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House with issues and utilities off

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Mike Millson

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Sophomore Member
Joined
Dec 23, 2005
Professional Status
Certified Residential Appraiser
State
Virginia
I'm curently doing a purchase in a declining market. The subject is ranch, about 45 years old, and is one of those that has had some decent upgrades such as extensive custom tile work, an updated kitchen(needs finishing touches ie trim, paint, fan/hood ect...), half the windows updated, updated main level bath and finished basement with more custom tile work and a full bath that's borderline high quality(materials are 1st class, workmanship average) some minor areas are incomplete also. I get the impression the previous owners were updating as the material became available.

The thing is, the utilities are off and the basement has signs of water damage and what appears to be mold(plenty of it too). There is some evidence of foundation work done recently also. Nothings dug up, but the brick work arround the basement windows looks real fresh and some of the patio in the rrear that meets the foudation looks new also. Both front basement windows are broken and boarded up.

My question is Can I do an "as repaired value" minus the cost(estimated by pros, i'll be calling for inspections) of the removal of the mold(it's on the drywall), replacement of the mold infected items, any foudation work estimated, and the touch-up work that needs to be completed.

My thinking is, I can estimate a more precise MV (As Repaired - Cost to Cure) than I can give an estimate at this time not knowing the extent of the water damage, mold, and possible foundation problems(cause of water problem).

Any advice will be appreciated. Thanks in Advance
 
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Randolph Kinney

Elite Member
Joined
Apr 7, 2005
Professional Status
Retired Appraiser
State
North Carolina
I'm curently doing a purchase in a declining market. The subject is ranch, about 45 years old, and is one of those that has had some decent upgrades such as extensive custom tile work, an updated kitchen(needs finishing touches ie trim, paint, fan/hood ect...), half the windows updated, updated main level bath and finished basement with more custom tile work and a full bath that's borderline high quality(materials are 1st class, workmanship average) some minor areas are incomplete also. I get the impression the previous owners were updating as the material became available.
Is there a question?
 

Otis Key

Elite Member
Joined
May 15, 2004
Professional Status
Certified Residential Appraiser
State
New Mexico
And how does the house have
A house doesn't have issues - the MB might but the facts are "it is what it is!!!!!!!!!!!!!!!!!"

Sorry but I agree with Randolph - "is there a question?"
 

Mike Millson

Thread Starter
Sophomore Member
Joined
Dec 23, 2005
Professional Status
Certified Residential Appraiser
State
Virginia
Sorry guys, I was finishing up the post
 

TJSum

Elite Member
Joined
Nov 12, 2007
Professional Status
Certified Residential Appraiser
State
Maryland
Hi Mike, it sounds like Loudoun or Prince William County ? Also sounds like a foreclosure? Anyway, many of the foreclosures in those areas had people living in them that were in the construction trades. Many added second kitchens in the basement, etc. For the most part, from what I have seen, permits were rarely had for the "improvements" you did see. So you might have legal issues as well. I would just set the report "subject to", like you said that would be easy to figure out. I would not give the "as is" value due to the unknown "cost to cure", which will only be known once all the reports for the qualified inspectors are in. If they demand an "as is" value, maybe there are similar foreclosures in the area in similar conditon, and you could base your value on that. It would probably be close to a "shell" value if there are serious ongoing mold and water issues. I don't see many lenders touching a property like this so it all could be a moot point because once they see your report the loan will be dead. Sounds like a 203-K situation at best.
 

Mike Millson

Thread Starter
Sophomore Member
Joined
Dec 23, 2005
Professional Status
Certified Residential Appraiser
State
Virginia
TJ,

You hit the nail on the head. It's in Manassas and yes the area has been hit hard with foreclosures. This one is a prduct of a foreclosed property the bank is selling now for 199K. It sold in 08/05 for 439K. I went to the County and the permits in the basement were legal; however, while investigating the water problem, the watershed guys told me half the property is in a flood zone-there is a creek running through the back yard.

If the mold issue is the "bad stuff" than yes the majority of the basement will have to come out, but i'm going to suggest the client get an estimate from a pro to estimate cost to cure.

My problem and question is the estimate of market value. I feel I can best estimate an AS Repaired value and go from there.

Anybody have any thoughts????
 

TJSum

Elite Member
Joined
Nov 12, 2007
Professional Status
Certified Residential Appraiser
State
Maryland
As you said, for your "subject to" value, it should be pretty clear cut. Acutally your "as is" value might not be that hard as there are plenty of foreclosures in that area. If you have other foreclosures in similar condition, that could be your "as is" value. Just state in the report, the cost to cure is another story and will not be known until the inspections are done to determine how extensive the issues are. I am surprised any lender is touching this unless it is a 203-K or construction type loan. Usually investors pick these up as cash deals, fix them up for resale. I do cover Northern Virginia as well, but do not do that much due to the traffic nightmares involved. The down market has really hit those two counties much more so then other areas in the DC metro area.
 

Mike Millson

Thread Starter
Sophomore Member
Joined
Dec 23, 2005
Professional Status
Certified Residential Appraiser
State
Virginia
TJ, I know what you mean about foreclosure comps. I have plenty. What I'm concerned about is the unknown cost of the two major problems---that is the mold clean up, and the cause of the water damage??

As far as the lender is concerned, I don't think they know what the true condition is.

Another approach would be to EA my way arround these problems and suggest the lender get professional opinions to fix them.
 

TJSum

Elite Member
Joined
Nov 12, 2007
Professional Status
Certified Residential Appraiser
State
Maryland
If they demand an "as is" value, I would assume the worst, based on your description and find foreclosure comps that are not much more than shells. The property is not really marketable as is, except for an investor who will come in and do a gut renovation the way it sounds. So if you have foreclosure comps that need total renovation, that should give you the ballpark value. Usually a dead give away is when you see cash deals if the description doesn't reveal the whole picture. Unless they can turn it into a construction loan, this deal is not going anywhere, hopefully they had some idea of the condition given the sales price, etc. Don't attempt a cost to cure, that is above an appraiser's expertise on situations like this.
 
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