No Kitchen & Home Equity Line of Credit (HELOC)

Discussion in 'Urgent - Help Needed' started by Alisa, Mar 3, 2006.

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  1. Alisa

    Alisa Member

    0
    Jul 18, 2005
    Professional Status:
    Certified Residential Appraiser
    State:
    Texas
    New order today from a new customer...yea!! BUT the customer mentioned it is for a home equity line of credit. Now if I have ever done an appraisal for a HELOC then I didn't know...so now I am wondering is there a difference?

    I call the borrower and go through my questions and she happens to mention
    she doesn't have a kitchen. I get her to elaborate and she tells me it is
    gutted and that the HELOC is so she can remodel the kitchen.

    I tried to reach the client to discuss this but he wasn't available.

    So do I make this subject to completion??? Hard to do if the $$$ is for the
    kitchen....a Catch 22 for sure. I think it was stupid to gut the kitchen and then go for financing but hey, what do I know?

    Can I adjust for it or give some type of cost to cure? I've never had a house
    without a kitchen before. And how do I find a comp with no kitchen??? That
    seems next to impossible.

    Thanks in advance for the help!!

    Alisa
     
  2. Steve Wyrick

    Steve Wyrick Member

    0
    Aug 15, 2003
    Professional Status:
    Certified General Appraiser
    State:
    California
    Absolutly the worst possible place to be with an appraisal. The lender won't wnat it "subject to" with a follow up 442 if you do it "as is" the you are going to have cost to cure that is probably going to drop value where they can't get a loan.

    Maybe someone else can answer this, but "Is a house without a kitchen a house or just a building?"

    Definitly need to talk to lender, probably to head underwriter of the lenders company since many loan officer's are so new they won't understand the issues involved.

    Nasty, Nasty, Nasty. If you don't get answers in writing on your scope I would say bye-bye to this lender and assignment.

    Good luck.
     
  3. Ron Griffith

    Ron Griffith New Member

    0
    Jan 12, 2005
    Professional Status:
    Certified Residential Appraiser
    State:
    Florida
    I'm always suspicious of new clients that call out of the blue (if this is the case). Some are just fishing for someone to do what others won't (lie, inflate values, OVERLOOK MISSING KITCHENS!).

    I leave these situations up to the lender. I give them a choice of "Subject to installation" of new Kitchen or "As Is" with a deduction for the missing Kitchen.

    It's not your job to make loan decisions, just to report your findings. It's not your fault the homeowner ripped out the Kitchen either but there is a way to report your findings and place a value on the subject. I have found most lenders won't lend on this though. If the homeowner or loan officer doesn't like it then I refer them to the Golden Rule - He who has the gold (lender) makes the rules.

    I hope you collected your fee up front. Rule number one for new clients - Collect at the DOOR! At the least charge an inspection fee for your time.
     
  4. Lobo Fan

    Lobo Fan Elite Member

    0
    Nov 28, 2004
    Professional Status:
    Certified Residential Appraiser
    State:
    New Mexico
    I inspected one yesterday that is a classic. It is a non-code home down 5 miles of bad dirt road. I would call it 60% complete. Still open to the studs, and dirt floors through more than half the bottom floor. Unfinished plywood walls, an unfinished roof. A permit has never been pulled, a building inspector couldn't find the place. It gets better... no permanent heat source, just a wood stove, plus they cook on a wood burning stove. No utility electricity, solar powered with a pretty sophisticated battery set-up. No propane, the gas trucks can't get down their road.

    HEOC for B of A. The pisser is that the borrower told B of A exactly what was going on.

    Between the inspection and comp search, I have about 8 hours into this puppy already. Plus I burned about $50.00 worth of gas just gettinh there and back. Fixin' to call the AMC right now to break the bad news. It is for the one that wants fresh updates every two hours, so I will have a nice one for them this morning.

    A cost to cure will likely approach the value of the existing property. Making it subject-to means I will have to go out there again someday.
     
  5. Alisa

    Alisa Member

    0
    Jul 18, 2005
    Professional Status:
    Certified Residential Appraiser
    State:
    Texas
    Ron, normally I am suspicious also however I marketed this customer myself. I was sending flyers out and I have started calling each company first. I am still suspicious though.

    Luckily I have not yet "observed" the property. I am calling the LO this morning. I felt this was a rock and a hard place situation i.e., subject to or
    cost to cure or adjustments....

    And then there will be across the board adjustments for condition because I pulled the comps last night and none of them have "no kitchen".

    I think I like Steve's idea of talking to the head underwriter.

    Chuck, I am glad that isn't my house to do....
     
  6. Don Clark

    Don Clark Elite Member

    1
    Jan 17, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    Virginia
    Definition of residential

    The only place I have ever found for a definition of "residential" is in the IRS code. It states that for any property to be residential, not just real estate, but all property, it must have a place to wash & prepare food, a toilet, and a place to sleep. It is not a residential property without a kitchen. I would call for installation of a sink and a cooking stove as a minimum or an amount that would cure the cost of both items.
     
  7. Alisa

    Alisa Member

    0
    Jul 18, 2005
    Professional Status:
    Certified Residential Appraiser
    State:
    Texas
    Well, the order is on hold and I can't say I am overly upset. The LO claims he didn't know there was no kitchen, only that he knew it was to remodel the kitchen. I hope this is true.....

    OH, I asked the borrower how she cooked and she said she has a George Foreman and a toaster oven. Can't imagine how she does dishes.
     
  8. Mountain Man

    Mountain Man Elite Member

    0
    Jan 15, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Georgia
    Oh man... we lived in a house I was remodeling once, and will never again! Even with our move last week, we didn't move until it was complete. Nothing is worse than living without a kitchen or bath, and the fresh scent of sheetrock dust every afternoon.

    I bet your order gets cancelled. They'll call someone else for a drive by or run an AVM.
     
  9. Hal Mann

    Hal Mann Senior Member

    0
    Jan 19, 2005
    Professional Status:
    Certified General Appraiser
    State:
    New York
    Can you say paper plates?
     
  10. Lobo Fan

    Lobo Fan Elite Member

    0
    Nov 28, 2004
    Professional Status:
    Certified Residential Appraiser
    State:
    New Mexico
    I had another one on an FHA deal where there was no kitchen. They cooked on a wood stove or a Coleman camping stove. It turns out that FHA has no definition for a kitchen in a primary unit, but does for a granny unit. We ended up deciding it was what was expected in the marketplace. That was a four burner stove and an oven. Took forever to get that 442 cleared.
     
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