How To Appraise House With Horrible Paint Job?

[Sbps30]

I'm appraising a house that is selling low because of horrendous color interior paint. I haven't come across something like this before. There aren't any homes like it to compare. How do you deal with this? It's obvious the home sold less than market value because of the paint. However, paint color is primarily a preference. I am thinking of appraising it higher and just writing an explanation why it sold less. Am I doing it wrong?

 

[Carnivore]

I am having difficulty in trying to understand your perceived problem. So let me say this first; Your approaching this all wrong.
I will have to make some assumptions first.

1. You are appraising a SFR for a Purchase.
2. I don't know if the Subject is listed(Broker Involved) or not, but I assume it is and you know the list price.
3. I assume you have a contract to purchase
4. I assume you have Sale and Listing Comparable all at higher list price and sold price than the accepted offer Price
5. You may or may not have data suggesting that the interior paint color is unacceptable to the majority of buyers except the one buyer who has made an offer and the seller accepted.
6. That one buyer/seller accepted offer is less than the list price and YOUR Preconceived market value.

It took me awhile to actually discover what the Real Problem is in your assignment.

You have broken a Cardinal Rule of Real Property Appraiser's.

The Problem is YOU!

You have allowed your personal bias to enter into the process.

I could be dead wrong on my assessment, but I don't think so.

Way smarter Appraisers than I lurk around in this forum and probably will correct me.

 

[Sbps30]

So, the home is selling lower than the listing price. After doing research it appears the market value (if we disregard the paint color) is closer to the listing price. The Realtor explained that very little people gave the home a chance because of the color of the walls. The problem I’m facing is I’m trying to figure out if the preference of the color of the walls effect the market value of the house. It definitely affected how many offers the home had. However, there isn’t a way to research this specific preference over others.

 

[Skeletor]

The Problem is YOU!

My goodness Carnivore slow your row buddy.

There is absolutely nothing wrong with calling out interior decor as a reason why market value is impacted. This condition is akin to the curb appeal problem or a home's interior painted black (I literally have seen this before TWICE!).

This appraiser noticed during the inspection that the home's interior decor is so bad that it may be impacting market value. Not only that but the REALTOR on the property has also communicated that the general feedback from the market has been negative. This is enough evidence to reasonably conclude that there is an impact on market value and the property's sale price reflects this. Market comps may suggest a higher value because none of them have this problem. But if the appraiser estimates the cost to fix the interior decor and applies some amount of market stigma, say 100% of cost-to-cure, the resulting deduction could very well account for that difference. It is perfectly reasonable and logical to incorporate this type of discussion and adjustment in the appraisal as long as the appraiser fully explains the argument to the reader.

One tip for you my friend. You might want to consider bracketing this with perhaps a C5 sale and maybe search back 24 months. Probably not a strong sale for comparison I realize this but it would bracket your condition.

The problem is not the appraiser, Carnivore. The way I see it, the appraiser has identified a valid variable that appears to have impacted market value on this particular property and the appraiser is simply trying to deal with it. And for that I say, good job.

 

[Sbps30]

Thanks Skeletor. That’s very helpful.

 

[Deleted member 152047]

I don't appraise residential, but I have bought a good deal of residential property. A significant segment of the residential buyer pool isn't going to get over horrendous paint, old carpet, general cleanliness, etc. All of these items have relatively low cost to cure, but a lot of people cant see past it.

When I bought my current home it had been sitting vacant for 3 years, had a frog pond in the back (pool), and the previous owner had piles of junk all over the property. I made $50,000 in a week by cleaning the property.

 

[Skeletor]

I made $50,000 in a week by cleaning the property.

See? There you go. It's updated vs outdated. The market always takes this into consideration, and there is a mathematical way to incorporate that reaction into a market value appraisal. In the case at hand, I believe that reaction can be measured using cost-to-cure + market stigma as I argued in my previous post.

 

[Mark K]

A paint job that the vast majority of potential purchasers consider hideous can affect the sales price, often to an extent that exceeds the cost to cure. Some people are incapable of seeing past minor cosmetic issues.

I'd appraise it as though it had a 'normal' paint job and then adjust downward for the cost to repaint the interior. I can have an average house interior in this area painted for about $2,500 and that's what I'd make as a condition adjustment.

 

[Carnivore]

My goodness Carnivore slow your row buddy.

There is absolutely nothing wrong with calling out interior decor as a reason why market value is impacted. This condition is akin to the curb appeal problem or a home's interior painted black (I literally have seen this before TWICE!).

The problem is not the appraiser, Carnivore. The way I see it, the appraiser has identified a valid variable that appears to have impacted market value on this particular property and the appraiser is simply trying to deal with it. And for that I say, good job.

You missed something in the OP original post. OP "I am thinking of appraising it higher and just writing an explanation why it sold less. Am I doing it wrong?"

Maybe the OP misstated what he/she was considering to do! The statement above was just wrong. The way I see it the Subject AS-IS is worth $X (weird paint color). The subject would be worth $X+AS-REPAIRED with a repaint. Lack of any other relatively similar data would necessitate use of this one data point(the current buyer).

1. Buyer is a data point
2. Cost plus (cost to cure) is another data point you could hang your hat on.
3. Similar weird situations like purple carpet throughout the whole house comparable
4. Wild guess on impact adjustment

The above would also satisfy to some extent demands for bracketing or being outside the range of values indication.

All this could be explained in the final reconciliation. The OP said they would explain.

So I was a little rough and I apologize.

 

[Mr Rex]

The ERC calls it personal decor or colors:

Guidelines: In developing an opinion of the Anticipated Sales Price, the appraiser must: 1. Consider the subject property’s appearance "as is" (or as instructed by the client) on the Date of Value Opinion with adjustments made to reflect reactions from a typical buyer’s point of view. These adjustments should reflect the comparative differences between the subject property’s appearance and similar properties in that market. The actual cost to cure may not be the appropriate measure for this adjustment. Consider the effect on value (positive or negative) of the following items: a) condition (e.g., modernization, restoration, repairs, necessary improvements, etc.); b) appeal (e.g., personalized décor, colors, design, etc.);