Appraising Fixer Uppers
Excerpts: We’re all familiar with the term “fixer-upper.” For many different reasons, properties can come on the market in less-than-par condition. The degree and cost to cure becomes an issue to buyers and sellers, and a challenge for appraisers. At some point it’s no longer “normal market value minus cost to cure equals as-is value.”
The terms “entrepreneurial incentive” and “entrepreneurial profit” are typically discussed in terms of investment property, but the principles involved can also be applied to the many fixer-uppers—whether the buyer is a “purely investor type” or an “owner occupied investor type.” Maybe a couple new terms should be discussed: “sweat equity incentive” and “sweat equity profit.”
The rest of the post is a very good case study
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My comments: I have appraised many fixer-uppers. My overall ratings are: Unlivable with holes in wall or ceiling, kitchen, and bath not functional, not lendable, etc. ) In my MLS “contractor special” is often used. Liveable: needs work but functional kitchen and bath.
Most of my appraisals are for estates, and fixers are relatively common. There are few comps as almost all homes are fixed up for sale. There are some good ideas in this post. Even if you have comps, there is often a very wide range of conditions.
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NOTE: Please scroll down to read the other topics in this long blog post on liability, appraisal errors, non-lender appraisals, Fannie non-appraisal options, unusual homes, mortgage origination stats, etc.
Posted in: adjustments, appraisal how to, Fannie, liability, non-lender appraisals
