional rebuild by a licensed contractor.

You will want to obtain a copy of the bid to rebuild the dwelling, and include it in your report.

The EA (and also a Hypothetical Condition) will relate to the bid as contracted, and will assume the rebuilt structure will be competitive to other dwellings in the neighborhood.

Use the 6 photo per page Subject Photos in your report, and include lots of photos showing the current situation.

 

[Rick Kulman]

What is the insurance company paying for? Have they approved the claim? You could be months away from any from any repair work commencing.

We appraised a property for a third party defendant's insurance company where the owner's (plaintiff) insurance company refused to pay. It is a multi unit apartment building where an entire wall buckled and a large crack extends from the foundation to the roof. The municipality condemned the building as being structurally unsafe in 2005 and evicted all of the tenants that day. The building has been vacant since.

A jury trial scheduled that was scheduled for October was adjourned till February 2009.

 

[Richard Carlsen]

Fire work is interesting and oft times requires a degree of sleuth. What you do depends on the degree of damage and the Intended Use of the report. It sounds like in your case the Intended Use is for a construction loan to rebuild. Therefore, the FNMA guidelines are not part of the assignment conditions since the loan will not be sold to the secondary market. However, if the end mortgage will utilize the appraisal without any additional appraisal work, then you must write it to the guidelines.

If that is the case, you make the report "subject to" completion per plans and specs. I personally have insisted when doing this kind of work for lenders on being provided a complete list of plans and specifications from the contractor before doing any work on the analysis. The reason is simple: There may be changes in the floor plan and/or quality of the improvements over what was in the original house. In this case, you do it just like an appraisal for a new construction.

In most cases, my fire work has been for insurance companies where they wanted the Market Value of the house as it was before the fire. This is a retro-analysis, often requiring sifting through the ashes to determine the floor plan and the quality of the construction (paneling or plaster/vinyl or tile, etc.) This is a sobering time as you poke around seeing the remnants of peoples lives lying there in the ashes and charred remains.

 

[jay trotta]

for the most part I would agree with Richard, but also, I would suggest a review of the HUD 203k requirements for building. It provides all the information and more of what they require on a build process. It offers a good format to follow if your interested, I have my own that I follow after all the years on both sides of that work and a list of questions that go along with the file folder.

good luck

 

[Austin Martin]

This will be a subject to appraisal
Thanks for the suggestions

 

[Terrel L. Shields]

Assume that the damage is repaired in a workman like manner and will be approved by a proper building inspection. Subject to completion.

 

[Cigar]

But be aware in these days of mold litigation, if the firemen put water on the fire, or the home has fire sprinklers (like the ICC just approved as a mandate for all new homes, although we are appealing) the cost of mold remediation can cost more than the cost of rebuilding, this is particularly true in Texas and California. This shouldn't affect appraisal because the remediation and air-quality clearance has to be done prior to rebuilding.