Conditionally Speaking…

Why do appraisers use alphanumeric Condition Ratings like C4 and C3?  Why not just say “Average” or “Good”?

Well, the long answer to that is there is now a thing called the Uniform Appraisal Dataset (UAD).  It’s been around since 2011. It standardized the way appraisers classify the appraisal data. It was basically implemented as a way for Freddie Mac and Fannie Mae to data-mine information from appraisal reports.  But that’s a discussion for another day.

One of the bi-products of the UAD is the Condition Rating system.  It consists of classes ranging from C1 – C6 that rate a property’s overall condition.  The thought being that a property will fit neatly into one of these categories and that condition is an absolute.  Prior to the UAD appraisers would classify condition using more subjective terms such as “Good”, “Average”, “Fair” and “Poor”.  Granted, the definition of these terms varied from appraiser to appraiser and report to report, which wasn’t always ideal.

The uniformity created by the UAD is a good thing.  It basically levels the playing field and has all appraisers speaking the same “language”.  Unfortunately, the rest of the real estate industry has not adopted the Condition Rating system developed by the UAD.  Real estate agents, homeowners and others involved in real estate still use the old “Good”, “Average”, “Fair” and “Poor” method of describing condition.

As a real estate professional, it’s worth getting to know the appraiser’s language when it comes to rating the condition of a property.  Imagine showing up at an appraisal appointment and saying to the appraiser, “Hey, I’ve pulled some sales for you and they are all in C3 condition, like the subject.”  From an appraiser’s point of view, your credibility just shot up and I’m going to look over your sales data more seriously.  You may even want to start using the UAD condition ratings in your property descriptions.

Understanding the UAD Condition Rating system isn’t hard.  Here is a rundown of the classifications and the criteria for each of those classes.  When you read through them you’ll see that they are pretty cut-and-dry, and that a property will typically fall nicely into one of these ratings.

C1 – The improvements have been very recently constructed and have not previously been occupied. The entire structure and all components are new and the dwelling features no physical depreciation.

Note: Newly constructed improvements that feature recycled materials and/or components can be considered new dwellings provided that the dwelling is placed on a 100 percent new foundation and the recycled materials and the recycled components have been rehabilitated/re-manufactured into like-new condition. Improvements that have not been previously occupied are not considered “new” if they have any significant physical depreciation (that is, newly constructed dwellings that have been vacant for an extended period of time without adequate maintenance or upkeep).

C2 – The improvements feature no deferred maintenance, little or no physical depreciation, and require no repairs. Virtually all building components are new or have been recently repaired, refinished, or rehabilitated. All outdated components and finishes have been updated and/or replaced with components that meet current standards. Dwellings in this category either are almost new or have been recently completely renovated and are similar in condition to new construction.

Note: The improvements represent a relatively new property that is well-maintained with no deferred maintenance and little or no physical depreciation, or an older property that has been recently completely renovated.

C3 – The improvements are well-maintained and feature limited physical depreciation due to normal wear and tear. Some components, but not every major building component, may be updated or recently rehabilitated. The structure has been well-maintained.

Note: The improvement is in its first-cycle of replacing short-lived building components (appliances, floor coverings, HVAC, etc.) and is being well– maintained. Its estimated effective age is less than its actual age. It also may reflect a property in which the majority of short-lived building components have been replaced but not to the level of a complete renovation.

C4 – The improvements feature some minor deferred maintenance and physical deterioration due to normal wear and tear. The dwelling has been adequately maintained and requires only minimal repairs to building components/mechanical systems and cosmetic repairs. All major building components have been adequately maintained and are functionally adequate.

Note: The estimated effective age may be close to or equal to its actual age. It reflects a property in which some of the short-lived building components have been replaced, and some short-lived building components are at or near the end of their physical life expectancy; however, they still function adequately. Most minor repairs have been addressed on an ongoing basis resulting in an adequately maintained property.

C5 – The improvements feature obvious deferred maintenance and are in need of some significant repairs. Some building components need repairs, rehabilitation, or updating. The functional utility and overall livability are somewhat diminished due to condition, but the dwelling remains useable and functional as a residence.

Note: Some significant repairs are needed to the improvements due to the lack of adequate maintenance. It reflects a property in which many of its short-lived building components are at the end of or have exceeded their physical life expectancy, but remain functional.

C6 – The improvements have substantial damage or deferred maintenance with deficiencies or defects that are severe enough to affect the safety, soundness, or structural integrity of the improvements. The improvements are in need of substantial repairs and rehabilitation, including many or most major components.

Note: Substantial repairs are needed to the improvements due to the lack of adequate maintenance or property damage. It reflects a property with conditions severe enough to affect the safety, soundness, or structural integrity of the improvements.

If you have any questions about Condition Ratings or any other appraisal related matter, please feel free to contact us by phone, email or by visiting our FaceBook page.

The Coyle Group’s team of Philadelphia Real Estate Appraisers are a leading provider of appraisals for Estate/Probate, Divorce, Bankruptcy, Tax Appeal and Pre-Listing. If you need a guest speaker at your next sales meeting, please give us a call. We would welcome to opportunity to speak to your group and field any appraisal related questions you may have. For more information please visit our website at www.TheCoyleGroupLLC.com You can also contact The Coyle Group at 215-836-5500 or appraisals@coyleappraisals.com

 

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Comments

  1. Thank you for sharing. The C ratings are here to stay, we might as well embrace it.

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