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standing water (damage) during original inspection

Discussion in 'Urgent - Help Needed' started by metrowideMN, Oct 24, 2011.

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  1. metrowideMN

    metrowideMN Sophomore Member

    0
    Oct 28, 2005
    Professional Status:
    Certified Residential Appraiser
    State:
    Minnesota
    When inspecting the subject (REO) a couple weeks ago, I found standing water on the kitchen floor which was leaking into the finished den below. Advised the borrower's lender and was told to put it on hold - the bank was going to make repairs.

    Fast forward to today where the borrower's lender contacted me and said the repairs have been made and it looks like nothing ever happened. I will be going back out to re-inspect the subject this week.

    So my question is: what would you state in the report regarding the findings during the original inspection?
     
  2. miktay

    miktay Junior Member
    Supporting Member

    34
    Jul 3, 2007
    Professional Status:
    Certified Residential Appraiser
    State:
    Texas
    Disclose everything you know. Did you get photos of the water the first time out?
    Include them with new photos of the same scene. Then include photos of any known repairs. Then disclose more.
     
  3. metrowideMN

    metrowideMN Sophomore Member

    0
    Oct 28, 2005
    Professional Status:
    Certified Residential Appraiser
    State:
    Minnesota
    Yes I do have photos of the water from the initial inspection.

    This was my initial reaction, but was told by the borrower's lender that if Fannie or Freddie sees the mention of water damage they'll kill the deal. Not that I should hide the fact, just sayin'....
     
  4. NorthTexValuation

    NorthTexValuation Senior Member

    0
    Sep 17, 2011
    Professional Status:
    Certified Residential Appraiser
    State:
    Texas
    Killing or making a deal is not your concern.

    Reporting what you observed during both inspections, and your requirements for mitigating the water damage is your responsibity.

    It would be a very bad move for you to take out the mention of prior water damage and simply comment, it looks good today. You cannot simply remove prior condition comments no matter what current condition is. Same would apply to a house that had a fire two years ago that you were aware of that now has been completely repaired. You still should report prior damage if you have knowledge. Report, report, report....
     
  5. vanguard

    vanguard Member

    0
    Oct 18, 2004
    Professional Status:
    Retired Appraiser
    State:
    Minnesota
    Did the client ask you to complete an REO addendum? If they did then a cost-to-cure for rental of a commercial dehumidifier should have been included in your repair estimate. Apparently the client believes the standing water may have been a hazard. I assume if electric service was active then electrocution is a possibility. Hopefully the property has been winterized and the water turned off. Any type of water damage has traditionally been a precursor to mold.
     
    Last edited: Oct 24, 2011
  6. vanguard

    vanguard Member

    0
    Oct 18, 2004
    Professional Status:
    Retired Appraiser
    State:
    Minnesota
    In addition, a significant number of cities in Minnesota require a truth-in-housing/point-of-sale inspections. The water should have been disclosed on the inspection report. The buyer as well as the lender are supposed to examine the inspection report. Was this a contingency on the purchase agreement or was the water not present when the required inspection was completed?
     
  7. Mile High Trout

    Mile High Trout Elite Member

    51
    Feb 13, 2008
    Professional Status:
    Certified Residential Appraiser
    State:
    Colorado
    Looks like you should check the validity of that position.

    Fannie loans on repaired or cost to cure properties right? I mean they don't only loan on new houses.

    Cost to cure should have been established and this should have been included.
    Additionally to that point: The repairs have a partial improvement influence which offsets other damages in the market value opinion, if even slightly.

    "The appraiser had observed standing water and then informed the lender of that. On the following dates, the lender stated to have repaired such condition. The following work order receipt of completion of repair is attached within the report. The influence of the fixed condition is a minor benefit to the subject's state of condition and necessary repairs, although the repairs noted in the REO addenda are still considered to be influencing the subject's comparable selection and market valuation analysis, having a cost to cure total of $x dollars.

    Just made that up, but something like that right? If a lending client is expecting every REO HOME to be in AVERAGE OR BETTER condition, I'd say those are not very realistic expectations. The point of cost to cure is so the lender, and potential buyer know very clearly what it will take to bring the home up to minimal habitable and market standards. Where is the lender coming from stating that an appraiser cannot mention damage in an REO report? Perhaps you should double check your informational source and get clarification from the next guy up the ladder or something.

    I mean think carefully about what is being stated in this scenario. The LENDER who OWNS the LENDER OWNED REO (REAL ESTATE OWNED) property is stating FANNIE will not lend on a damaged property. Who is FANNIE going to LEND the PROPERTY too? The LENDER whom is CURRENTLY IN POSESSION of the property? I'm not following the logic with the lenders request. (Not shouting, just trying to be text schnazzy for effect.)

    Great questions - intriguing but possibly rooted in a mentality better suited for a mortgage banker who deals primarily with refi's? The MB appears concerned with selling the package again on the secondary market. Any other more knowledgeable appraisers who can continue that line of thought regarding the nuances of an REO being viable in a transfer situation, and how that consumer chain of activity plays out? That's an interesting topic which may be a root topic regarding this thread.

    Funny: http://www.youtube.com/watch?v=umkaDyjyIis&feature=related (One does not simply rock into average condition - HA!)
     
    Last edited: Oct 25, 2011
  8. vanguard

    vanguard Member

    0
    Oct 18, 2004
    Professional Status:
    Retired Appraiser
    State:
    Minnesota
    Due to the incongruity between Fannie/Freddie REO guidelines and the lenders concern, I would suggest that you ask the lender to e-mail you a direct statement from Fannie Mae reguarding the water issue if for no other reason than lender transparency. I would contact the person at Fannie Mae that supposedly issued this statement. This could possibly be construed as an attempt to influence the appraiser. I would put the response in your work file for future reference.
     
  9. metrowideMN

    metrowideMN Sophomore Member

    0
    Oct 28, 2005
    Professional Status:
    Certified Residential Appraiser
    State:
    Minnesota
    The LO was telling me he thought it might kill the deal, but he's not the underwriter and didn't know for sure. I've worked with this company for years and know he was definitely NOT trying to influence me. Plus nearly all communication is done via email, which I have saved on my server (and backups).

    An REO addendum wasn't requested, and this is in Rosemount which doesn't require a truth in housing inspection. Even if it was in a city that required it the leak & damage occurred shortly before my appraisal inspection, which was 60+ after the home went on the market.

    **** happens with foreclosures - a lot of the times we see it and sometimes we don't. I was 99% sure how I was going to handle this situation, just wanted a 2nd opinion.

    Thanks for the input everyone
     
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