Non Lender Appraisal "subject To" Question

[tuneman420]

I have an appraisal I am completing for a contractor who is buying a property from an in-law. Before he makes an offer, he wants to know what it is really worth. The house needs some work and wouldn't pass an inspection the way it is currently. So I am wondering if I should make it " subject to" and if so would I also need to provide 2 values? Any feedback would be appreciated.

 

[graindart]

Probably need to discuss with the contractor client. He / she can tell you what information they're seeking in hiring you. Does the client want to know the current as-is value? Are they also relying on you for an as-repaired value to see if it's worth putting the effort / time into?

 

[JTip]

Probably need to discuss with the contractor client. He / she can tell you what information they're seeking in hiring you. Does the client want to know the current as-is value? Are they also relying on you for an as-repaired value to see if it's worth putting the effort / time into?

Exactly.

The client, in fact, wants both (of course) but is expecting one fee. Charge a fat fair fee (two values with two sets of comps) because they will want both. Don't let the client trick you......

 

[Slappy]

I would consider offering to do it "subject to" repairs and tell him you would take his input re the cost of the needed work. That way, he could "back off" from your appraised value a offer price he would be comforable with for his inlaw sellers. I would not want to do more than one appraisal in this case.

 

[Terrel L. Shields]

" subject to

He is a contractor, why would he consider your estimate of repairs worth the paper it was written on? As is and carefully point out the defects. He would be more interested in arbitraging the functional obsolescence related to repairs needed.

 

[Michigan CG]

I would consider offering to do it "subject to" repairs and tell him you would take his input re the cost of the needed work. That way, he could "back off" from your appraised value a offer price he would be comforable with for his inlaw sellers.

That is what I would do.

 

[J Grant]

I have an appraisal I am completing for a contractor who is buying a property from an in-law. Before he makes an offer, he wants to know what it is really worth. The house needs some work and wouldn't pass an inspection the way it is currently. So I am wondering if I should make it " subject to" and if so would I also need to provide 2 values? Any feedback would be appreciated.

Ask your client ( the contractor). If all he wants is an "as is" value, then stick to that. Remember that even though his inlaws are not an intended user. they are involved to the extent that if they after feel the appraisal led to him buying "below market value" (whatever that means to them), they might have an issue with the appraisal...even though they were not the intended user. I personally don't like doing appraisals for entangled family members. So, if you do it, make sure you write on it that the intended use is a decision about the property by the buyer, not for any other intended use or user, and that the owner is recommended to get their own appraisal. (he's going to use it and possibly show it to them as his rational for offering X)

 

[bnmappraisal]

So I am wondering if I should make it " subject to" and if so would I also need to provide 2 values?

Many good posts above.
providing 2 different opinions of value is providing 2 appraisals (SUBJ TO and AS IS), so make sure you consider that if that is what the client wants.
I did one last year for a guy selling a house to an "acquaintance" that was not completely finished. The client wanted the report "SUBJ TO" it all being completed. I made sure BOTH understood what that meant (buyer was also an intended user).
All the best

 

[hastalavista]

The "subject to" terminology is most applicable to lending assignments, not private party assignments.

The underlying concept that supports a "subject to" appraisal is the extraordinary assumption or hypothetical condition. These would be applicable in a private party assignment.

A "subject to repairs" when the repairs haven't been made is not an as-is appraisal, which is what your client probably wants. The value is based on a hypothetical condition.
The assumption that repairs will be $X, and therefore the value is $Y is an as-is appraisal. The $X repair estimate may or may not require an extraordinary assumption. If I'm making the estimate, I probably will include an EA. If I was relying on a bona fide repair estimate, I might not use an EA (but I could).

It may sound like I'm slicing the baloney a bit too thin here, but I don't think I am. I advise that when the assignment is not for a mortgage finance intended use, to not use mortgage finance terminology; it can lull us into appraising a non-mortgage assignment as-if-it-were a mortgage assignment. And that may be the wrong thing to do.

Good luck!

 

[bnmappraisal]

I read the OP again. Seems it is definitely pertinent to speak again with the client to find out exactly what they are expecting.
AS IS value?
SUBJ TO value? (SUBJ TO the HC work has been done)