Over-improvement

[Dublin ohio]

( Can You Have it Both Ways ? )

An over improved under improvement

 

[glenn walker]

Over-improvement refers to improvement on a land in excess of the need. It is over in the sense that it does not make the best use of the property, or is excessive in comparison with the improvement of similar properties. An over improvement lessen the market value of the property

 

[J Grant]

If the other comps are bigger-better- and newer HOW is the Subject Over-Improved ? Seems its Under Improved

Perhaps if the demand from buyers willing to pay for it is the big new houses, a big older house built in the 1940s could suffers obs in comparison.

Somebody willing and able to pay for the newer materials and tech is not going to jump at the chance to buy the same sf in an older model - (typically). the OP has to get into the appraisal before they can really know what shakes out.

 

[glenn walker]

I am playing the devils advocate as I had a appraiser on our fee panel who once stated the Subject was Over Improved for the Neighborhood but then in his H & B Use analysis he stated its current use was not its H & B Use as its Land or Lot and its surroundings allowed much larger and better quality homes. I threw it back in his lap and said think about this for a day or so and then lets discuss this conflict you are having.

Perhaps if the demand from buyers willing to pay for it is the big new houses, a big older house built in the 1940s could suffers obs in comparison.

Somebody willing and able to pay for the newer materials and tech is not going to jump at the chance to buy the same sf in an older model - (typically). the OP has to get into the appraisal before they can really know what shakes out.

Think a little longer H & B Use has more to do with what you can do with the Land or Lot as if vacant. Not about its current upgrades or amenities.

 

[J Grant]

HBU and over-improvement are different steps in the appraisal.
HBU is left as is or demolish for land value (or an alternate legal use such as commercial etc )

A house is already at its HBU as a residential property but happens to be over built or over-improved. That becomes a value issue relative to the demand issue in the relevant market area A property is an over improvement or super adequacy because buyer demand is not there to recover the cost in the subject's location/market area.

The fact that they will pay for it in a superior location 10 miles away does not mean we should find a comp 10 miles away and use that to show there is demand for the subject in its location - that would be misleading. The point of an under or over-improvement is it is situated in the wrong place.

 

[Terrel L. Shields]

plus a significant amount of additional living area. wev already perfo a preliminary comp search and this thing is turning into a MESS!

permitted or not? As for a pool, I usually have a few paired sales and they rarely bring 50% of their depreciated cost here. Some people actually fill them with rock and concrete the top smooth.

 

[FMV]

Now How About Highest and Best Use Analysis -It would not be to say the Subect is Over Improved for the neighborhood would it ? It would say its an Under Improvement for the neighborhood and not its highest and best use. Now you have to think about the conflicting analysis by explaining you think its Over -Improved but your H & B Use says its An-Under Improvement. ( Can You Have it Both Ways ? )

Hey Glenn,
Definitely agree with this somewhat.. always first analysis the HBU of course for this situation.
Per Fannie: This subject DOES fall into this category;

An over-improvement is an improvement that is larger or costlier than what is typical for the neighborhood. For example, a 4,000 square foot home located in an area of homes where the typical home is 2,000 square feet may be considered an over-improvement. Furthermore, a home with an in ground pool in an area where pools are not typical may also be considered an over-improvement. The appraiser must comment on over-improvements and indicate their contributory value in the Sales Comparison Approach adjustment grid.

Improvements can represent an over-improvement for the neighborhood, but still be within the neighborhood price range, such as a property with an in-ground swimming pool, a large addition, or an oversized garage in a market that does not demand these kinds of improvements.

The fact that the property is an over-improvement does not necessarily make the property ineligible. However, lenders must review appraisals on properties with over-improvements that may not be acceptable to the typical purchaser to ensure that only the contributory value of the over-improvement is reflected in the appraisal analysis.

 

[FMV]

Hey Glenn,
Definitely agree with this somewhat.. always first analysis the HBU of course for this situation.
Per Fannie: This subject DOES fall into this category;

An over-improvement is an improvement that is larger or costlier than what is typical for the neighborhood. For example, a 4,000 square foot home located in an area of homes where the typical home is 2,000 square feet may be considered an over-improvement. Furthermore, a home with an in ground pool in an area where pools are not typical may also be considered an over-improvement. The appraiser must comment on over-improvements and indicate their contributory value in the Sales Comparison Approach adjustment grid.

Improvements can represent an over-improvement for the neighborhood, but still be within the neighborhood price range, such as a property with an in-ground swimming pool, a large addition, or an oversized garage in a market that does not demand these kinds of improvements.

The fact that the property is an over-improvement does not necessarily make the property ineligible. However, lenders must review appraisals on properties with over-improvements that may not be acceptable to the typical purchaser to ensure that only the contributory value of the over-improvement is reflected in the appraisal analysis.

From the conversation with the borrower and pictures sent via text.. this has basically been like a Desktop review prior to getting out there.. these are just no fun as they have done so much to this thing.. full remodel without demo.. I have almost no sales whatsoever..(only one).. which is making this tough.. then the fee is already awful due to how slow it is. We have been almost tempted to just Cancel and have them reassign.

 

[FMV]

Perhaps if the demand from buyers willing to pay for it is the big new houses, a big older house built in the 1940s could suffers obs in comparison.

Somebody willing and able to pay for the newer materials and tech is not going to jump at the chance to buy the same sf in an older model - (typically). the OP has to get into the appraisal before they can really know what shakes out.

Hey JGrant,

Thank you for the post.. sorry, but what does OBS stand for?

 

[J Grant]

Hey JGrant,

Thank you for the post.. sorry, but what does OBS stand for?

obsolesence