Neighborhood description and boundaries:
The subject is located in the central portions of Ukiah's westside, one to two blocks west of State Street which is the primary south to north surface street through the cities business district. Gobbi Street is a narrow but busy two lane street linking the business district to the residential neighborhoods to the west. Subject's lot is across the street from a large Rite-Aid store and next door to a small accounting business occupying a residential type structure. The location is subject to a steady flow of traffic along this section of the street and activity from the Rite-Aid. Noise levels are relatively high. Neighorhood boundaries are west of State Steet, east of Dora Street, north of Freitas Avenue and south of Mill Street. Insufficient sales in any given period in this small section of the city and the scope of work included use of sales from similar neighborhoods in central Ukiah. Centrally located in the city and within walking distance to major shopping, services, parks and dining. School district is Ukiah Unified.
With a population of about 15,000, the City of Ukiah is the largest city in Mendocino County and the seat of local government. This is an urban area of a county which is otherwise sparsely populated. Employment is stable and adequate to support the needs of most of the local residents. Some residents commute to the major employment centers of Sonoma County or even further into Marin County or the San Francisco Bay area, one to three hours south, via Highway 101, the primary corridor through Northern California. Ukiah sprawls north to south along Highway 101 with the west side of the highway being more developed than the east side. Home buyers are attracted to the Ukiah area for it's small town atmosphere, proximity to numerous recreational opportunities and median pricing well below that of areas in Sonoma, Marin and Napa Counties.
Market conditions:
The current mortgage lending market remains very volatile six months after a global repricing of credit risk in July 2007. Many lending programs and products that were readily available less than a year ago are no longer available and there has been a significant decline of investors in the secondary market. The result is higher higher borrower qualification, less liquidity and other conditions resulting in fewer loans being made. Fewer loans available reduces the amount of purchase-ready buyers and increases the amount of competition among the sellers for those fewer buyers. When sellers are competing for buyers, they do so by lowering prices. Media saturation campaigns detailing the current problems in the mortgage lending industry and it's effect on real estate markets, in particular the spector of upcoming foreclosures resulting from resetting adjustable rate mortgages in combination with declining residential property values appears to be exacerbating the problem. This dynamic has become apparent in trend analysis and its influence, based on my research and conversations with market participants, is present in the market and is likely to increase. Therefore, the reasonable conclusion I draw is that this market is best described as volatile and unsteady and is in decline at this time.
The subject is located within the city limits of the City of Ukiah. Although this is the largest city in Mendocino County and is a small urban market, the population is only about 15,000 and there are very few sales in any given year and there is very little conformity between residential properties and locations within the city. Slow market conditions over the last six months reduces the number of closed sales even more and this makes statistical trend analysis very difficult (limited sampling). Per BAREIS MLS statistics for the overall Mendocino County market the median sales price is the same for 2006 as it is for 2007 year to date ($400,000 for both periods). This is not an accurate assessment because it includes sales from the early part of the 2007 marketing period and signficant changes in market conditions did not start occuring until the summer of 2007. Exposure time average is currently about 162 days and has increased from about 132 days in mid-2007 and less than 90 days in late 2006 and early 2007. Unsold inventory has increased and number of sales each month has decreased. At this time there have been about 11 sales per month in the Ukiah market and there are currently 118 active listings. There are 18 current pending sales. Average days on market for active listings at this time is about 143 days, pending sales at about 163 days. Most effected by price decreases and excessive inventory are modest homes in lower priced neighborhoods. These types of properties experienced a significant run up in pricing over the last 2 to 3 years due mainly to speculative buying and purchases be underqualified buyers taking advantage of easy loan qualifications, low interest rates and adjustable rate mortgage loans offering "teaser" rates.
Description of subject property:
Typical size "city lot" of about 5,616 square feet with R2 zoning. Lot is is typical but non-conforming and was likely subdivided prior to implementation of current zoning ordinances. Level lot with public utilities. Located in a high traffic area. Very little landscaping, ample concrete driveway and additional parking area.
Improvements consist of a single family residence built during the 1940's (estimate by owner is 1948). "Shotgun bungalow" design built on post and piers with a concrete perimeter crawlspace enclosure. Redwood siding, asphalt composition roofing, aluminmum dual pane windows and screens, metal gutters. Exterior siding has severe paint peel, flaking and chipping including exterior windows frams. Rear siding has some new siding which has not been painted. Areas of soft wood near the foundation indicate siding has dry rot or other forms of wood destroying organisms. Mostly confined to two or three boards up from the concrete perimeter. Roofing, windows, gutters and HVAC appear to be new or newer and in very good condition. Interior has been recently remodeled and updated with new drywall and crown molding trim, refinished wood floors, new tile in the bathroom and new fixtures, new kitchen cabinetry and concrete countertops (one counter has not had the countertop installed yet). New stainless steel appliances including a countertop range. Floor coverings in kitchen and laundry room have not been installed (plywood subflooring at time of appraiser's onsite visit.) Per owner, plumbing and electrical have been updated as well as the sewer lines. Garage has new roofing and a new patio roof. See the attached repair addendum for more details.
New dual pane windows and screens (aluminum) - Observed by appraiser
Wall insulation - Not observed by appraiser
New drywall, trim (crown molding, interior windows, baseboard) - Observed by appraiser
Plumbing - Some observed by the appraiser/some not observed
Sewer pipes (assume laterals) Not observed by the appraiser
Gas plumbing in kitchen and laundry - Not observed by the appraiser
Electrical wiring - some observed/some not observed by the appraiser
Refinishing of wood flooring - observed by the appraiser
Tile flooring in bathroom - observed by the appraiser
Concrete contertops - observed by the appraiser NOTE: A portion of the countertop was not installed on inspection date.
Sinks and faucets - observed by the appraiser
New appliances (stainless steel) - observed by the appraiser
Bath, tub, sink and toilet - observed by the appraiser
Front & rear doors - observed by the appraiser
Gas furnace and Central air condition - observed by the appraiser
Surround sound wiring - partially observed by the appraiser
On demand water heater - observed by the appraiser
Fence in back yard - observed by the appraiser
Flood drain in back yard - not observed by the appraiser
Roof over patio - observed by the appraiser
New roofing over house and garage and new metal rain gutters - observed by the appraiser.
Items which have not been repaired or changed significantly include exterior deficiencies, mostly concerning the exterior siding of the residence and the garage and yard landscaping. The redwood siding has areas with severe paint peel, chipping and flaking. As the residence was built before 1978, the presence of lead based paint is possible.
The owner supplied a total estimated costs for the above additions and repairs in the amount of $67,800. My client's instructions which were included in the engagement letter from xxxxxxxx state that I am to provide a thorough description of the items, photos of each, the costs provided by the borrower and their impact to value, if any, within the body of the report. Some of these requirements were impractical such as observing and photographing items such as underground sewer lines, plumbing, insulation and electrical work concealed within walls, attics or crawl spaces, etc. The list above states which items were and which items were not observed or observable by the appraiser. It is the appraier's assumption that these items are completed as described by the borrower. The appraiser has not been asked to verify or check the costs supplied by the borrower with published cost guides or other sources but based on the appraiser general experience the costs appear to be reasonable. The borrower did not provide a cost breakdown for each individual item.
The above additions, changes and repairs have a significant impact on value because they represent modernization of the improvements, decreasing depreciation, lowering effective age and extending the useful life of the structure. The increase in appeal and thus market value of the extensive interior updating is somewhat diminished by the exterior deferred maintenance and deficiencies. Exterior deferred maintenance can have an impact on "curb appeal" and "first impression" and there would also be a market reaction to the cost associated with curing the deficiency. The appraiser was not provided with inspection results nor bids for repairing the siding. It appears that portions of the exterior siding near the foundation have dry rot and possible infestation of wood destroying organisms. This is often referred to in pest reports as "Section 1" items. Costs for repairs is probably in the range of $2,000 to $3,000. Removing the old paint and repainting the exterior of the residence is probably another $2,000 to $2,500. Market reaction to these costs in this market at this time could be two to three times the amount of the cost. I have made adjustments to the comparable sales to account for market reaction to the subject's exterior deferred maintennace.
The subject sold in 2004 for $200,000 and at the time, per the borrower, the structure had severe deferred maintenance and lack of updating. The appraiser assumes this to be a true characterization and the sales price tends to support this assumption. As of the effective date of this appraisal, residential properties in close proximity to the subject with similar zoning and similar improvement characteristics similar in condition to the subject at the time of the last sale are selling in the low to mid $240,000's. This supports a upward market change of $40,000 for the subject for the time period between the last sale and the effective date of this appraisal. Comparable sale 4 is a recent sale in close proximity to the subject. This property is similar in condition to the subject except for the exterior siding issue. The sales price, after adjustments for condition and a more quiet location indicates that the subject's updates and repairs should contribute an additional $40,000 to $45,000. Completion of the subject's exterior renovation would likely increase market value in excess of the cost of the repairs.
