Quality Rating for a House That Has Been Gutted?

[Webbed Feet]

...and the REO form clearly states:

Provide an itemized list of repairs recommended to bring the property into marketable condition. Cost estimates should be based on reliable published cost sources and/or local cost resources. The appraiser is not an expert in the field of building construction and actual costs may vary from those provided. Repair costs and opinions reported herein are subject to future revision based on new repair estimates and evaluations by a licensed building contractor.

Interpretation: My opinions of the repair costs are probably worthless, but I think disclaimers can get me out of being successfully sued over it.

 

[Webbed Feet]

Thank you all for your replies. They're very helpful.

I should have been more specific in my description. The house is a 2,600 sf farmhouse built in 1947. It's on 6 acres in a rural area 10 miles outside the metro area. It is bank-owned, and the assignment is for market value as-is and as-repaired.

There was extensive renovation done to the property in 2006, possibly even foundation work, as the foundation is a poured concrete perimeter with no evidence of cracking or settling inside or out.

There was only one sale in the market that was both bank-owned and in need of a similar level of repairs, and paired analysis between it and move-in ready homes showed a $50,000 difference in price. It was only on the market for 20 days, which helped determine the 30-day as-is and as-repaired values required by the bank.

I feel confident in my repair estimates, as I have cross-checked cost data. I was a contractor in a former life, and my husband still is. I am familiar with construction costs in the area.

Again, thanks for all the suggestions. I often feel like I am on an island here, and it is nice to be able to connect with others in my profession.

My mind goes elsewhere versus the repair estimate controversy. Your wording of your sentence above bothers me as I don't know if you mean only one sale had such need of repairs and it happened to also be a foreclosed property, or you are saying that you think you need a foreclosed property as a comp. If the later, you've not considered the definition of value versus distressed sales.

Then we have many appraisers post here that later, when asked, finally disclose they actually hold a certification and not the "Licensed" showing on the forum profile. That said, IF you are "Licensed" then I suspect just the value of the acreage alone will push even your "as is" value conclusion over $250,000. As not a sale and no loan amount in play, the total opinion of value should be the "Transaction Value" per state administrative rules. Toss that in with only one comparable in similar condition, and I think you've got yourself a "Complex" real estate assignment.

So if you are "Licensed" you might want to pause for consideration of the limitations on your type of authority to appraise in your state per your license.

 

[residentialguy]

Interpretation: My opinions of the repair costs are probably worthless, but I think disclaimers can get me out of being successfully sued over it.

right? :new_all_coholic:

 

[J Grant]

I had noticed both bank owned and needing same level of repairs comment as well.

Appraisers can use REO comps in appraisals, but in market value purpose appraisals. However the REO status should not be the reason for selection just because the subject is REO owned....similar condition to subject is the proper selection reason.

Of course analyse if sale type impacted value, how it sold in price vs non REO sales etc. For a stripped down house such as subject , likely buyer is an investor and that likely buyer is considering REO owned property. There are times an REO owned sale may not be not usable, however many times it is ( same as any other sale, we vet it for terms,, reasonable exposure to open market /MLS listed etc )

In some markets, REO owned properties comprise a number of the sales most competitive to subject. The Appraisal Institute and other guidance recommends using REO sales when doing so means arriving at credible report results. We'e been down this road before on the board and I avoided commenting for that reason

 

[Terrel L. Shields]

The Appraisal Institute and other guidance recommends using REO sales when doing so means arriving at credible report results

As credible as all those 2011 REOs that were flipped six months larger for double or more? Yes, I believe we call this the "dartboard" method. We make not one but two subjective adjustments amounting to perhaps 30% of the value of the properties each...

 

[J Grant]

As credible as all those 2011 REOs that were flipped six months larger for double or more? Yes, I believe we call this the "dartboard" method. We make not one but two subjective adjustments amounting to perhaps 30% of the value of the properties each...

If the prior 6 month old sale of the REO was in fair condition and subject was in fair condition, then yes the REO likely was a good comp . If six months later the REO is renovated and flipped, then the sale price reflects that. If the subject was in fair condition, likely it was a candidate for renovating and flipping and it's typically motivated buyer was an investor.

I don't make 30% or large adjustments on value of these properties...the whole point of using an REO, when one uses them, is because they are the comps that need the least adjustment, the comps most like the subject .

 

[Doug Wegener]

repairs

Just my two cents regarding repair estimates. At a certain point with very extensive repairs, it probably gets beyond the ability of MOST (not all) appraisers.

It is really an art to accurately estimate repair estimate costs when they are very significant, and relying on published cost sources will probably not be that accurate.

In my case, I have a sister who has years of experience rehabbing these properties for her REO repair business. What I do is give her a call and get the numbers from her. The form itself says you can rely on local cost sources.

I am comfortable with that. If anyone wants to sue me,let them go right ahead but I know my information is reliable.

Of course, not everyone is in that situation and the better part of wisdom for some is to call for cost estimates It just depends who you are and what your available sources are.

Also, that is a good point about complexity. If the value is beyond $250,000 a licensed appraiser would be acting outside the scope of his/her license.

 

[J Grant]

good post, Doug

One of the reasons I am willing to do REO repair estimates on the REO form addendum is that the pre printed statement does not use the word accurate. They describe it as a list of itemized repair items to bring the property into marketable condition, (based on cost sources or local sources,). It states appraiser is not a contractor and that the estimates are subject to change based n revisions/inspections by inspections or licensed contractor).

Of course appraisers should try to do the best job we can but the expectation stated right there on the form is not that of accuracy per an inspector or licensed contractor. It's a working estimate for clients to make some decisions about a property and to give them an idea of what might be needed to bring property into marketable condition.

 

[Doug Wegener]

Agreed

Agreed Agreed