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Appraisal Adjustments Marketability and Costs

by Bill Rigdon on Aug 13, 2015 Selling 327 Views

There are both appraisers and non-appraisers who think that if a building needs $ 50,000 in repairs that a value reduction of that same amount is appropriate to bring it back to market value.  There are times when that conclusion could be true but more often than not there will be a loss to an owner associated with marketability. 

You have to consider the fact that even $ 10,000 in repairs can takes months to "cure."  You have to realize that it's not just them money.  There is the, ordering, selecting of materials, scheduling and negotiating with; painters, plumbers, electricians, carpenters, flooring installers and a virtual army of others

If you haven't thought about how much time is lost and how inconvenient it is to have people in your home week after week then you haven't been around long enough to have gone through it.  It's miserable and you just can't relax while the work is being done.  Often you need people from three or more firms working at the same time, and it can get crazy.  It requires constant monitoring, you can't seriously work and have major work done on your home unless you work from home.  The time and effort of taking delivery of say tile flooring can take months.  Whatever you thought you wanted from a supplier or retailer it probably won't be available and if it is may take 60 days or more to get it.

Some people try to avert all of the pain related to repairs / replacements by paying a general contractor to deal with the purchasing and installation (parts and labor).  It's usually 20% of the total repair cost to escape it and you still have to deal with the inconvenience of having the repair / replacement crews around. 

So an appraiser looking at roofing repairs, cracked tile, water damage in the ceilings or walls or any number of other problems must consider not only the cost of the materials and labor to fix the problems but also the time, inconvenience and finally the reaction of a potential buyer who will have to deal with them if they buy.  All of those considerations taken together are the true loss associated with the property.

That's why having a cost manual to reference or having several contractor cost estimates is not sufficient for an appraiser.  It may be that you know that it will cost exactly $ 10,000 to fix a property problem, but that doesn't mean that the reduction in property value due to the problem or problems is $ 10,000.  In fact it is likely that buyers will expect a much larger reduction in price because they understand what it will take to have the problem or problems fixed.

If you are an appraiser and you want to explain your lager than hard dollar cost to repair or replace you may want to develop a cut-and-paste discussion of loss due to marketability and have it ready to place in your reports.

Bill Rigdon, ASA is a real estate appraiser located in Henderson Nevada doing business as W Rigdon Appraisal Service, he can be contacted at wrigdon@cox.net and his website is http://www.appraiserslasvegas.com

Article source: http://www.appraisalarticles.com/General-Real-Property-Topics/General-Real-Property-Topics/General-Real-Property-Topics/Selling///4566-Appraisal-Adjustment-Marketability-and-Costs.html

wrigdon

Bill Rigdon

Articles: 9 Contact author

Henderson based certified general appraisal

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