Hypotehtical condition

[gorillakimchi]

Hi all,

Hope everyone is staying busy and making some $$$ for Christmas

I was arranging an inspection appointment and had a brief conversation with the owner.

He mentioned that the property (quadplex) is currently under remodeling and that I need to appraise it as if it’s remodeled.

It sounds like I may need to appraise the property using a hypothetical condition, assuming it’s remodeled.

I wasn’t entirely sure, so I told him I’d appraise it "as is" and decide after inspecting the property.

I think he might be right, but honestly, I don’t have much experience appraising a property with a hypothetical condition.

1. Should I appraise it "as is" or under a hypothetical condition?
2. If it’s a hypothetical condition, could you please share some useful tips?

 

[Tom D]

Good question to ask the lender, who will tell you da answer.

 

[Surf Cat]

Who's the client? What's the purpose of the assignment?

 

[gorillakimchi]

Who's the client? What's the purpose of the assignment?

Ledner and conventional refi. I think they need money for remodeling? I am appraising the property but really don't know how this entire system works. Never learned from my previous supervisor & I feel like im blind sometimes lol. Trying to learn from here and youtube hehe

 

[gorillakimchi]

Good question to ask the lender, who will tell you da answer.

Yes sir!

 

[Surf Cat]

Ledner and conventional refi. I think they need money for remodeling? I am appraising the property but really don't know how this entire system works. Never learned from my previous supervisor & I feel like im blind sometimes lol. Trying to learn from here and youtube hehe

The lender has ordered an "as is" appraisal for refinance. There's your problem to be solved.

The borrower is not your client and you don't appraise the property the way they want you to. The borrower needs to make sure that you have access to each unit or that the tenants are all going to be there to access the units.

That being said, now that you found out that one or more of the units are undergoing remodeling, contact your client and inform them of what you found out and how they want you to proceed.

For example, if one or more of the unit's kitchens are gutted, you'll need to make the appraisal "subject to" being complete.

Make sure your client is aware of this.

Hypotheticals are typically per plans and specs. You derive an as is value in its current state then, a value as if the units were built per the plans and specs plus a materials break down provided to you.

 

[Fernando]

The lender has ordered an "as is" appraisal for refinance. There's your problem to be solved.

The borrower is not your client and you don't appraise the property the way they want you to. The borrower needs to make sure that you have access to each unit or that the tenants are all going to be there to access the units.

That being said, now that you found out that one or more of the units are undergoing remodeling, contact your client and inform them of what you found out and how they want you to proceed.

For example, if one or more of the unit's kitchens are gutted, you'll need to make the appraisal "subject to" being complete.

Make sure your client is aware of this.

Hypotheticals are typically per plans and specs. You derive an as is value in its current state then, a value as if the units were built per the plans and specs plus a materials break down provided to you.

Couldn't said it better myself.
However, I would immediately contact the client/lender and tell them the situation.
Client/Lender will tell you to do appraisal as-is, subject to, or lender will not do the loan.

 

[Surf Cat]

Let's say after contacting the client.... the client instructs you to proceed "as is" with a cost to cure. This is fine for minor items such as installing laminate plank flooring, tiling countertops, or general painting.

However, if the client wants you to provide a cost to cure for a remodeled kitchen or bathroom, these need permit inspections signed off on, such as plumbing and or electrical.

Don't just willy-nilly provide a $45,000 cost to cure for a remodeled kitchen and sign the report. That's subject to certificate of occupancy.... view the codes of the city that you're in.

 

[Fernando]

In the past, most of my client/lender won't make loans on such large renovation projects. Too many things that can go wrong like mechanics lien issues.
Talk with your client/lender.

 

[gorillakimchi]

The lender has ordered an "as is" appraisal for refinance. There's your problem to be solved.

The borrower is not your client and you don't appraise the property the way they want you to. The borrower needs to make sure that you have access to each unit or that the tenants are all going to be there to access the units.

That being said, now that you found out that one or more of the units are undergoing remodeling, contact your client and inform them of what you found out and how they want you to proceed.

For example, if one or more of the unit's kitchens are gutted, you'll need to make the appraisal "subject to" being complete.

Make sure your client is aware of this.

Hypotheticals are typically per plans and specs. You derive an as is value in its current state then, a value as if the units were built per the plans and specs plus a materials break down provided to you.

I learned one thing today. Thanks for your advice. I will see the property condition and let the client know. It's holiday weekend, so I'm not sure that they will respond promptly