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Unfinished Addition

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David Bodtcher

Junior Member
Joined
Oct 18, 2002
Professional Status
Appraiser Trainee
State
Utah
Im appraising a home that is adding on a pretty big addition. The framework and outer walls are all finished, just needs the insulation, carpet, drywall, ect. done. do I appraise it "as is" with functional obsolescence as cost to cure or is it going to detract from the value?
 

Phil Rice

Member
Joined
Apr 22, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
I have done a few like this, here is my experience:

My client wants an "as is" value, so that is what I do. If you are not sure, ask your client if they prefer subject to completion.

I have never had any success finding comps with construction in progress. If you can find that kind of market data, then by all means, use it.

I do not check on or try to enforce building permits. I take extra photos and include them in the report. I do my best to disclose what things looked like at the inspection.

When I look at the house, I try to see the big picture, and ask myself, if this home was on the market, would the construction in progress add value, be negative, or neutral? As a general statement, at the begining of a project like this, the value is negative (my opinion), as they near completion of the construction the impact on value is positive (assuming they do a good job), and everything else is neutral.

Is the roof complete? What about electrical, plumbing, HVAC? Subfloor (plywood)? It sounds like you are near the end of the negative value phase and/or just moving into the neutral value phase of the project.

I make no effort to calculate or estimate the cost to finish the project. I include the new space in my sketch (dotted line) but I do not count any of the unfinished space in GLA. Try to determine what the house is worth without any construction, and make a statement that due to lack of market data, no adjustment is made.

In my limited experience, I have never made a positive adjustment for construction in progress, even though it might have had an indirect influence on my final opinion of value.

I have never had a question or problem with this approach.
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
Most of my clients want to know what the cost to cure would be, so that if they have to take this home back tommorrow, they've got an idea of the problem. Also, as to doing the home, there are two ways. First is the base home with contributory value for the addition "as is". The second is with the addition complete but reduced by the cost to complete along with market resistance in that they have to finish it. Either way, the home can be appraised "as is" as opposed to "subject to".

Roger
 

Bob Stainbrook

Sophomore Member
Joined
Jan 3, 2003
:usa: I also run into these a couple of times a month. Lenders usuall want the appraisal to be " as is " so I e-mail them with the condition of the home at the time of inspection and ask them how their underwriter wants the situation to be addressed. Most of the lenders have a specific percentage of : cost to cure " they'll allow. I have a couple good general contactor friends who will fax me a qoute to complete, based on my market and I'll include this with my addendum in the body of the report so the lender has a good idea if they were to foreclose on this home where thy're at in hard dollars.
 
W

walt kirk

Guest
Does your client know about the situation? Assuming that this is a refinance there is a good chance that the owner is trying to get funds to finish the addition. If that is the case consider appraising the house subject to completion per plans and specs.
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Why not give two values....."as is" and "subject to completion"???
 
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