Unadjusted values don't bracket the subject's value

[ZZGAMAZZ]

Appraisers also need to remember that market exposure, the DOM on MLS, and offered estimate is a key component of the market value opinion.

Look to see how long it takes problem child properties to investors in your area on the MLS. If normal, move-in ready houses are selling in 15-30 days, we might (for example ) see problem child and repair issue properties selling in 4 months (or not, whatever the time frame is). The pool for investor purchases, particularly for a more complex build issue like this can be far smaller than for owner-occupant purchases. A big repair or mold issue or part-finished house often can not get financed, which means only those with cash step up to buy, which limits the buyer pool and impacts the price

Of course, at a dirt cheap price, it would sell fast to an investor, but is dirt cheap the MV price...? It would sell in 10 days if very cheap, 8 months at a higher price, and in 3-4 months in a mid-range = so price according to your estimate of market exposure.

Interesting comment because the only reasonable, similar, partially-completed listing--which appears to be discounted more than 50% of its "Subject To / As Completed" value--has experienced more than five months of exposure in a market where 5 weeks is typical. I've been trying to track down that listing to determine how he established the list price, as a way to determine the "upper limit" concept discussed long ago on the AF, although I'm wondering if he established the list price scientifically, or just guessed at it.

 

[J Grant]

Interesting comment because the only reasonable, similar, partially-completed listing--which appears to be discounted more than 50% of its "Subject To / As Completed" value--has experienced more than five months of exposure in a market where 5 weeks is typical. I've been trying to track down that listing to determine how he established the list price, as a way to determine the "upper limit" concept discussed long ago on the AF, although I'm wondering if he established the list price scientifically, or just guessed at it.

compare trooubled properties in other areas and find a pattern. Longer marketing times is often typical unless they are offered at fire sale prices. They are not eligible for financing, and most owner-occupant buyers or even an average investor is not interested.

 

[ZZGAMAZZ]

You should probably start your own thread Zag.....you hijacked this one....

Yea, I realize it, but 1) Seems that almost every AF thread reminds me of a similar issue I had been meaning to ask about; and there have been soooo many times that I read a new thread thinking to myself "what a weird, atypical scenario"--which turns up in one of my new assignments within like 48 hours!!!; 2) the downside is that I reviewed a few comments yesterday but couldn't tell whether they were referring to the original post, or the stealth post !!!!!!!!

 

[Terrel L. Shields]

"what a weird, atypical scenario"-

After 31 years I still say that

 

[George Hatch]

I might get blasted for this comment, however: all AF responses seem to bode favorably for the client who presumably is seeking to strip the lien(s) on the property--although it is the inherent reason for the appraisal but not the "Intended Use" of the assignment, per se. [Being aware of the "real" reasons that assignments are ordered doesn't affect the appraiser's objectivity, or else few of us would ever be be declared as un-biased.]

IRL the lenders almost always lose a lot of money on these. If the buyers were to buy at (retail - cost to cure) with no further discounting for contingencies, holding costs or economic incentive, aka profit, the lender would still lose money. Just not as much money. And IRL no flipper or contractor is going to undertake the risks without expecting a commensurate reward. So that renders impossible any sentiment that "As Is" can equal (retail - costs)

I don't see any aspect of "bodes favorably for the lender" in these situations.

 

[alebrewer]

The term "the lowest spread between the numbers." Does that refer to the width of the adjusted value range?

It would seem to me... I'm not familiar with that term, but that seems logical.

 

[ZZGAMAZZ]

IRL the lenders almost always lose a lot of money on these. If the buyers were to buy at (retail - cost to cure) with no further discounting for contingencies, holding costs or economic incentive, aka profit, the lender would still lose money. Just not as much money. And IRL no flipper or contractor is going to undertake the risks without expecting a commensurate reward. So that renders impossible any sentiment that "As Is" can equal (retail - costs)

I don't see any aspect of "bodes favorably for the lender" in these situations.

I meant "bodes favorably for the client," who is the owner, who could receive favorable consideration from the court to strip away a mortgage if the discount-to-market negatively affects the Opinion of Value to the extent that the equity is less than the amout owed the loan (although the OV must be objective).

HOWEVER, I've been thinking about the AF's advice that I can legitimately determine buliding/renovation-factors. I am preparing to do so this morning, after I review various cost documents. HOWEVER, how will the BK Court respond if & when the builider who is owed so much $$$$ shows up in Court to contest the part of the appraisal in which my opinion of the percentage of completion is reported--seeing as how he easily could fabricate his firm's professional opinion basesd upon the intimate knowledge of the project, as well as the fact that I had tried to obtain his advice because I felt it was more valid than mine could be. Even if the difference between my opinion-based number and his knowledge-based number differs by, say, $25K, would/could it prompt the BK Judge to dismiss the results of my report? (Years ago a BK attorney told me that lenders never ever show up in court to contest a BK that involves a mortgage, although seems to me that BK;s must cost lenders millions of dollars during periods when markets are tanking)

 

[George Hatch]

Interesting comment because the only reasonable, similar, partially-completed listing--which appears to be discounted more than 50% of its "Subject To / As Completed" value--has experienced more than five months of exposure in a market where 5 weeks is typical. I've been trying to track down that listing to determine how he established the list price, as a way to determine the "upper limit" concept discussed long ago on the AF, although I'm wondering if he established the list price scientifically, or just guessed at it.

You keep referring to "partial construction' without explaining what stage the structure is in. "Partial" limited to a slab will probably sell for finished or previously improved lot value, or close to it. "Partial" amounting to 90% completion is going to sell a lot closer to "As Completed".

Another consideration for those buyers is what *they think* the pricing will look like at the end of their project. If this project is at 50% completion and it's going to take a minimum of 4 mo to complete the construction and market it to a buyer then what do they think the retail price will be at that point? Higher? Lower?

---------------------------
Whereabouts is this property located? 'Cause I did a partial construction on an SFR located up in one of the communities in the SB mountain area a couple years back. Slab + framing + some sheathing + septic + water/power at the street. My opinion of the "as complete" was $400k at the time, and it ended up selling for $125k. Much less than 1/2 the "as completed" value.

 

[Zephyr999]

I meant "bodes favorably for the client," who is the owner, who could receive favorable consideration from the court to strip away a mortgage if the discount-to-market negatively affects the Opinion of Value to the extent that the equity is less than the amout owed the loan (although the OV must be objective).

HOWEVER, I've been thinking about the AF's advice that I can legitimately determine buliding/renovation-factors. I am preparing to do so this morning, after I review various cost documents. HOWEVER, how will the BK Court respond if & when the builider who is owed so much $$$$ shows up in Court to contest the part of the appraisal in which my opinion of the percentage of completion is reported--seeing as how he easily could fabricate his firm's professional opinion basesd upon the intimate knowledge of the project, as well as the fact that I had tried to obtain his advice because I felt it was more valid than mine could be. Even if the difference between my opinion-based number and his knowledge-based number differs by, say, $25K, would/could it prompt the BK Judge to dismiss the results of my report? (Years ago a BK attorney told me that lenders never ever show up in court to contest a BK that involves a mortgage, although seems to me that BK;s must cost lenders millions of dollars during periods when markets are tanking)

His estimate would be from cost factors...since he has the builder breakout on what materials and labor costs.

Your estimate is an opinion of 'as-is' value with the cost approach developed 'as-if' complete solely to help derive an estimated deduction for properties that sold fully finished.

Do you have comps that sold similar to what the appraiser understands the final product will look like?

 

[ZZGAMAZZ]

You keep referring to "partial construction' without explaining what stage the structure is in. "Partial" limited to a slab will probably sell for finished or previously improved lot value, or close to it. "Partial" amounting to 90% completion is going to sell a lot closer to "As Completed".

Another consideration for those buyers is what *they think* the pricing will look like at the end of their project. If this project is at 50% completion and it's going to take a minimum of 4 mo to complete the construction and market it to a buyer then what do they think the retail price will be at that point? Higher? Lower?

---------------------------
Whereabouts is this property located? 'Cause I did a partial construction on an SFR located up in one of the communities in the SB mountain area a couple years back. Slab + framing + some sheathing + septic + water/power at the street. My opinion of the "as complete" was $400k at the time, and it ended up selling for $125k. Much less than 1/2 the "as completed" value.


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