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house with unfinished area above grade

Discussion in 'Urgent - Help Needed' started by FeeSimple, Oct 3, 2011.

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  1. FeeSimple

    FeeSimple Sophomore Member

    0
    Jun 9, 2009
    Professional Status:
    Certified Residential Appraiser
    State:
    Washington
    I have a house Im potentially appraising (havent started yet, dont even have an order.. but I've been getting questions about it).

    The house is 2 stories, newer construction, however the 2nd bath located upstairs is not sheetrocked, the fixtures are in, its insulted where it needs to be, plumbing and electrical are all done, just no 'finish' work.

    My first reaction is that it must be finished. I beleive thats a fannie mae requirement, all above grade square footage besides attic area must be complete.

    When questioned about this, that was my response, and they are questioning what my conditions will be for the report. I beleive it is my responsibility to absolutely disclose everything I'm aware of, and its even a requirement that I take photos of every bath anyway, but the realtor wants to know if I would be requiring this to be finished for the appraisal or not.

    I've heard several schools of though on this, the one that makes the most sense to me (please correct me if I'm wrong), is that it's not necessarily the appraisers job to require corrections of this nature, and I don't beleive this to be an adverse 'safety soundness or security' item. However it IS my job to disclose everything about the situation, and let the underwriter decide how they would like the situation handled.

    I will have to address the effects of marketability for only having 1 functional bath and make adjustments, or maybe Ill do a cost to cure for the finish work. By the way, the house is vacant, it's a short sale, currently held by the bank that supposedly is getting the purchase transaction though, so its suppose to be in-house 'so I was told'.

    Am I on the right track with this?
     
  2. Thomas Fiehler

    Thomas Fiehler Senior Member

    2
    Jun 2, 2003
    Professional Status:
    Certified General Appraiser
    State:
    Ohio
    The appraiser doesn't make the call to require it to be finished-the UW does. We report, they decide.
     
  3. SutnNC

    SutnNC Senior Member

    8
    Nov 5, 2008
    Professional Status:
    Certified Residential Appraiser
    State:
    North Carolina
    I don't think you're off track, just a bit of sorting needed. Some steps need to be taken right out of the gate I believe.

    A few road blocks (problems) that I see in this are:

    1- You will LIKELY have a "marketability issue" as is.

    2- You will likely have a "cost issue" as is (or even subject to).

    3- You may have a safety issue as is.

    You have heard this before but you have got to talk to the client and see what their expectations are- they're ordering the appraisal for their needs so nobody else (us) can really tell you exactly what you need to do until you understand what they are expecting of you. Follow their lead and develop your scope from there. If you cannot meet their expectations for whatever reason (being ethics and/or competency), then you should decline the assignment.

    My advise would be to let them know what you seem to already know and find out how they would like to proceed. Try and get yourself out of the box so to speak (which I find myself in as well all too often): there is no "one way" to do this assignment.

    Moving on-

    If you are not sure if this is "intended" to go to the secondary market, offer the General Purpose form. If they say no, then it's likely going to the secondary market. I don't do this to play games but it's a decent test. I don't know who your contact is however, it would not be unusual for some "contacts" to not know the details and inadvertently give you bad information on the intended user(s) (a little phone monkey directed sarcasm there).

    Being that it is a short sale, they MAY have a buyer (from what you mentioned), MAY be using the appraisal for the mortgage transaction as well and (in the condition that you have summarily described) it would not be unusual for a "subject to" appraisal to NOT be acceptable. This does not mean that you have to do an "AS IS" appraisal that hides the conditions that would likely lead to a "subject to" report given certain users and expectations.

    If they decide to proceed "as is," it does mean that you will be developing your report in a different manner with other market indicators/measures and [likely] costs to consider.

    They however, cannot have it both ways as I see it.

    I'm sure someone can add/take away from this but these are some of my first thoughts.
     
  4. NorthTexValuation

    NorthTexValuation Senior Member

    0
    Sep 17, 2011
    Professional Status:
    Certified Residential Appraiser
    State:
    Texas
    Why are you asking and answering questions and commenting on hypotheticals and extraordinary assumptions when there isn't even an appraisal assignment yet? Sure sounds like a waste of time to me.
     
    Last edited: Oct 3, 2011
  5. Restrain

    Restrain Elite Member

    19
    Jan 22, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Florida
    Your appraisal is for the client. Ask the client if they want it as is or subject to. In regards to the home being complete, this is a requirement for the loan to be sold to Fannie. Fannie is not the client. If the client wants it as is, I would suggest somewhere a cost to cure along with the market impact to support your condition adjustment.
     
  6. zdfenton

    zdfenton Junior Member

    2
    Nov 13, 2008
    Professional Status:
    Certified General Appraiser
    State:
    Wisconsin
    Fannie requiring all above grade areas being finished is a myth. Just like Fannie requiring all properties be at least average condition (a lot of secondary market investors require that but not Fannie). They only require repair for physical deficiencies that affect soundness, structural integrity, and livability. If you think the bathroom is a soundness, structural integrity, or livability issue condition for it. See the Seller's Guide section on condition B4-1.4-16

    https://www.efanniemae.com/sf/guides/ssg/sg/pdf/sel092711.pdf

    As to all the commenting about doing what the client wants, I may be wrong but it sounds like the client doesn't know what they want, and only want conformity to Fannie guidelines. In which case again just deal with soundness, structural integrity, and livability issues.
     
  7. Doug Wegener

    Doug Wegener Senior Member

    14
    Apr 14, 2005
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    Certificate of occupancy

    If there is a construction loan on the property and the appraisal is for permanent financing going to Fannie Mae, the lender will need a certificate of occupancy. Has a certificat of occupancy been issued. If not, it may become an issue.


    "The lender must retain in its individual loan file the appraiser’s certificate of completion and
    a photograph of the completed property. When a construction-to-permanent mortgage loan
    provides funds for the acquisition or refinancing of unimproved land and the construction of a residence on the land, the lender must retain a certificate of occupancy, or an equivalent form, from the applicable government authority."
     
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