VA liquidation for house with no kitchen and no bathroom

[valuecommando]

Hi fellow Appraisers,
I'm appraising a house for the VA (single family residence) that was going to be remodeled yet the contractor failed to remodel the house. So the house had the entire kitchen and one bathroom ripped out which includes: all kitchen fixtures removed, sink removed, lower kitchen cabinets removed, countertops removed, kitchen/bath flooring removed, appliances removed, all bathroom fixtures removed, some insulation removed, and some drywall removed. All the plumbing and electrical connections are intact. The remaining 60 percent of the house is just fine and has functional bedrooms and bathrooms. Since this is a liquidation, is the house going to need everything in the state that it was prior, or the cheapest materials possible? Would you add an adjustment to the quality and condition, or just the quality or condition? Please let me know if I'm missing anything that you would include in the report because these liquidation reports have been commonly heavily reviewed. Thank you in advance!

 

[Zoe]

It is "subject to". No brainer. No condition adjustments necessary. You find good comps similar and do subject to. Find best comps you can similar to subject and subject to.

You can make condition adjustments then. Throw that ball right back on the lender.

 

[Zoe]

"as is" is different ballgame for VA. Same with any lender. As far as I know VA don't require both "as is" and "subject to". Most liquidation assignments are "as is"

The only avenue I can picture is if a vet is buying it where you would have to do subject to.

VA is your client. If lender is selling house and VA is your client, they want "as is".

 

[Zoe]

Liqidation means they are fixing taking the keys. They want "as is".

 

[valuecommando]

That's right, they want an "as is" appraisal.

 

[J Grant]

Hi fellow Appraisers,
I'm appraising a house for the VA (single family residence) that was going to be remodeled yet the contractor failed to remodel the house. So the house had the entire kitchen and one bathroom ripped out which includes: all kitchen fixtures removed, sink removed, lower kitchen cabinets removed, countertops removed, kitchen/bath flooring removed, appliances removed, all bathroom fixtures removed, some insulation removed, and some drywall removed. All the plumbing and electrical connections are intact. The remaining 60 percent of the house is just fine and has functional bedrooms and bathrooms. Since this is a liquidation, is the house going to need everything in the state that it was prior, or the cheapest materials possible? Would you add an adjustment to the quality and condition, or just the quality or condition? Please let me know if I'm missing anything that you would include in the report because these liquidation reports have been commonly heavily reviewed. Thank you in advance!

What do you mean by a "liquidation report, and "this is a liquidation"

Is the value sought market value, or liquidation value?

If the house is being valued " AS IS," the fact that it needs the kitchen and bath finished indicates the most likely buyer is an investor or speculator who might pay cash and expect a discount, and who will finish the kitchen and bath and resell the house for a profit. Similar conditn comps needing remodel or repair are usually the best comps since they would appeal to the same buyer.

 

[Zoe]

What do you mean by a "liquidation report, and "this is a liquidation"

Is the value sought market value, or liquidation value?

If the house is being valued " AS IS," the fact that it needs the kitchen and bath finished indicates the most likely buyer is an investor or speculator who might pay cash and expect a discount, and who will finish the kitchen and bath and resell the house for a profit. Similar conditn comps needing remodel or repair are usually the best comps since they would appeal to the same buyer.

You don't have to dramatize girlfriend. LOL

On the other hand, I do feel sorry for the Vet about to lose their home.

If Vet is buying? It changes the whole perspective.

 

[George Hatch]

If you're worried about how to get to the "as is" there are a couple ways to do that:

1) Look at the sales histories of remodeled homes that recently sold to find their acquisition price. You're looking for remodel flips where the property was acquired a few months prior, remodeled and subsequently resold at the higher price. Preferably for heavy remodels including all-new kitchens/baths. (resale - acquisition = discount for "as is"). Sales data rules. The flip properties don't have to be directly comparable to the subject because what you're looking for is the discount factor itself, not for a comp for your sales comparison. Although you might find a direct comp or two among a comparables dataset for a VA financed home.

2) estimate the cost to cure and multiply by 2 to identify the discount from remodeled that a contractor might apply to the "as completed" remodel condition. Hard costs for labor/materials are just part of the discount for "as is". Those buyers will also have to consider a cushion for contingencies, the cumulative holding costs during the remodel/flip and their own profit margin requirements (because nobody works for free).

Either way you will need to find sales that fit the "as completed" condition in order to get to the "as is". The actual discount factor may be more than or less than hard costs * 2; exactly where it will hit will depend on the market conditions for the remodels in the subject's market segment.

None of this analysis is difficult but you will need to get a handle on the costs to cure, and you will need to beat the bushes to identify several remodel flips that can be used to establish a pattern of buyer reactions and to support the discount factor that you are using. Time consuming, but not particularly difficult.

 

[Amy Perkins]

Maybe 25k and a hefty discount like 25% it depends on where it is

 

[sputnam]

Hi fellow Appraisers,
I'm appraising a house for the VA (single family residence) that was going to be remodeled yet the contractor failed to remodel the house. So the house had the entire kitchen and one bathroom ripped out which includes: all kitchen fixtures removed, sink removed, lower kitchen cabinets removed, countertops removed, kitchen/bath flooring removed, appliances removed, all bathroom fixtures removed, some insulation removed, and some drywall removed. All the plumbing and electrical connections are intact. The remaining 60 percent of the house is just fine and has functional bedrooms and bathrooms. Since this is a liquidation, is the house going to need everything in the state that it was prior, or the cheapest materials possible? Would you add an adjustment to the quality and condition, or just the quality or condition? Please let me know if I'm missing anything that you would include in the report because these liquidation reports have been commonly heavily reviewed. Thank you in advance!

It's a condition issue.