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  #41  
Old 04-27-2012, 12:23 PM
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Originally Posted by Denis DeSaix View Post
While I agree with much of the sentiment expressed by others (this could be an unacceptable assignment condition) I also have an alternative view that would allow (IMO) me to complete the assignment as "acceptable" with the conditions the client is asking for. And, I think this is another example where the pre-printed GSE form with its set "check boxes" muddy rather than clarify the waters.

The first item I consider is the use of an HC, and would such use be consistent with USPAP?
One of the qualifiers in using an HC is that it can be used for purposes of reasonable analysis; also required is that its use results in a credible analysis and that its use be clearly disclosed.

Next, I ask myself why would a lender want me to use an HC? Well, a legitimate reason (I think) is that the lender does not want to loan on a non-permitted garage conversion. That is well within its rights and it can have minimum property qualifications that exceed the GSE requirements. No harm, no foul there.

So, why would the lender (legitimately) want me to complete the appraisal and value it as-it-is-not if they are not going to loan on it as-it-is?

The answer (and this isn't just Denis' surmise, this has been told to me by senior decision-makers in large lending institutions) is that many lenders do not want to simply disqualify a loan if there is an alternative. What they would prefer to do is to go back to the borrower and offer them the loan under the conditions for which they (the lender) feel comfortable making. In cases like this, the lender might be very comfortable closing the loan if the garage were reconverted. Otherwise, it will pass on the loan.
Also, without having the appraisal describing what exists, the lender doesn't have anything "official" to hang-its-hat on for declining the loan. Rather than order two appraisals (the one, as-is, to tell the borrower they won't make the loan, and a second, as-is, if the borrower decides to make the changes required by the lender), they opt for one report that describes what is and what it will be worth if the changes are made. They can then make a lending decision and the borrower can then decide to either change or walk based on that lending decision.

What I have a concern with as an appraiser is making my reports "subject to" some alteration that the market doesn't require (or, that the basic GSE guidelines don't require as well). And, without having explicit instructions by the client as to why it wants the appraisal subject to an alteration that the market or GSE basic guidelines don't require, it appears that I (the appraiser) am the one making those demands. I do not put myself and will not be put into that position.

However, if I am given the instructions by the client and the reasons for the instructions, and am allowed to include those reasons in my report as the basis for doing what I did (making it subject-to), then I am less hesitant assuming that it meets all the other criteria.

Indeed, this does happen from time to time on assignments I have. A situation is discovered during the inspection that falls outside of the norm; I call my client and explain it to them and ask them how they want me to proceed. Sometimes their first response is something I won't do and I'll tell them why/wherefore. Sometimes their response is, "We won't loan as-is, but we will loan if the house is changed to X. Make the appraisal subject-to X and we'll provide the option to the borrower."
Denis: I understand. I can do that as long as I cite the reason why the report is being made subject-to; that it is your requirement, not mine.
Lender: Yes, please do.

Now, I understand that many times such conversations are not possible. I don't work for any AMCs, so I don't have to go through any middlemen to get guidance/instruction from my clients. And, my clients are such that none have ever told me I could not put such an instruction in my report (if they told me I could not, I wouldn't complete the assignment).

I also understand that such options could lead to abuse. If I thought my clients were trying to pull a fast one, I wouldn't do it. I'm fortunate in that I honestly believe none of my mortgage-lending clients try to pull such "fast ones".

So, as I describe the situation, I believe it could be done for the following reasons:
A. It fits the requirements for using an HC and is consistent with USPAP.
B. It is not contrary (as far as I know) to any GSE guidelines.
C. It clearly states the reason for the HC; it is not appraisal or market-driven but rather client-specific required to meet the client's property standards, and
D. I can understand the reason why the request is made, and I consider it a reasonable request given the intended use of the appraisal report.

Certainly there may be exceptions where the request would pass A, B, & C and I still may refuse to complete the assignment due to my own comfort level. Quite frankly, I haven't had that situation happen (I don't have many of these types of situations happen, but they have happened). And, the underlying premise in my alternative view is that there is nothing fraudulent or misleading going on.
I was hoping Denis would come by and make sense of what I was saying

Thanks Denis!!!

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  #42  
Old 04-27-2012, 12:24 PM
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Fine you win, Mr Rude. Despite the title, the language of your post sounded like it was based on a situation you once encountered, since you were so specific about the 3 garage bay and lender instructions etc.

Hypothetically, can you answer any of your own questions?
  #43  
Old 04-27-2012, 12:34 PM
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Originally Posted by J Grant View Post
Fine you win, Mr Rude. Despite the title, the language of your post sounded like it was based on a situation you once encountered, since you were so specific about the 3 garage bay and lender instructions etc.
I'll be Mr Rude if you'll be Ms Informed.
  #44  
Old 04-27-2012, 12:39 PM
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Too bad you couldn't have answered the question and maybe at least provided two examples, one with a garage door in place and one with it removed (both non permitted). You can discuss it hypothetically endlessly (and it has been discussed in hundreds of threads), but each time out, the appraiser will be looking at a different level of construction and change from original use.

Have a good weekend.
  #45  
Old 04-27-2012, 01:03 PM
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Quote:
Originally Posted by PropertyEconomics View Post
With all due seriousness ... who the hell is a GSE lender to tell me to modify my house when the market does not react negatively to the conversion I have completed?

The GSE Lender can go f themselves ...

I agree with the others ... it is an unacceptable assignment condition with a lender overstepping their bounds and making an incredibly stupid requirement of an appraiser that a borrower will not complete. Why is an "as is" value not acceptable if there is market support for the conclusion the conversion is not negative to the market? If the collateral value supports their lending decision they should make the loan. I think lenders are becoming big brother ...
I think the lenders are more concerned with "can the dwelling be rebuilt 100% to its current footprint?" They are just trying to make the subject fit the program. I don't agree with it. But, I think that is what is going on.
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  #46  
Old 04-27-2012, 07:47 PM
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Quote:
Originally Posted by J Grant View Post
Fine you win, Mr Rude. Despite the title, the language of your post sounded like it was based on a situation you once encountered, since you were so specific about the 3 garage bay and lender instructions etc.

Hypothetically, can you answer any of your own questions?

Geez why not discuss the theory instead of being all ******y about how you want the thread to go or how you wish the OP had been stated.

IT IS THEORY ... live with it or find another thread to bother in. Frankly I think this has been one of the better discussions on the topic until some came in demanding specifics ... we all get the specifics its the theory which Denis addressed very well.

Thanks Denis!
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  #47  
Old 04-27-2012, 07:51 PM
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Originally Posted by RSW View Post
I think the lenders are more concerned with "can the dwelling be rebuilt 100% to its current footprint?" They are just trying to make the subject fit the program. I don't agree with it. But, I think that is what is going on.

RSW .. I totally understand what you are saying, but this is the issue that has always perplexed me .... IF there is adequate insurance coverage then the lender is covered in case of the structures demise ... they are covered in my opinion.

To me its another silly lender requirement with no basis for being other than to limit lending, which if that is their intent fine ... I am just perplexed.
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  #48  
Old 04-27-2012, 08:11 PM
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Denis's post was excellent, addresses the points with common sense, theory, and practical application covered, well put!

Last edited by J Grant : 04-28-2012 at 08:31 AM.
  #49  
Old 04-28-2012, 08:45 AM
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I totally understand what you are saying, but this is the issue that has always perplexed me .... IF there is adequate insurance coverage then the lender is covered in case of the structures demise ... they are covered in my opinion.

From a lender point of view, the issue of concern might be, that even though there is an insurance policy on the home, if the policy has a clause that denies payout if the owner makes changes to the home that are non permited or not to code involving electrical, for example, and then the house burns down, the insurance claim might be deined.

Even though the market sees value in the non permited addition with the non permited electicral wiring, it is of concern to the lender.

It's the lender's money, and they can make whatever rules they want. Nobody is forcing a homeowner to borrow against their house.

The appraiser is the one who is vulnerable in these situations, because yes, the market is seeing value in the non permited addition, and the appraiser is reporting on value, but on the other hand, the client does have a concern about non permited additions and safety or zoning issues.

Should the appraiser follow the market, or his clients's needs, if the client need is contrary to market value evidence? Is there a way to satisfy both?

Imo, these issues can put appraisers in vulnerable positions.

Last edited by J Grant : 04-28-2012 at 09:00 AM.
  #50  
Old 04-28-2012, 08:51 AM
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Originally Posted by J Grant View Post
Imo, these issues can put appraisers in vulnerable positions.
Just want to double check and make sure we're not talking about Clearbox now...
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