Interesting job, who would buy this?

[Jeff Horton]

Got an interesting job. I did a Home Inspection on this property 2 months or so ago. Clients lawyer calls and he is in divorce proceedings and talked to me about doing the Appraisal.

The house has some very questionable structural issues. As a Home Inspector I can't say if it is sound or not. But there were several items that concerned me. Addition with a questionable foundation. Damage to the foundation. Door cut in the basement wall with no lintel. Spliced rafters in the attic, etc. I would imagine it would scare most buyers off if they were to see the report. It would me! There are enough homes around I would just keep looking. And the house wasn't in great condition too.

So, I know its going to take a substantial discount to allow for condition. But what I am wondering is, who is the buyer pool for this house? Investors, the handy man type looking for a bargain? Someone else?

Second, would you address this in the report? I am thinking that this house is going to have a very limited buyer pool and that it should be addressed in the report because it is going to affect the value. Any downside or things to avoid saying?

:dry: And before it starts, it is a narrative, yes I have done divorce Appraisals before, yes I have been to court before, yes I worked out fee's ahead of time.

 

[Lawrence R.]

Can only really speak to one issue.

Another pool of interested buyers would be like a guy I had buy a house form me one time.

He worked as a truck driver, but had been an electrician/plumber a few years back.

He didn't have a lot of money, but he needed to buy a house. He knew he could afford one I had, but it needed a good bit of work.

He knew that the house was liveable in its current condition, and in exchange for a deal, he could afford to buy it as is and fix it up along and along.

There are probably a good few people like that out there, that can move in and do the repairs themselves, in order to live in a better part of town or in order to own a home that fits thier budget.

 

[hastalavista]

So, I know its going to take a substantial discount to allow for condition. But what I am wondering is, who is the buyer pool for this house? Investors, the handy man type looking for a bargain? Someone else?

In my markets, such a property with significant/substantial structural issues or concerns is outside of the typical buyer pool and located in the atypical buyer pool. I did a similar assignment a few years back- my conclusion was that given the level of significant structural issues (mine was a $2.5-million dollar (as-repaired) house in a gated golf community that I concluded had a market value of about $1.4-million as-is) the typical buyer was a contractor/developer.

One thing I considered in my assignment was this: Because of the condition of the property, no A- or B-paper lender would touch it. It would have been hard money or a construction loan. I interviewed several different lenders in the market and they all agreed on one concept- whoever they loaned to on this property needed to have experience in fixing or developing similar types of properties.

The estimated repair costs were somewhere around a half-million dollars. The rest of difference was due to risk, entrepreneurial incentive/profit, holding costs and marketing costs (by the way, I relied upon other experts for the repairs).

This assignment was a lot of work (the longest thing I ever wrote) and I definitely under-bid; but it was a good learning experience. One of the reasons the assignment was so long is because of the intended users and purpose of the appraisal: Divorce, non-real estate persons. Therefore I had to go into detail to explain my rationale so that these sophisticated but non-realty experts could understand how I arrived at my value conclusion.

This was a contested situation; I worked for the attorney that represented the wife. The other side hired an appraiser whom I actually worked for a short-time about 10 years prior (a good guy). His estimate was $2.2 and he completed it mostly on a form.
The case never went to court; the opposing attorney conceded the value in a non-mediated negotiation.
The reason I bring this up is because of the importance I put on such an assignment to provide detailed communication of the analysis to the users.

Good luck!

 

[Mr Rex]

I think the buyer pool would be the same as the pool of buyers for a REO with similar problems. Did a HI on Friday of an REO, got the appraisal order yesterday. Interesting to get your own Inspection for use in your appraisal. Some problems, none as serious as yours.

So, I'm thinking your property has rehab investors as potential buyers, and they are going to beat the price down to allow for some serious profit. Now, the thought of sitting on the stand in a divorce and telling what a POS this is and why its going to sell for peanuts sounds like fun.