Is This An Exceptable Cost To Cure.

[JoeGermade]

Please, I need to submit this report tomorrow and this is my addendum. Please give me any input. It was a 2900/SF pile of rubish basically. Does an appraiser have to note crack pipes on grounds?

• Small Income : Overall Quality and Condition of the Property

According to the Homeowner this property has been abandoned for 7 years. The exterior of the subject property has been vandalized as well as has garbage and debris left on the grounds. The interior of the house has been vandalized by vagrants and squatters who appear to still occupy this property. All circuit boxes/and or breakers have been removed, copper plumbing pipes have been removed, all kitchen and bath fixtures have been torn out, walls have been knocked down. There is a skylight in the attic that has been removed. Since the skylight was removed from the attic water has freely entered the house causing mold, deterioration of wood, and destruction of the insulation and drywall. There are holes in the floor supports from the second floor which allow you to see clearly to the first level. There are steps leading to the basement from the first floor which are destroyed. The floor supports for the first floor appear to be water logged and deteriorated. There are no basement windows which allow animals and water to enter. There is a leaking water main in the basement. Also there are to large juts of concrete in the basement which may have oil tanks located inside. This home has no electric, running water, or heat.

The subject is in overall poor condition with the following repairs required.
Below is an itemized cost to cure of repairs needed, but not limited too. See all attached photos.

Removal of debris through out property and in home. $2,500
Replace all first floor windows $5,000
Install basement windows. $1,000
Reframing areas of holes from water damage and vandelizing. $3,000
Rewire electric of entire home and install new breaker boxes. $10,000
Reinstall all copper pipes and plumbing as necessary. $10,000
Install new heating system. $7,500
Install 3 kitchens. $10,000
Install 3.5 baths. $7,500
Install drywall to most of the interior. $8,500
Replace insulation. $1,500
Paint and trim of complete interior. $5,000
Install/replace all fixtures (lighting, outlets, switches) $1,500
Refinish hardwood/ Install new floor covering. $6,500
Replace all interior and exterior doors. $3,500
Install stairway from basement to first floor. $500
Install skylight in roof. $500
Replace basement bilco doors. $500
Pest/Rodent removal and treatment. $1,000
It is recommended an engineer inspect floor supports, oil tanks, and extent of water damage. $3,000

Total cost to cure: $88,500.00

This cost to cure is an estimate using materials that are average for the subjects neighborhood. The appraiser in no way implies himself as a professional in the building field and bases his estimates soley on experience, and conversation with local contractors.

The above noted cost to cure is included in physical depreciation in the cost approach and in condition adjustments on the grid.


• Small Income : Comments on Sales Comparison

Due to lack of similar sales in subject's neighborhood, appraiser utilized comp# 1 which is over 6 months old. GLA is adjusted at $25.00/SF, lot size is adjusted at $0.50/SF which is common for the marketplace.

The appraiser was forced to make an across the board condition adjustment because of the subject cost to cure.

Comps# 3 and 4 are 2 families, but are considered to have similar functional utility to that of the subject. There were no other comparable 3 family homes in the subjects market place.

Adjustments which exceed FNMA's 10% line, 15% net, and 25% gross adjustments guidelines were necessary due to the subjects cost to cure.

Comps# 1 and 2 are located beyond 1 mile and in Hempstead which is considered a similar competing neighborhood. These comps beyond the mile were utilized because they are the only comparable 3 family homes at this time.

Comp# 1 is currently listing for $429,000 as of 12/18/2004. Condition adjustment to comp# 1 is based on MLS#1666480 which states "part still being renovated". Which means the subject was not in average condition at the time of the 6/04 purchase.

Condition adjustment to comp# 4 is based on listings information and a driv by inspection.

• Small Income : Analysis of Current Agreement

There is no known listing agreement or sale of the subject property or above comparables in the past year per Comps Inc. & MLS, as of the date of the appraisal. (other than noted) There is no known sale of the subject in the last 5 years. According to the homeowner the subject has been auctioned and is currently in contract for $150,000. The appraiser was not furnished with a sales contract or and proof of this information.

 

[JoeGermade]

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[JoeGermade]

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[JoeGermade]

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[Mike Johnson]

Looks like you have done about all you could.

I recently did a repo that was RAVAGED by mold and/or mildew. Some of the ceilings had collapsed to the floor. Dark mold everwhere. No way to estimate what it would cost to cure until someone removes all the drywall and cabinets. Way beyond my expertise (or anyone else's until the drywall is removed).

I just said "here is my estimated value and I will be pleased to reconsider the value if and when you furnish a professional cost of repair estimate."

 

[Robert Anderson]

The damage/repairs are very extensive. I would not feel comfortable estimating the cost of the needed repairs and would decline to do so. It is possible and perhaps probable that there is damage that you have not detected. The $3,000 you estimate for floor supports, oil tanks, and water damage may not be near enough.

Just as important is the absence of a charge for profit. No one is going to purchase the subject property and make these repairs unless they are compensated for their time. The minimum profit that I would use would be 15 percent of the cost of the repairs and a profit of 30 percent may be more realistic give the amount of needed work.

Have you spoken with the lender about this appraisal. They may not want to make a loan on a property such as this. If they want you to proceed, I would require that they supply a cost estimate from a qualified professional.

 

[JoeGermade]

Its actually an REO appraisal. I dont know exactly what the appraisal is for its through a very good AMC I work for. This is the only job they have gave me that I am really unhappy with. I think becuase it is in contract for $150,000 the bank thinks it is worth more and dosnt want to let it go for that much.

 

[Ramon Tate]

Whew! I'm glad that's not mine. Here's some things that troubled me and I'd bet you'll be asked about.

1. RED FLAG - 7 years.....That's a long time for extensive deterioration to develop unseen in those difficult to probe places. Personally, I wouldn't want to render a value opinion on such a situation without an extensive engineering assessment first. Water has a very nasty habit of following paths that can be hard to track. As it pertains to rot, corrosion, and mold, what you were able to see might just be the tip of the proverbial iceberg. Though you identified the visual/identifiable, it's highly probable that there's going to be additional damage. I'd be much more emphatic about the possibility/probability for additional issues that could represent LARGE additions to your cost-to-cure estimate. For your own CYA, don't limit your suggestion of an engineer's inspection to specific items!!! The one cost-to-cure that might be the most costly of all may well be something you didn't think of! Don't paint yourself into a corner!

2. Depending on the laws in your State, the number and extent of your cost-to-cure recommendations might be construed to contitute a representation of a professional building inspection, or given the ambiguity of USPAP, even a "consultant's opinion". (I'm just being a devil's advocate on some issues that might need to be considered)

3. I wasn't quite sure how to follow your comments regarding "Comp 1". But, that aside, the spread between that comp's "listing price" ($429K) and your subject's combined figure (contract + cost-to-cure) $238,500, hit me a bit sideways. Even if the comp's list is $100K too high, that still leaves one whale of a spread.

Personally, if it was mine, I'd put enough PROMINENT disclaimers on that one to effectively say that my opinion should not be utilized to make any financial decision of any kind.

 

[Scott Kibler]

Is all that stuff necessary to make the property marketable?

I know of several neighborhoods that have a pretty active market for properties in poor condition. The typical buyer's are professional rehabbers, not Mr & Mrs Consumer and family.

 

[JoeGermade]

Ramon, this house actually appraised for $280,000 this is still on the low end of my comps. 2 of the sales I had sold over 400K. Comp# 1 actually sold for $325,000 and that comment was just staing that it has relisted for $429K and i made an adjustment less then the rest of the comps because I felt it was in a similar inferior (but not as inferior) as the subject.


I have very limited experience with REOs, I have done some work for HUD but nothing I have ever done was this bad. I also was wondering if the Highest and best use of this house would be to tear it down. The town has been trying to tear it down under eminent domain because it has 2 town parcels located next door.

All the information I got on the history of this was by the owners son who hasnt stepped foot into this house for 2 years. The bank just requested they wanted a full report done "AS IS". I even notified them stating the cost to cure would be well over there 10% guidline and they said they still need it no matter what ASAP. Its forclosing tomorrow and i recieved the assignment thursday and inspected it friday. they were B*tching to me they wanted it by friday afternoon.