Water Damaged Property

[Armando Castillo Jr.]

Fellow Appraisers

Need your opinions concerning a water damaged property that I'm appraising. According to the MLS remarks dated 08-05-03, water damage throughout the house, flooring needed. The property was listed for $75,900 and sold in August 03 for $72,000, cash. This property is now under contract for $110,000 and has new wall to wall carpet and vinyl floors in the kitchen and bathrooms. There is no evidence of water damage. The condition of the subfloor is unknown. The interior and exterior were painted. I will mention the water damaged remarks on my addendum. Do I need to insert a disclaimer? If so, how would you word the disclaimer. Great forum and great people.

Thanks, Armando

 

[Walter Kirk]

Armando,
Have you talked to the listing brokers to determine what the damage was? If the damage was cosmetic perhaps the seller bit the bullet and made the repairs. If you can't get the information that you need from the brokers you might consider checking with the building inspector to find out about any building permits. If you can't find any information make your report conditional upon proof of proper repairs of reported water damage.

 

[Francois K. Gregoire]

Armando,

You may wish to grab your copy of the USPAP, (2004 Edition), turn to page 233 and note the applicable references to Assumptions, Extraordinary (Extraordinary Assumptions) and pay particular attention to the definition of the term on page 3.

A similar example was discussed in a thread concerning orangeburg sewer lines. You can find the thread here......

http://appraisersforum.com/forum/index.php...=0&#entry124204

Good luck

 

[hal380]

Hi Armando:

In the comment section under the heading of "Comment on Recent Sale" I would state the following

The subject transferred on 8/5/03 for $72,000 it was noted in the MLS that there was some water damage to the subject at that time. The Appraiser is making the extraordinary assumption that repairs have been made.

Hope this helps. I try to keep it real simple and to "not know more than I do know"

Regards


Hal

 

[xm39hnu]

Remember that when appraising under an extraordinary assumption, you must:
1) State that you're doing so.
2) State the basis for the assumption
3) State what effect it will have on value.
I would word it something like this:

Subject transfeered on 8/5/03 for $72,000. The MLS noted that there was some water damage to the subject at that time. This appraisal is performed under the extraordinary assumption that all significant water damage has been repaired in a workmanlike manner according to construction requirements of local building codes. The basis for this assumption is that there was, at the time the appraiser inspected the property, no evidence of improper or incomplete repairs, and the structure appeared sound. The appraiser is not an expert in repairs or damage remediation. If a subsequent inspection by an expert discloses that the water damage remediation was not properly performed, the opinion of value expressed herein would be negatively affected substantially. The appraiser reserves the right to modify that opinion of value accordingly.

 

[hal380]

Hi Jim;

EXCELLENT POINT and thank you for the clarification.

Regards

Hal

 

[xm39hnu]

One other nasty little "gotcha" I've read about: Any time you mention the value in the report, say, in the cover letter or letter of transmittal, you have to mention that it's subject to an extraordinary assumption. Example:

"The report states that the final opinion of market value of the fee simple interest in the subject property is $325,000.00, subject to an extraordinary assumption that all repairs have been completed properly. Please read the comment addendum carefully for details."

 

[Armando Castillo Jr.]

Appraisers, thank you very much for taking the time to response to my water damaged property appraisal. Lee Ann I appreciated your email. I have another question. Once I indicate the appraisal is being performed under an extraoridinary assumption, is the appraisal a complete appraisal, summary written. Before I get hammer, I'm taking a USPAP course in February 2004.

Regards, Armando

 

[Restrain]

The assumptions do not change the type of report. It's either complete, limited or restricted. The report is either self-contained or a summary report. Extra-ordinary assumptions do not affect either type of report.

A 1004 is a complete, summary report. A narrative can be a complete report either in summary or self-contained format. A 2055 is a limited in summary format.

Hope this helps.

Now, as to your extraordinary assumptions. Be sure to include a mold/hazardous contamination disclaimer. You had water contamination. Just removing the floor coverings doesn't cut it. You have to open up the sheetrock up the walls, remove and replace insulation in the walls, etc. Also, check with your local insurance company and see if such a home can get insurance or if there's a significant premium hit. This happens here in Texas all the time and we have to consider it.

CYA, CYA, CYA.

Roger