Tear Down

[Ruben Ramon]

I am doing an REO appraisal where the house is 2 feet below grade, 3400 sq ft. The house is leaning over among a LOT of other things. I have come to the conlusion that it should be appraised as vacant land minus the cost of demolition. By the way, the parcel (8.5 acres) is awesome.

My issue is, there are NO comps for this. There are no similar comparables even assuming the house isn't in tear down condition. What I am thinking about doing is taking three comparables and subtracting all the improvements in the sales grid (i.e. not giving the subject's improvements any credit) and make an additional deduction for the demolition of the subject property. I have a good idea of the vacant site value, and I am going to discuss my vacant sales comparables.

What do you all think?

 

[Robert Dunkle]

Are there any VACANT land sales to use as comps? Just arrive at the value as vacant, deduct the cost to demolish, add any value for site improvements that will remain!!

 

[Ruben Ramon]

The REO lender requires improved comparables, no vacant land sales.

 

[CANative]

Comb through land sales more carefully. It's almost certain some of those will have a cabin, mobile, or tear down on them. Ask a few Realtors who specialize in land sales if they know of parcels with tear-down improvements that have sold.

 

[hastalavista]

Ruben-

If you are able to value the subject as vacant land only, there is one thing you may want to consider:
Based on your post, I assume that the house has significant foundation problems (2 feet below grade- is it "sinking"? Certainly, "leaning" toward one side implies this?). This could be due to-
A. Poor drainage and inadequate site/foundation work.
B. Soil/subterranean conditions that were not adequately discovered and addressed during construction.

Your problem is that you know the current improvement is unstable. You don't know what the cause of that instability is. If you assume that it is because of inadequate planning and site work, you may be right and the problem may be with the "improvement" and not "the site". However, if the site work and construction was considered "adequate" based on what was known (soil tests) of the site, then (IMO) it is the "site" that has the issue. If that is the case, this could significantly affect any value you put on it.

8.5 acres is a large site, and plenty of places to put a 3,500+/- improvement. Assuming that the existing improvement was located at what was perceived to be the optimal placement within the lot in terms of "appeal" (maybe a view amenity?), it could be now that placement at that location is no longer viable?
If your lot is level, or there are plenty of alternative placements positions that are no better or worse than the existing improvement location, maybe that isn't a concern, but it may be worth considering/commenting on in your report.

My point here is that you may have an extremely complex situation. Given the intended use of the assignment, and the requirements of your client, you may be able to use EAs or HCs to address some of these possibilities. But, you may also need to have the client obtain some additional reports/inspections from other providers (soil engineer, contractor, etc.) before you have enough information to determine if there is a problem with the site (which may affect the vacant land value) and not just the improvement's construction (which probably wouldn't affect the vacant land value).

Good luck!

 

[hastalavista]

The REO lender requires improved comparables, no vacant land sales.

Given your situation, that requirement may result in an unrelaible value (I said "unrealiable"- not "misleading").

 

[The Warrior Monk]

The REO lender requires improved comparables, no vacant land sales.

If the home is unliveable, unstable, and must be torn down, HBU is not "as improved," barring some value added due to the footprint.

If my interpretation of your post is correct, I believe that it would be inappropriate to compare this property to other improved properties, and would turn the assignment back to the lender.

Appraisers are the ones responsible for their work product, not the lender.

 

[Ruben Ramon]

If the home is unliveable, unstable, and must be torn down, HBU is not "as improved," barring some value added due to the footprint.

If my interpretation of your post is correct, I believe that it would be inappropriate to compare this property to other improved properties, and would turn the assignment back to the lender.

Appraisers are the ones responsible for their work product, not the lender.

It is not a lender, at least in the common sense. Its Fannie Mae. I do think that the propertywas in the wrong spot on the property. There are a lot of hills, and one was actually cut into to put the house into the spot its in now.

As said earlier, this only affects the reliability of the appraisal, not the accuracy. Removing the contribitary value of the improvements to determine land values is a common practice in my market where there are no vacant land sales.

There is another spot on the property that is naturally flat, a step on the property if you will. There, you won't have the hill pushing down on it.

Oh, I left out a small detail. The story is, and I can't confirm this, is that the house used to be a chicken coop. That may account for the imporper placing.

 

[CANative]

To paraphrase Mike Garrett: You can't make chicken soup out of a chicken coop.:icon_smile:

 

[Ruben Ramon]

Comb through land sales more carefully. It's almost certain some of those will have a cabin, mobile, or tear down on them. Ask a few Realtors who specialize in land sales if they know of parcels with tear-down improvements that have sold.

Even if they do exist, nothing like the 3400 square feet with a deck and inground pool with patio surround...and about 100 tires