Please help! House in terrible shape!

[Jennifer Lee]

Hi All,

I just inspected a house with a severly damaged roof, mold, dampness and OBVIOUS water damage to the ceiling, flooring and walls. It is a purchase and the buyer is aware of all the obvious damages to the property. He plans on purchasing the property to tear down.

Now my questions:

What are my options in completing the report?

I am leaning towards "subject to repair?", since I dont know what the extent of the water damage has done to the house.

OR do I complete it as "subject to an inspection?"

Would appraising the property "AS IS" with a large cost to cure adjustment , be out of the question?

Please help! If there are any other options, please ADVISE!

Thank you in advance.


Jennifer Lee

 

[Mike Kennedy]

Consideration:

"as-is" is it habitable, or is HBU vacant, buildable, lot with cost to remove inhabitable dwelling. ????

 

[Brad Gillispie]

First thing I would do is call your client.....do they know of all the damage? Are they treating the deal as vacant land with Demo? I would start with the one who matters most....then see if you feel comfortable with the way they want it done. I have walked away from several an asignment because what the client wanted was not something I either, 1) was qualified to do, or 2) willing to do (i.e. not mentioning the true condition...."holes in roof do not equal sky lights.")

 

[38Scarcello]

It sounds like a tear down. I've been in a few of those homes, where the land is about 85% the value. I was frightened for my life and ran out the door like a deer. You think I was going into that basement?? Yeah right!
Depending how bad it is, i'd just return it to the lender "NO THANKS"!

 

[Robert Hronek]

Call your lender and tell them what you found. If it is a tear down then they should be looking for the proper loan and appraisal. The property does not meet secondary market guidelines and shouldnt be sold to fannie. Likely what they need is a lot appraisal. Get the buyer to give your his estimates of removal costs. If this is going through an MB it is not a loan they can make.

 

[Mountain Man]

He plans on purchasing the property to tear down.

We have a lot of tear downs in my area, and when the owner says that... it's a good indication of the Highest and Best Use. Sounds like a LAND appraisal to me.

 

[SmilingDog]

You say that the property has mold. Are you sure? Are you experienced in the identification of mold and other toxic materials? Because if you say this you are in fact stating that you are an expert in this...

I know what you mean about the property being in bad shape. What I've done in the past (which has already been suggested here) is that you first contact your client and advise them of the condition of the property. They may not be aware of this, and may very well cancel the deal. At which point you can charge a fee for the time you spent on the assignment.

You can also ask them if they want this "subject to" or "as is". For all we know this could be a loan to fix the place up.

If "subject to" I'd appraise the property with verbage that states there are extraordinary assumptions made that the property will be brought up to market standards (i.e. an average condition) and that it will be habitable and meet local and state building/housing regulations.

If you opt for the "as is" approach, I would hit it hard for what the condition (NOTE: not a cost to cure). This is simply "as is" with the condition adjustment reflecting what the market's reaction would be to said condition and appeal.

Talk to your client.

This is not one to gloss over... "it is what it is".

 

[38Scarcello]

Just return the darn thing! Charge a cancellation fee and use that money to advertise yourself to that lender's competitor. Right back at you! This appraising stuff is like just so easy!

 

[Reginald Whitworth]

Jennifer,

If the house contributes little or no value to the land then perhaps it should be torn down as the buyer proposes. In that case you would appraise the vacant lot minus the cost of demolition and debris removal. I would make an estimate of likely repair costs versus the value of the improvements alone (not including land value) to start. What will the buyer do with the property after removal of the improvements? build another house, duplex, apartment or commercial building? What uses will the county permit

Reg

 

[SmilingDog]

Jennifer,

If the house contributes little or no value to the land then perhaps it should be torn down as the buyer proposes. In that case you would appraise the vacant lot minus the cost of demolition and debris removal. I would make an estimate of likely repair costs versus the value of the improvements alone (not including land value) to start. What will the buyer do with the property after removal of the improvements? build another house, duplex, apartment or commercial building? What uses will the county permit

Reg

Be careful about what contributes value and what does not... I did one a few years ago that was a tear down. It turned out in was registered with the Historical Society and was worth fixing up. (If it had been torn down it would no longer be considered "historical").

Maybe that's not what you have, but just giving you more info...