Sewer flooded house

[Jeff Horton]

Just received a call from an attorney ( a Field I am trying to break into) requesting an appraisal. Seems they have 2 homes that have been flooded by the sewer. They need an appraisal of present value of the houses. They are bringing in a contractor to give them an estimate of damage to houses.

I have not seen the houses and do not have all the details yet. I am trying to get my thoughts together before I get there. Anyone dealt with anything like this?

Obvious we have a cost to cure what ever damage this has caused. Contractors estimate is going to weigh heavily in my appraisal. I wondering if there are any other issues that might affect value? Stigma comes to mind but that would be tough to prove and stand behind. But if the houses were sold as-is there is probably going to be some discount beyond the cost or repairs I would think. But how much?

Any other input? I am open to wild thought here. Want to be prepared when I go visit the houses.

 

[Lee in L.A.]

Is there a chance of the sewer flooding the houses again? Or can it be permanently fixed / prevented?

For an as is value, there's gotta be some stinkma attached.

Fix them up, and maybe no problem.

 

[George W Dodd]

Jeff,

Look for sales of homes that have had any major sturctural problem or suffered from heavy damage like a fire. Then look and see if you have any that were sold "as is" and see if you can extract the discount rate that way. They don't necessary have to be comparable to the subject as you are looking for a discount rate. Then use the discount rate applied to you comparable sales.

It might be necessary to use a variety of different type of damages to develop a range of discount percentage: structural, water, fire, environmental, etc.

IMHO I believe you will find the discount much higher than its cost for the "pain and suffering" and profit motive involved in restoration.

BTW this should be very good for future assignments with attorneys, as many of my assignments deal with problem properties.

 

[David S. Roberson]

George,
I agree. Most attorneys are full of crap.

 

[Jeff Horton]

Thanks George. I like to think that I would have thought of that eventually but I am not so sure

Just got some more info from the Attorneys office in an engagement letter. This could be the break I needed. Turns out one of the defendants is a local Judge and of course an attorney also. If I do good on this that could be three new references! Man I am excited about this break.

One more question. I am thinking that this would be a good job to do a narrative report. I have a good template but have not used it much the past few years. Just updated it a couple of weeks ago for a land appraisal . Seems to me there is more chance to explain my thought process and what I saw than the 1004 most appraisers would use. Any input on that anyone?

 

[Dave Smith]

Jeff:

About fifteen years ago I was involved in a sewer back up situation like you described. I don't remember how I arrived at the value other than cost to cure and some sort of discount but it was totally renovated after the law suit got settled.

The house has been sold several times since then, and always at approximately market value. The stigma, if there was one, appears not to have been a big factor.

The stigma of a house fire situation about twenty years ago on another house also appears to have vanished over time too, with the house selling a couple of times at market value after reasonable time on the market.

Just my $.02 worth..

 

[George W Dodd]

Jeff,

I highly recommend doing a summary narrative style report. It is important to provide as much detail about the process as possible. Just remember to keep it as brief and to the point as possible.

The use of graphs, charts, picture imbedded in the report helps a lot if they stress your points.

Adding an executive summary in addition to the report has been very popular with my clients, you might want to give it a try.

 

[Terrel L. Shields]

The key to the damage is mold. If mold is present and it is a mycotoxin, I suspect the damage could exceed the value of the building if extensive. I would call for a mold inspection. Often mold comes on anyway even after clean up and repairs. sheetrock, stud walls, etc. will have it. Any black specs need sampled. 48 hr. ran a story recently on a house in Tx that had to be walked away from. A minor leak started it all and both the owner and his child were seriously affected. Multizilion dollar settlement.

 

[Pamela Crowley (Florida)]

It becomes pretty easy in court to kick an appraisal completed for the other side when they did it on a URAR and yours is a narrative. URAR was made by Fannie & Freddie for LENDING purposes.

If it's not for lending and especially if it's for a potential court case, I think you should do a narrative. Besides, when you do a narrative for a potential divorce or for a HO to establish a potential selling price, they can't turn it in for a lender to use after the fact. Narratives blow the underwriters minds.

:crazyeyes:

Just my $.02

 

[Jeff Horton]

George you just seconded what I was thinking about a narrative. The one I just did was a lot with little demand in a high dollar neighborhood. Narrative format allowed me to explain better how I come to my conclusions in a step by step manner leading up to the grid.

I also agree with say it in as few words as possible. As I posted in another post. As a home inspector I have learned to say the roof appears to leak and not elaborate as to why. Unless it is obvious of course.

Now, could you elaborate on your Executive Summary? I think I know what you are saying but i would rather just ask you explain and admit I am not sure.

Terrel, thanks for reminder about mold. Thats a good point. I am making a list of things I need to remember and to ask the attorney when I see the house next week. That has been added to my list.

Pam I agree with your thinking 100%. I recently blew the dust off my narrative template for an individual (mentioned above) so that if he sells the property he asked me to appraise he can't give the appraisal to the buyer to use for a loan. It also turned out to be much easier to explain why this lot was not selling and what was wrong. Aside from the time it took to update some things on the template I dont think it took any longer to do the Narrative. If so not more than an extra hour.

Thanks for all the input!