It’s always interesting to appraise properties with big condition issues. There are so many factors to consider and look for, but often properties in “poor” condition (as opposed to “fair” or “good”) include some of the following: severe neglect over the years for whatever reason, additions without permit (usually with shoddy workmanship), unfinished remodeling, water or moisture damage of some sort, debris throughout the site, wood decay, or some other obvious failure such as a caved roof or sagging foundation.
Appraising a “fixer” is similar to any other valuation in that it’s necessary to find comparable properties with the same or similar condition issues. In some areas that is easier to do than others. For example, a 2-bedroom cottage “fixer” is usually not hard to come by as a comp in the 95817 zip code of Sacramento, but a 2-story 3500 square foot ten year old Roseville ”fixer” is a little more challenging. When a house is only a decade old, it’s usually not already in the “fixer” category, right? But imagine if a property was heading toward foreclosure, and the owner (or a vandal) turned on all faucets and stopped up the drains for four days before anyone found out about the problem. Do you think there might be some serious damage throughout the house? Yes indeed. I appraised a property like this within the past year in a different city and it was definitely an interesting valuation situation because there weren’t any other “fixers” with water damage (or similar damage) in the subdivision where the subject property was located. That made things a bit interesting for me to say the least.
Usually “fixer” properties in “poor” condition are attractive to investors instead of first-time home buyers. Investors have two things that many first-time home buyers do not have: 1) Cash to purchase the property outright or cash to cover a significant portion well beyond 20% down. ”Fixers” often do not qualify for conventional financing, so they tend to sell on the lower end of the market where cash reigns supreme; 2) Investors also have cash to fix the property and rent it out or re-sell it on the market in “average” or “good” condition.
www.SacramentoAppraisalBlog.com Appraising Fixer-Type Properties
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