Rehab Vs. New Construction

[Travis McGee]

I have a client that wants a appraisal on his investment home which he has rehabed within a neighborhood that is under going renovation and property values are increasing, mostly due to the location. The location is close to downtown Atlanta and buyers are paying for this location. The problem that I am facing is some homes have been knocked down just for the site and new homes have been constructed, the subject property that I would appraise has been completely renovated and of course the owner/investor has his chops set on the same value as the new homes which he has made sure that the GLA is similar by finishing the attic area. New home 2 houses down, 1 across the street and it keeps going. I would appreciate any and all advise or opinions on this topic. I have declined the assignment for now because the amount of work involved and the pay. There are about 30-40 sales on the same land lot with a range of 60k-400k I would like to find 6 rehab comparables and be done, however the client insist that his home is new or just like new.

 

[Caterina Platt]

I think you are wise at declining the assignment. To be blunt, 'Mr. Investor, I will do my job to the best of my ability and value the property as I see fit within accepted guidelines, standards, and appraisal practice. I will not be told which comparables to use, nor what value is desired.'

You'll never win on this one, nor will the fee be large enough to cover the PITA factor. Know it alls are rarely convinced into understanding reality, and I just don't have the time or patience to walk into the hornet's nest.

 

[Ghost Rider]

Since when did the client get to determine how the home is appraised. IMHO, If the market would not discount the fact that the subject is rehabbed, or if they would view and compare the subject to a completely new dwelling....I probably wouldn't decline the assignment, I'd charge an arm and a leg for it, and do your due dilligence to find out what the typical market acceptance is for a completely new property vs. a rehabbed one. Very important for this type of assignement - COD - Cash or Certified check ONLY, Appraisal does not leave your hands until the fee is in your bank account.

If you're not comfortable with the assignment from a competancy standpoint, then thats a whole other situation, but it sounds like you're more declining the assignment cause it's a PITA than for any other reason. Nothing wrong with that, but I'd get the fee, and do it right.

 

[Walter Kirk]

Your investor doesn't want an unbiased appraisal, he wants a sales tool that he can use to fool a potential buyer into paying more for his rehab than it is worth. Your integrity is worth more than the fee for this job.

 

[Travis McGee]

Thank you all for the input, I do not want to seem ignorant here but I need to know what does PITA mean? I assume it is the time involved vs. the fee associated with the assignment.

 

[Farm Gal]

It is hardly a secret-squirrel professional acronym...

Pain In The A** or you could say: Anatomy" generally referring to the part that warms your seat.

There IS a more legitimate use of PITA which is Principal Interest Taxes And Insurance which for some reason I have never fully understood but may be figuring out is also called PITA. I &think* that one started out as Association Dues Is there anyone long enough in the tooth who is willign to both confirm AND admit that they are older than dirt if they remember what form THAT one came off of?

But your orriginal respondant undoubtedly meant hte first acronym deciphered above

 

[Otis Key]

the subject property that I would appraise has been completely renovated and of course the owner/investor has his chops set on the same value as the new homes which he has made sure that the GLA is similar by finishing the attic area.

As stated, Caterina gave the most sound advice. And I would have probably said the same thing as her.

Now. My question: Who, Why, What, Where, When?!

Why is he ordering the Appraisal?
Who is it for?
Why is not the lender ordering the appraisal?
What is the purpose of the appraisal?
When did he want you to estimate the value to be for?

Why - you're taking an order from an individual? Hmmm - FIRREA
Who is it for seems pretty self-explanatory, as does the why. What is the purpose of the appraisal? Marketing? Financing?

Be very careful

 

[SHaugabrooks]

You can't let the client determine your comp selection. That is why you get to be the appraiser and he get's to be the client. Although this guy might have dramatically lowered the effective age of the property the non-curable items are still in place. More than likely the market is going to pay less for older homes, although I would pair a few sales together and see the market reaction.

I would match apples to apples and load in comps that are renovated and disregard the new homes. If you don't, the investor he submits it to probably will. God forbid if this is a purchase and the investor is flipping the home. The lender will really look hard at your appraisal. You can't tell the lender you used new sales because the owner told you too.

Good Luck

 

[Rich Hahn]

apples to apples...

Rich

 

[Otis Key]

apples to apples... 

Rich

And "Dust to Dust" <_<

Stay the course and do what you're supposed to do - provide your "experienced", unbiased opinion of value based upon the data you have. No "educated guesses" or "based upon my professional opinion" reports - that's a sure way to get banned or "black listed". You're supposed to be pro so think about it - remember all you're learned and gained from the experience and then, when you've figured out that you've taken on more than you can handle - bail. :dance: :dance:

We're getting way too carried away. If you don't know what you're doing then decline the job or call someone in that you know, trust and is experienced. Otherwise you are violating the competency portion of USPAP.