Ask Henry

As-Is Appraisal with Cost to Cure

Dear H2,

Is it acceptable to complete a URAR form 1004 "As-is" and also give a cost to cure? I appraised a house that had water stains on the ceilings and walls due to a prior roof leak which has been repaired. I gave a cost to cure of $8,000 to replace the damaged drywall and have the walls and ceiling repaired and replastered. But I did not call for this to be a condition of the appraisal; it was merely a "heads up" to the lender that there were water stains, etc. My exact wording was as follows:

"The subject property was in good exterior physical condition; the subject's roof is 5 years old and had leaked onto some of the interior 2nd floor walls prior to replacement according to family members of the owner. As a result the interior walls show signs of old water staining, peeling paint, and cracks in plaster (see photos). This is seen as cosmetic deferred maintenance in nature; repair is not called for, but the cost to cure is estimated at $8,000."

Is this proper or is it a conflict of statements?

Al Benjamin

Dear Al,

As long as your appraisal is clearly the value of the property in "as is" condition, there should be no problem. The problem occurs when it is implied in the wording somewhere that the value of the property when cured is the "as is" value plus the cost to cure. The cost to cure and the increased value of what is "cured" are not directly related. The market may recognize only a fraction of the cost to cure in a subsequent purchase -- or none at all.