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How to determine effect on value

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Ultraviolet

Senior Member
Joined
Dec 31, 2002
Professional Status
Retired Appraiser
State
Arizona
First of all I would like to say how appreciatiave I am of this forum. This is my first post here, though I did post once or twice on the old forum a couple of years ago. I read posts as often as possible and have learned a great deal.

Here is my scenario: Typical home in a subdivision of 8,000 SF lots, ranch style, single attached carport, etc. The homeowner has decided to put an addition on the home and the day of my inspection the concrete driveway has been removed, carport is gone and there are two 4' deep trenches across the side yard, around to the front of the home in preparation for sewer hook up for a new bathroom. The appearance is as if the owner has done the work himself (shovel sticking out of the trench). As noted, this is a typical in-town subdivision with concrete sidewalks, curbs, etc. The loan is for a very good client who was unaware of the work and is concerned only with an honest appraisal.

I know this impacts value but how do I go about determining how much and how do I report it? As a safety issue? I would appreciate any and all comments and/or advice on how to report this. Thank You :)

Rae Saunders
 
Joined
Jan 13, 2002
Professional Status
Retired Appraiser
State
Florida
"As Is" for this would need pictures and an estimated cost to cure to put it back into average/typical for the neighborhood condition. Condition adjustment necessary.

I have had a couple in the past where the lender decided to do it as some type of construction loan making it subject to completion of the addition. This would need plans and specs for what the HO is going to do and an appraisal "subject to" completion per plans and specs.

Call your lender and find out what they want. This depends on your relationship with the lender and if they are one of the good guys or not.
 

Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
I agree with Pam. Call the lender and find out what they need/want. My experience has been that the HO will just tell the LO that they are doing "a little work" around the house. And the lender truely has no idea that the HO has ripped his place apart for a major addition.
 

Ultraviolet

Senior Member
Joined
Dec 31, 2002
Professional Status
Retired Appraiser
State
Arizona
The lender wants me to do it "as is". I just wanted some input on how others have handled similar situations because this is one I haven't dealt with before. So, basically the cost to refill the trenches (labor and fill) and repour the driveway? The carport would not necessarily need to be replaced, enclosures and additions are common in the neighborhood.

Correct?

Thank you !!

Rae Saunders
 

Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
I think you are getting the idea. The problem is readily curable if the cost is nearly equal to, or less than, the dollar amount the typical buyer would want for a discount. Get your mentor, or someone familiar with the cost (including labor and profit), to help develop a cost estimate for installing a driveway and making the hole, whole. 8) Write some comments on what you did, what you assume, and how you adjusted in the market grid.

The carport would not necessarily need to be replaced, enclosures and additions are common in the neighborhood.
If the carport was enclosed, be careful about calling it GLA; or explain and justify why it qualifies as GLA with good, solid market data. Describe the finishes and utility, take PLENTY of photos.
 

Ultraviolet

Senior Member
Joined
Dec 31, 2002
Professional Status
Retired Appraiser
State
Arizona
M Leggett:

Thank you for the input. Funny, how something so simple caught me off guard, I am not really a "newbie", though I have worked in more than one office where "ignore, ignore, ignore" was the official party line and certain situations were never properly detailed (like this one).

I have just never seen someone dig up their yard in a homogenous, city subdivision without the aid of a contractor, in advance of improvement loan approval. I didn't realize it was as easy as "cost to cure" because I was trying to make it more difficult so it would just go away :D . Too much work, not enough rest :oops:

I appreciate the quick, friendly response.
 

Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
I am not really a "newbie", though
Oh, sorry. :oops: And yeah, you need to forget about the "ignor it training". Many "production shops" don't understand that we are the eyes, ears, and nose for the client.
 

KD247

Senior Member
Joined
Jan 24, 2002
Professional Status
Certified Residential Appraiser
State
California
Under "normal" conditions, repair costs (including the cost of managing the repair job) would be pretty close to the effect on value. A buyer would probably be willing to accept a discount that covers the repair costs and would get the job done while moving in.

But the response of buyers changes in different market conditions and the effect on value might not be directly related to the cost to cure. If there was an oversupply of directly competing properties, the average buyer would probably be thinking "I want a significant discount for a "less-than-turnkey" property, plus the cost to complete the repairs, plus compensation for the inconvenience, plus an additional discount to cover any unexpected problems with the repair".

In a strong market with a shortage of available competing properties (or if the subject has some unique desirable characteristics) the typical buyer might say "Who cares about a simple repair job!?!!! This is the only decent property that's available and I'll take it, regardless of the trenches and missing driveway."

So (in my opinion) the effect of the ongoing repair work could vary significantly, depending on the marketability of the subject in current market conditions. The net effect on value and marketability could range from insignificant to a sizeable amount. Faced with this, I would gather all pertinent data, establish upper and lower limits for the adjustment amount, and then make my best estimate.
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
Koert:

Very well writ, I think this belongs in this months "how to explain to newbie place of honor"!

in Fact: I sort of wish we had a Words of wisdom file for explaining such things. we have many responses of this type that belong in such a place.
 
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