Appraisal Podcasts

The following is from an email exchange I was following and with the author’s permission, I have reposted it here for you to review. Now that we have entered hurricane season again, let’s all hope that the lessons learned from Katrina won’t be needed this year. Liz thanks again for this story.

A couple of months ago Ken Verrett asked me what I’d learned about appraising post-Katrina.

“However, I have a favor to ask of you Liz! When you have time, could you post your thoughts on the impact of the storms and the recovery process as it relates to values, appraisal challenges, and any other areas you want to address?”

I told him I’d answer when I had a moment. Here are a few of the things I’ve learned.

The property vultures arrived along with the first wave of relief workers. Many people (especially senior citizens who (a) didn’t have a clue what their house was worth and/or (b) had already been through this once with Camille and were overwhelmed with the enormity of Katrina’s devastation) sold out at rock-bottom prices. One man offered me less-than-lot- value for my mother’s house. He said, “You don’t even have to pull that wet drywall and insulation out. I’ll take it off your hands right now, as-is.” Such a deal! NOT. A lot of people who had habitable housing sold their houses for triple their market value to people who had to have housing RIGHT THEN.

Sometime it was a construction company sending employees in to start bidding large commercial rebuilding contracts; other times there was a family member with medical needs who couldn’t live in a shelter or a camper; sometimes it was just a normal family who couldn’t stand living in a FEMA can-dominium ONE MORE MINUTE.
While FEMA seemed to stand for Federal Employees Missing in Action, the Red Cross and the National Guard did a fabulous job in those first few weeks. Now it’s the faith-based organizations that are doing all the work. UMCOR provided us what they call a “flood bucket.” It’s a 5-gallon bucket (useful for myriad tasks: sitting on, standing on, hauling things in, etc.) It arrived containing a pair of work gloves, a pair of rubber gloves, clothesline, a quart of Clorox, sponges, rags, dish soap, hand sanitizer, and toilet paper. At the almost-eleven- month mark, we still have hundreds of volunteers here every week. As of last month, our small church had housed over 5,500 volunteers, most of them in one-week shifts, working all day and sleeping on the church floor at night.
I’ve learned that the days of guesstimating the age of a house by the color of the bathroom tile or the date in the toilet tank are gone forever. When you’ve been Katrinaed, you pretty much replace everything. I’ve learned that Effective Age is difficult to explain when the property has been flooded-&-gutted. The slab and some framing, even the brick exterior, may be 35 years old (post-Camille) , but all systems (electrical, plumbing, HVAC) and finishes (flooring, walls, fixtures, cabinetry) are brand new. Some 150+ yr-old houses were lifted by the storm surge, moved back 10-20 feet, and dropped back down. If the foundation blocks didn’t punc ture the flooring, they can sometimes be lifted and set back on their piers. It’s rare, and unbelievable to watch.

I’ve learned that “gutted” can mean either the 4′ mark or the entire wall height. Drywall hung sideways (the 4′ way) will replace walls that were flooded to 3′ or less if the wet stuff was cut out in time.

I’ve learned that a secondary verification source for comparable sales is critical in this type market. “View from street” can be deceiving. Likewise, I will not do any exterior-only valuations. [One REO company] still orders these non-contact assignments for pre-foreclosure purposes. No thanks; I’ll pass on that liability.

I’ve learned that mold can grow on ANY surface and it’s a good idea to keep paper breathing masks on hand at all times, especially for REO’s. The moratorium on foreclosures is a farce. The borrower must still pay “reasonable carrying charges” (i.e.: the interest) during the amnesty period. For most folks, interest is the biggest chunk of their monthly payment. How are they going to make interest payments on an uninhabitable property while paying rent or a new mortgage on the house they’re now living in? Not bloody likely. Hence we’re seeing a lot of severely damaged, underinsured houses simply abandoned.

I’ve learned that living in a FEMA Palace forces one to buy the tiniest size available of every possible item. If you’re used to shopping at Sam’s Club or Costco, forgetaboutit! Did you know they make Tabasco in smaller-than- pint size? Of course the MRE’s all come with a teeny-tiny bottle of the stuff (4-5 drops?) but I had no idea you could buy it in 2-oz bottles in the grocery store.

I’ve learned that boarding windows with plywood on the outside doesn’t protect them from floating refrigerators or grand pianos being tossed about like bathtub toys inside the house. The lead in lead-glass windows is very soft when rammed with a dining table. Even if most of the glass is intact, the overall window is not salvageable.

I’ve learned that Marshall & Swift can’t keep up with building costs here. The program “2006 Gulf Coast Reconstruction Estimator” issues monthly cost updates. It’s more realistic.

I’ve learned that drywall from China, Europe, and South America is of equal quality to that produced in the U.S.; it does, however, cost 4 prices due to transportation.

I’ve learned that IRS rules for Casualty Loss call for one value before the disaster and another “after the market has stabilized.” The retrospective value (pre-storm) involves a lot of forensics even if I happened to have appraised the house before. Interior pictures, although not included in original reports, have proven invaluable. Post-storm values are harder.

When will the market stabilize? Or has it already? Most people are asking for before-&-after values of 8/28/05 and 8/30/05. I try to explain that “after” is not “the day after” for IRS purposes. (Note: I am not a tax accountant, nor do I play one on TV). The market plummeted immediately after the storm (bottom feeders preying on traumatized victims) and then experienced a huge run-up as people began getting insurance checks or other funds. Then values hit a plateau. Now, as more businesses come back online, they’re bringing employees back to town. All those people have to have places to live. That’s put us right back into a housing shortage.

Last, but maybe most important, I’ve learned that when a homeowner who’s been slabbed is standing in a pile of rubble pointing, saying “this was the bedroom, there was the living room. . .” and in their mind’s eye they’re seeing irreplaceable photos and family heirlooms, it’s OK to stand there in the debris and cry right along with them.

Liz Buchanan, reporting from Katrina country on day 321

Elizabeth L. Buchanan
Providing Value to the Mississippi Gulf Coast
Mailto:mailto:Liz%40BuchananAppraisals.com

This entry was posted on Friday, July 21st, 2006 at 8:52 pm and is filed under General, Single Family. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.