REO appraisal of gutted home.

[Ruth Troop]

HELP.....I just received a request for a REO appraisal (short sale), when I called the Realtor to set up an appointment I was told that the ENTIRE house is gutted.....no heat, no plumbing, everything removed down to the studs. This proeprty is located in a small city in PA and there are no comparable properties (gutted homes)....what do I use as a comp???? I am also asked to do a "cost to cure"......how am I to do this when dealing with JUST a shell???? Any suggestions and/or guidance would be appreciated.....

 

[Red1234]

Ruth,
I would calculate the cost to bring the property back to a marketable state. You may need to call some contractors and get a rough estimate. You could also get the figures from the Marshall & Swift home repair and remodel guide. Do the appraisal as though it is marketable and reduce the value by the cost to cure. Include an addenda explaining exactly what you did and lots of pictures.

 

[VegasWayne]

REO appraisals generally need to establish at least two values, as-repaired and as-is. The as-repaired is based on the sales comparison approach and the as-is value would be the as-repaired minus the cost to cure minus the incentive needed by an investor to risk this investment.

 

[RSW]

Have you ever done a proposed construction appraisal?

 

[Lee Lansford]

HELP.....I just received a request for a REO appraisal (short sale), when I called the Realtor to set up an appointment I was told that the ENTIRE house is gutted.....no heat, no plumbing, everything removed down to the studs. This proeprty is located in a small city in PA and there are no comparable properties (gutted homes)....what do I use as a comp???? I am also asked to do a "cost to cure"......how am I to do this when dealing with JUST a shell???? Any suggestions and/or guidance would be appreciated.....

Are you certain yet that the value "as is" is more than the value of the land?

 

[Riick]

It may well be that the value is in the land, and the shell / structure needs to come down.
Especially in this market.
...Also... what part of PA is it in???; Just reading that people buying up rights to drill for oil / natural gas in NE and NW parts of the State.

 

[hglenbetts]

Possible negitive value

I've got some markets, where cost to cure on something like that is greater then repaired value, so you're back to value if vacant (Lot value less cost to clear)

 

[Ruth Troop]

Thanks for all the suggestions….

I would calculate the cost to bring the property back to a marketable state. You may need to call some contractors…..
“Cost to Cure” is going to be like rebuilding an entire home minus the shell…


Are you certain yet that the value "as is" is more than the value of the land?
I am looking into the H&B use of the vacant lot....it may be that razing the shell and selling the vacant lot ends up being the best way to go.

 

[bart nathan]

Make sure you get a good fee

 

[redfish]

Why does everyone jump over the highest and best use analysis?

Prior to inspection, take what the agents say with a grain of salt. Many of these johnny come latley REO agents inflate how bad a property is to A). get the negative influence going in you head prior to inspection to get a low opinion so they can sell it faster, or B).they are used to selling nice homes and they reflect huge resistance to properties that really aren't that bad to a typical investor or REO market participant. I get all the time. "holy cow! wear your hazmat suit to this one, The house needs $5,000,000,000,000......................in repairs". They use the same marketing techniques just in reverse for REO's.