Appraising a "damaged" or "unfinished" property

**miamicuse** · 09-05-2009, 03:06 PM

If someone purchased a property originally intended to update and upgrade it and then flip it, then the real estate market bottom fell out and they ran out of money, so the property is in a gutted state with construction debris everywhere, then it goes into foreclosure and now is bank owned.

If we assume the property, if in good condition, based on comps would be worth 500k, how would this "half demolished" state of the property affect it's valuation?

Location is south Florida since I think this may be relevant information.

Thanks,

MC

**MinnesotaPropertiesOnline** · 09-05-2009, 05:42 PM

Are you asking what the property would appraise at AS-IS or based on completion of the "rehab" project?

If as-is then yes the "half demolished" state will affect the value.

If you are looking to get a construction loan to complete the home then a bank would send out an appraiser to evaluate the property as if completed. You will need a licensed contract to complete a construction sworn to submit to the bank and the appraiser will use this sworn to help them value the property as if completed.

**miamicuse** · 09-07-2009, 06:34 AM

I am asking it's as-is value, I am not concerned about it's future value after the rehab.

(1) If I hire an appraiser to determine the AS-IS value of the property today, how would this condition be accounted for into the appraisal.

and

(2) How would the property taxes be affected by this condition? Right now it is being taxed as if the property is in good condition, and it is not. I suppose I can request a visit by the county to assess it's current value?

**Greg** · 09-07-2009, 10:38 AM

The house is worth the after repairs value, minus the cost to fix it up.

You won't be able to get a conventional loan on this type of property.

**miamicuse** · 09-07-2009, 06:32 PM

Originally Posted by Greg

The house is worth the after repairs value, minus the cost to fix it up.

You won't be able to get a conventional loan on this type of property.

What is the problem with getting a conventional loan, as long as it's priced right? is the problem in appraising a property of such nature, or with the house being inhabitable?

**Greg** · 09-08-2009, 05:49 AM

Talk to some lenders.

**Nick Brian** · 09-08-2009, 11:43 AM

If I compare your property to a product which is in a manufacturing process. And now it's taken in between the process to final product it'd definitely be devalued. To lenders it's a relative issue. They normally don't like it for a conventional loan.

**tucsonhomes** · 09-08-2009, 12:00 PM

Originally Posted by miamicuse

What is the problem with getting a conventional loan, as long as it's priced right? is the problem in appraising a property of such nature, or with the house being inhabitable?

This is all so dependent on the specifics of you, the property, and the deal itself.

The specifics of the required repairs are important, your credit worthiness is important, the specifics of your loan (down payment, interest rate, term, etc) are all very important aspects of the contemplated transaction.

Do you have a real estate professional involved, and if so, what is their advise, and if not, simply based on your question, get one.