What Happens When You’re Willing to Dig a Little Deeper – Extent of Research

This is Diana with ABC – The Appraiser’s Business Companion.  An interesting question came my way this past week from a local appraiser here in Lafayette, LA.  “Can you help me wrestle this problem?  I went to the property and found cracks and prior patch work.  I went inside and found carpet pulled from the interior of one of the rooms.  I pulled the prior listing some 8 years ago where the property was listed for a day with a disclosure of “some settlement”.  The house was pulled off the market one day after it was listed and it was purchased from the current owners for $30,000 below list price.  I contacted the lender and asked for the prior foundation reports, both were within a month prior to me arriving.  I can’t understand what the reports are saying as they detailed they’d given prior foundation work but the current situation, if remedied, cannot be completely cured for on-going impact of surrounding trees and the current work that is necessary will in all probability have impact on the remaining structure.  It also states that even with a repair the house will never be level.”

I actually went to the appraiser’s office and looked at the pictures, read both of the foundation reports and saw significant shifting in the exterior brick veneer of the 58-year-old dwelling.  I started asking questions, most of which were “unknown” in the response.  The appraiser stated, “this is all they sent me; to me they need to just bulldoze this puppy.”  “Hmmm, why do you say that? I asked.”  The response was, “if the foundation guy says this can’t be cured and on three different places in the report the notation was “the owner is aware of this incurable condition or aware of this need to address the outdoor trees sucking up all the water I don’t see why anyone would want this property.”  Another puzzling factor, the estimate to remedy the foundation issues on the 3,600 sq. ft. dwelling where cracking was significant on two exterior walls was only $11,000.  That seemed low to me given my experience on properties with such obvious bulges and significant cracks over 3/16”.

Having all of this information it lead me to asked about the reason for the appraisal engagement.  Low and behold there was a pending contract that represents a 65% increase in the pending price over the paid price some 8 years ago by the current owners.  The buyer is a grown, former military professional who fell in love with the quaint older town and the older house.  What would make someone see the outside shifting with such a positive response just 30 days of being placed on the market?  How could the exterior patch work and current, very obvious budging of the brick veneer, block shearing through the brick veneer go without any concern?  It wasn’t even mentioned in the contract.

I went back to the pictures where the interior was well maintained but nothing appeared remodeled.  I looked again at the pictures and zoomed in looking at the windows, the doors, the floor.  I asked another question, “Did you observe any interior cracks or stuck windows, stuck doors while you were there”?  After the appraiser answered “no” I made another comment, “Odd isn’t it, that with such significant shifting outside there was absolutely no evidence on the interior.  No fresh paint, no place where doors were uneven due to possible shaving.  Did you talk with the foundation specialist?’  Again, the answer was “no”, exhorting almost the unreasonableness of my question.  In the appraiser’s opinion the question didn’t stand a chance of being answered.  The appraiser was curt in their response; “why would the foundation specialist waste their time talking to me?”

I proceeded to give my input.  “In my opinion you have two choices, you have to decide first on the highest and best use, “as if vacant” and then “as improved in its current condition”.  The “as improved” in its current condition cannot be made without speaking directly to the foundation specialist, or at least attempting to.  They hold the answer to this problem.”

Another hour was spent on explaining in writing the complexity of this dilemma so that the lender could consider the difficulties and give some direction on how to proceed as there were two choices, either value the land with the consideration of the cost to raise the dwelling due to lack of any completed expert report or details about the comments made, or have a “one-on-one” with the foundation expert specifically asking the questions necessary to ask based on what you observed and what the reports stated with clear details about the future life of the improvement.  The appraiser thought I may have been a bit of a waste of their time and were hesitant as to making such clarifications to the lender.  “I’m going to do what you say but not until Monday.  I won’t be able to get them anyway.”

I got the call from the appraiser this morning who was pleasantly surprised that the foundation company and specifically the specialist who was at the property both in the previous restoration that was done and the more recent inspection just over a month ago.  He stated, “You have to understand the reason I can’t raise the area to equal the remainder of the dwelling is these two areas, which you saw were indicating substantial differential movement, were two separate additions to the house.  The house is solid.  There was some lousy patch work done to try and tie in the two additions to the exterior with uneven, amateur craftsmanship on applying the brick.  You have to understand, there’s a hardboard exterior outside the main house.  When the first carport enclosure was made there was an attempt to just brick the entire house including the addition.  The unevenness of the foundation is due to the additions that were added on two different occasions both being ten years apart (most recent addition about 15 years ago).  The fact that mature trees and shrubs are constantly sucking up the water from underneath the slab is most noticeable in the area of the two additions where in my opinion there was a “pour over” on top of the carport slab which was not sufficient support for the load of those two enclosed areas.  I can fix the dwelling in those two areas but not to the point where they will be exactly level with the main house.  The exterior brick is just a brick veneer issue where there was an attempt (poorly carried out) to create what appears to be a brick veneer original exterior.  The house is solid.  Did you notice there were no interior cracks or interior problems with the doors or windows?  My plan is to proceed repairing the foundation where it needs to occur in the two additions but with a clear warning that on-going shifting will continue if there is not a removal of the trees or at the very least a maintenance of the vegetation.  If this is done there is no reason to believe that house can’t survive for at least another 50 years”

Sometimes appraisers may think they know what the response or lack of response will be if they dig deeper so they just don’t try.  But in this case, the diligence to dig deeper into the situation now gave the appraiser exactly what they needed to proceed.

The appraiser can’t do anything about the expectation of a 65% appreciation over the past 8 years on a dwelling where no work was done to correct the shifting of those areas that were additions.  But now they have the information they need to explain the cause of the foundation failure, the cost to cure and the economics of the area to prove with and without cure the amount of change over the past 8 years and how that has impacted the subject property.  We may not want to dig deeper but digging deeper is what we need to do when we are presented with complex assignments.

This is Diana Jacob and you’ve just had a “tip of the week” from ABC-The Appraiser’s Business Companion.