Here is some information you should know about appraisals on damaged houses.
Market Value – “Subject to Completion of Repairs”:
Usually the client is going to need the appraiser to do an appraisal as if the damage did not exist. In other words give a “Repaired Value” instead of an “As Is” value. In Appraisal terms, the appraiser will use a “Hypothetical Condition” to appraise the property, which means the appraiser considers something as fact for the sake of analysis even though it is not true. In this case the house is considered to be in the condition it was in before the property was damaged, even though the home is obviously damaged.
The appraiser will do a physical inspection of the property documenting the current condition of the property and noting all items of damage. Part of the appraisal process will be estimating “cost of Repairs” The appraiser may rely upon other professionals for assistance such as a contractor or other repair experts or may make his own estimates utilizing cost manuals.
The appraiser will be trying to piece together information about what the house was like before the damage. So the appraiser will gather details about the house from a variety of sources like a physical inspection, Tax Records, the home owner, Birds-Eye View Maps, aerial views, old MLS listings and even talk to the neighbors. These sources are used to piece together the physical characteristics of home, equipping the appraiser with the ability to do an appraisal despite the damage.
Application of the appraisal process:
Now the appraiser is ready to apply traditional means of the appraisal process like gathering similar market sales of neighborhood homes for the sales comparison approach to value, land sales and reproduction cost data for the cost approach. Then the appraiser will be able to write the appraisal report and produce a creditable appraisal giving both an “As Is” and “Subject to Completion of Repairs” market value estimate.
Got a Question?
Do you have a question relating to real estate appraisals? We can help. Simply fill out the form below and we'll contact you with the answer, with no obligation to you. We guarantee your privacy.