12 Year old home with no permanent heat

Discussion in 'Fannie Mae, Freddie Mac, USPAP' started by Scott R Marshall, Jan 17, 2011.

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  1. Scott R Marshall

    Scott R Marshall Senior Member

    0
    Dec 14, 2006
    Professional Status:
    Certified Residential Appraiser
    State:
    New Mexico
    Okay I have a home with no permanent heat source. It is approximately 2500square feet with 1 non-thermostatically controlled pellet stove. When I asked the homeowner what is their heat source, they said the windows. I understand the requirements for heat for FHA/USDA, I do not know if Fannie/Freddie has a similar guideline in place or not. Are there such guidelines and if so, does the appraisal have to be made "subject to" or is a cost to cure adequate.
     
  2. Mike Kennedy

    Mike Kennedy Elite Member

    26
    Sep 28, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    New York
    Questions:

    Is there a Building ordinance with heating specs in effect? If so, does the BO require a Certificate of Completion/Compliance/Occupancy?

    Remote Location? Desert? Is it possible the house was built 12 years ago and the lot is still classified as a vacant, unimproved site?

    Is the lack of a heating system other than the "windows" common / typical in the local market?

    Governing Municipality?
     
  3. Scott R Marshall

    Scott R Marshall Senior Member

    0
    Dec 14, 2006
    Professional Status:
    Certified Residential Appraiser
    State:
    New Mexico
    Mike,


    I was going to look into all those items as well as I have always been under the impression that in order to get a C.O., it must be heated by something recognized as permanent. No permananet heating source would be considered very uncommon in the market in which the property is located but there may be a handful of similar properties. I attempted to locate the site by doing a preliminary search via the county's website but had no luck finding it (not a good sign). I will be calling tomorrow to verify whether the county knows its there although the location would not be considered remote, more like a suburban/rural hybrid.

    My real question was apart from all that necessary research are there any Fannie/Freddie rules in effect similar to FHA requiring permanent heat in plumbed areas?
     
  4. Mike Kennedy

    Mike Kennedy Elite Member

    26
    Sep 28, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    New York
    As-Is Condition of the Subject Property
    Fannie Mae permits appraisals to be based on the as-is condition of the property provided existing conditions are minor and do not affect the livability, soundness, or structural integrity of the property, and the appraiser’s opinion of value reflects the existence of these conditions. Minor conditions and deferred maintenance are typically due to normal wear and tear from the aging process and the occupancy of the property.
    Note: While such conditions generally do not rise to the level of a required repair, they must be reported.

    Examples of minor conditions and deferred maintenance include worn floor finishes or carpet, minor plumbing leaks, holes in window screens, or cracked window glass.


    Requirements for Existing Construction
    The tables below provide requirements related to existing properties that have physical deficiencies, minor conditions, or deferred maintenance items that may or may not affect the livability of the property.

    Requirements for Existing Construction When There are Minor Conditions or Deferred Maintenance Items that Do Not Affect the Livability, Soundness, or Structural Integrity of the Property

    Lenders must review the appraisal to ensure that the property does not have minor conditions or deferred maintenance items that affect livability, soundness, or structural integrity of the subject property. If the appraiser reports the existence of minor conditions or deferred maintenance items that do not affect the livability, soundness, or structural integrity of the property, the appraiser may complete the appraisal “as is” and these items must be reflected in the appraiser’s opinion of value.

    Minor conditions and deferred maintenance items include, but are not limited to, worn floor finishes or carpet, minor plumbing leaks, holes in window screens, or cracked window glass and are typically due to normal wear and tear. The lender is not required to ensure that the borrower has had this work completed prior to delivery of the loan to Fannie Mae.

    If there are minor conditions or deferred maintenance items to be remedied or completed after closing, the lender may escrow for these items at their own discretion and still deliver the loan to Fannie Mae prior to the release of the escrow as long as the lender can ensure that these items do not affect the livability, soundness, or structural integrity of the property.

    Requirements for Existing Construction When There are Incomplete Items or Conditions that Do Affect the Livability, Soundness, or Structural Integrity of the Property

    When there are incomplete items or conditions that do affect the livability, soundness, or structural integrity of the property, the property must be appraised subject to completion of the specific alterations or repairs. These items can include a partially completed addition or renovation, or physical deficiencies that could affect the soundness or structural integrity of the improvements, including but not limited to, cracks or settlement in the foundation, water seepage, active roof leaks, curled or cupped roof shingles, or inadequate electrical service or plumbing fixtures. In such cases, the lender must obtain a certificate of completion from the appraiser before the mortgage is delivered to Fannie Mae. Although the original appraiser should complete any required certification of completion, the lender may use a substitute appraiser.

    *IMO, if a permanent heating source is a muni requirement (i.e. Somewhere in New Mexico???) it would fall into the same category as elect/plumbing above


    Physical Deficiencies That Affect Soundness, Structural Integrity, and Livability of the Subject Property
    The appraisal report must identify and describe physical deficiencies that could affect a property’s soundness, structural integrity, or livability, or improvements that are incomplete.

    The property must be appraised subject to completion of the specific alterations or repairs.
    If the appraiser is not qualified to evaluate the alterations or repairs needed, the appraisal must identify and describe the deficiencies and the property must be appraised subject to a satisfactory inspection by a qualified professional.

    The appraisal may have to be revised based upon the results of the inspection. If so, the report must indicate the impact, if any, on the final opinion of value. The lender must review the revised appraisal report to ensure that no physical deficiencies or conditions that would affect the livability, soundness, or structural integrity of the property are
    indicated. The lender must ensure that material conditions are repaired before loan delivery. If a property has incomplete improvements, the alterations or repairs must be performed. The lender must obtain a completion report from an appraiser before loan delivery.
    Property Condition Disclosure to Borrower
    The lender must disclose all known property condition issues to the borrower so that the borrower may take necessary actions to address such issues.

    Printed copies may not be the most current version. For the most current version, go to the online version at
    http://www.efanniemae.com/sf/guides/ssg/. 531

    Highest and Best Use

    If the current improvements clearly do not represent the highest and best use of the site as an improved site, the appraiser must so indicate on the appraisal report. Fannie Mae will not purchase or securitize a mortgage that does not represent the highest and best use of the site.


     
    Last edited: Jan 17, 2011
  5. Terrel L. Shields

    Terrel L. Shields Elite Member

    62
    May 2, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Arkansas
    what's wrong with a pellet stove? Is that different from a propane, fuel oil, or coal furnace that has to be filled up periodically?
     
  6. Mike Garrett RAA

    Mike Garrett RAA Elite Member

    1
    Jan 14, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    Colorado
    I know that area and a pellet stove would not adequately heat a 2,500SF residence during the winter. Electric baseboard heaters are probably the least expensive and quickest method of providing a heat source.
     
  7. stefan olafson

    stefan olafson Senior Member

    0
    Apr 2, 2003
    Professional Status:
    Certified General Appraiser
    State:
    North Dakota
    Has the property been lived in for the past twelve years? If so, maybe the pellet stove is adequate? I appraised an older farmhouse, circa 1890 in ND once with a kerosene stove in the LR as the only heat source, the property was a 2 story with vents between floors which allowed the heat to rise to the second story. It was a VA loan so I called and was informed that if the heat source worked for the past 100+ years it was good enough for them.

    Check with the city/county to see if there is anything in their code on central heat, if not maybe the pellet stove is enough?
     
  8. Scott R Marshall

    Scott R Marshall Senior Member

    0
    Dec 14, 2006
    Professional Status:
    Certified Residential Appraiser
    State:
    New Mexico
    As for the adequacy of the pellet stove, as it is non-thermostatically controlled that would be my biggest issue. As a side note, some of the bedroom doors were closed and they were markedly cold although the remainder of the home was comfortable enough. This area can and does receive a moderate amount of snow for the area (moderate being probably 5 to 10 inches per year although can and does get more in particularly wet winters) and nighttime temperatures during the winter can drop into the single digits and although somewhat rare, daytime temperatures can remain below freezing .
     
  9. BOCK FOLKEN

    BOCK FOLKEN Member

    0
    Jun 22, 2005
    Professional Status:
    Certified Residential Appraiser
    State:
    Florida
    I tend to agree with Stefan. The local code will dictate which direction you take. Most areas, even rural ones, adopt national or state building codes (that typically reference national codes). Most of these require a central heating source. If the local code does not require it, then you are back to what the market expects. It sounds like Fannie will accept it if is not required by code, and acceptable to the market.

    FHA requires central heat in all but parts of south Florida.
     
  10. Walter Kirk

    Walter Kirk Senior Member

    3
    Jun 24, 2003
    Professional Status:
    Licensed Appraiser
    State:
    New Jersey
    Is the house designed for passive solar heat?
     
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