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Why We Need To Read The Purchase Agreement

Discussion in 'General Appraisal Discussion' started by Chris Colston, Jul 28, 2005.

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  1. Chris Colston

    Chris Colston Elite Member

    0
    Jul 24, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    Florida
    I'm in the process of doing a condo conversion. I've had the order for awhile and have been asking for the purchase agreement. The property was originally a small apartment building (12 units) that was pretty much decimated during Hurricanes Frances and Jeanne. Now some investment firm out of Miami is going to convert the units to condo. I finally received the purchase agreement.....most of it is in very small print that I need a magnifying glass to read except this paragraph:

    Anybody know who would lend on THAT? I'm wondering if the lender read it or if they just rely on us to tell them. Oh yeah, and the closing is scheduled for a year from now...my value will be useless by then. Now I know why it took so long to get the contract.

    Would any of you touch this request? I'm thinking of sending this one back to the lender.
     
  2. TEL2002

    TEL2002 Elite Member

    2
    Jan 16, 2002
    Professional Status:
    Retired Appraiser
    State:
    Louisiana
    Just disclose. Why not do it. YOu have a guaranteed new assignment in a year.
     
  3. Pamela Crowley (Florida)

    Pamela Crowley (Florida) Elite Member

    3
    Jan 13, 2002
    Professional Status:
    Retired Appraiser
    State:
    Florida
    Hey Chris,

    Scope of Work and Hypothetical Condition!!!!!

    Plus, BIG fee!

    :rainfro:
     
  4. Chris Colston

    Chris Colston Elite Member

    0
    Jul 24, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    Florida
    There's no hypothetical...it's blatantly out there in the open...The roof does NOT comply to code requirements and WON'T be fixed.
     
  5. Randy Beigh

    Randy Beigh Senior Member

    0
    Jan 16, 2002
    Would I loan on it? Yes, absolutely. If I was a lender, lending is what I do. Now, the criteria changes for the additional risks involved. That could include larger down payment, higher interest rates, making sure I was in 1st position, and whatever I forgot.
     
  6. Carnivore

    Carnivore Elite Member

    0
    Jan 15, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    North Carolina
    Yes, You go ahead and loan on tha Randy because I wont without lots and lots of additional information from D3P's.

    hmmm, lets see roof was not properly installed. What could they mean by that?
    Do they mean the shingles? Do they mean the underlayment and shingles.

    Or

    Does this mean the Complete roof system? Yowser!!! Whooo hoooo! Lets see now, Hypothetical, 3 floors that means four units per floor translates into a guesstimated 4000 sft flat commercial grade roof. Hmmmm, whats the cost of that? Whats actually hidden underneath?

    Wonder what else does not meet code?
     
  7. Randy Beigh

    Randy Beigh Senior Member

    0
    Jan 16, 2002
    Andrew,

    It's all about risks. If you are being paid enough to take those risks, then life is good. This is not some conventional loan where the borrower will be paying 5% interest with 95% loan. If the interest is high enough(say 10%) and the down is 30%, the risks may be palatable to the lender.

    I worked for a company who was always analyzing the risk and judging the interest rate. The typical lender may decline this, but the question was would anyone touch this. The answer is an absolute yes. They used the HPC's for what they were meant to be used. :lol:
     
  8. Roger R. Patzold

    Roger R. Patzold Member

    0
    Jan 17, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    Virginia
    Why send it back? To let some skippy do it, not mention the roof problem, and let the investor get burned.

    Call the lender first and the:

    Do the appraisal;

    Make the necessary statements;

    Provide a cost to cure;

    Provide a value "as is" and a value "as repaired".

    Good Luck
     
  9. Chris Colston

    Chris Colston Elite Member

    0
    Jul 24, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    Florida
    Well here's another tid bit from the contract:

    I'm going to have to find out if this means the A/C for the common area, if any, or all of the central A/C for each unit. It is my experience that in most condos, each unit has it's own A/C system

    I'm also getting ready to ask for the budget and condo docs. I'm not sure either are ready or available yet.

    The lender has been informed. Actually I'm not sure who the lender will be, the client is that company with "Tree" in the name that supposedly "provides 4 companies to compete for your business".

    The whole thing is going to be "SUBJECT TO COMPLETION" anyway. There are contractors working there right now. As of last week there was no record of the 12 distinct units in the tax records, just one big apartment building. Today there are 12 separate units with brand new folio numbers. Two story, 6 units per floor, 884 sf, 1/1, selling for $284,000 (pre construction)!! Roof is mansard...flat tar/gravel/membrane.

    With no reserves, I can't wait to hear what the condo fees are going to be!

    My other question...who would buy one of these after reading this contract? The buyer I've got here is one of the principles in the investment holding firm that currently owns the building and is doing the conversion.

    Randy, I understand it's all about the risk, I'm just thinking the lenders in the TREE group don't take those kind of risks.
     
  10. Carnivore

    Carnivore Elite Member

    0
    Jan 15, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    North Carolina
    Chris,

    They will take the risk, just as soon as you putr your signature on the line. :p
     
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