A request for subject to appraisal.

[moh malekpour]

This is not an FHA appraisal or a new or under repair construction. This is a typical conventional loan that the agent has asked me to do the appraisal based on subject to upgrading the property because there is a recent sale in the market that was sold high due to its highly upgraded condition. If the subject gets similar upgrading, its value would be similar to that upgraded model match and the lender knows that. I know that subject to is a must for FHA and also for new construction or even old constructions that are under repair or upgrading at the time of appraisal but I never had any request like this and I am not sure it is a common practice or it is a trap, I would like to get any feed back or experience that you have on cases like this.
Thanks.
Moh

 

[Bemis Pownall]

#1 who is the "agent"? Realtor?

#2. what does your client want.

#3. What is the purpose of report. refie, divorce, death etc..

#4. Is it REO?

#5 how big a difference between as is and updated?

What I see happening..... you do it "subject to" then couple weeks later the UW wants it "as is" then sticking to your guns all heck breaks loose..everyone is yelling, they only care about value, not how you arrive at it.

Most refies and lenders want report as is..

If it were me Id do "as is".

 

[Pamela Crowley (Florida)]

Get a written list of the upgrades they intend to do and make it SUBJECT TO COMPLETION OF PROVIDED UPGRADES. Make sure you list those proposed upgrades in your report.

 

[bradellis]

Moh,

I have done many. No problem. Simply appraiser the subject as if the work has been completed per the plans and specs (yes- you do need them) and check the box :"subject to".

Two notes.

1. Do not let yourself get pressured into changing it into "as is". Some clients try to play this game. "Well the work is underway, and you KNOW it will be finished, so help us out". No can do. The basis for this request is the pricing of the mortgage. Construction loans cost more than straight up refis and carry many more requirements for the typical funding lender.

2. Do NOT forget to invoke a hypothetical conditin. You KNOW the work is not done, but they are asking for a value under the premise that it IS done. Not at all different form doing an appraisal on proposed construction.

Brad Ellis, IFA, RAA

 

[Jo Ann Meyer Stratton]

And I am sure you will remember that cost does not always improve value!!! Whether it is proposed construction with a change in upgrades or a remodeling project with big plans---the market might not support those costs.

 

[moh malekpour]

Thanks Brad for the advice. I know that the subject to is legitimate but I wonder why he is looking for that kind of appraisal. He is not my regular client and I have never done any work for him before. He found me on the Internet and called and asked me to do the appraisal based on subject to upgrade. I told him that the loan would not be closed unless he gets the 442 and he said he knew it. He calls himself a real estate advisor and he does real estate sale and loans. The property is a 25 years old SFR- PUD commonly known by agents as patio home with zero lot line located in a project with about 300 units with 2 or 3 different floor plans. They were originally built 25 years ago with wood shake roofs and some of them are currently upgraded with tile or composition roofs, new kitchen appliances, new carpets, and interior/exterior paint. The project is in Irvine where the market is hot and upgrading is marketable as the upgraded model match was sold 25k more than the subject, as is condition. The subject was a rental and is in below average condition. It needs new roof, carpet, new kitchen appliances, interior/exterior paint, possible plumbing repair, doors and termite treatment. I am going to itemize all those conditions in the report and appraise it subject to those conditions and make an assumption that it has been upgraded and let him to deal with it and I am going to tell him to call me for 442 reinspection when the upgrading is done.
I hope, I am not going to make some unworthy headaches for myself .
Moh

 

[Larry Lyke]

moh --

There's nothing unusual about the appraisal request. Just follow some basic good sense guidelines:

-Get paid upfront (front this stranger). Including the final inspection fee. It'll also be the "agent's" declaration of intent to follow through.

-Obtain plans and specs from agent. Do not prepare them yourself from verbal conversations. Otherwise, the "Change Orders" will drive you mad and he might slip you them after the initial appraisal and expect the fee to remain static.

-"Subject to" means all is well and done when you say it is!

 

[bradellis]

Moh,

The cool part is that you already have the upgraded model match so you know what the value will be upon completion. BTW, Larry gives you good advice about getting paid up front from this new client- you do not know him- and as you know, there are NO FLAKES in California!

Be careful, though. All fine and well that they are upgrading, but going from a wood shake roof to comp. shingle may or may not be adding a lot of value. Sometimes re-roofing merely protects value more than adding to value- but the market is so very hot right now it's amazing to see the prices buyers are willing to pay.

Good luck.

Brad Ellis, IFA, RAA

 

[Larry Lyke]

Be careful, though. All fine and well that they are upgrading, but going from a wood shake roof to comp. shingle may or may not be adding a lot of value. Sometimes re-roofing merely protects value more than adding to value...

Further to Brad's comment on the composition-shingle roof replacement in lieu of the wood-shake roof: The principle of substitution applies in the respect that the house has to have a roof, of course, but does the new roof add value. Insofar as the new roof has more appeal, it can usually be said that it adds value if the market says so.

My point can be taken to mean, changing the roof from a wholly satisfactory roof to a new wholly satisfactory roof can be a neutral substitution. Or, because the market fears fire, the new but cheaper roof may actually be more market-driven and appealing.

Every once in a while in my marketplace, I see an $250,000 Rambler with a hand-split-shake roof. In actual cost, the roof is 15% of the value of the house, but it's an undesirable roof in this clime what with its heavy snow-load, low pitching and ice damming.

 

[jtrotta]

Larry

True the pricipal of substitution applies and every house needs to have a roof; BUT - if the house has a 20 year old Roof, are we not suppose to comment :?: perhaps even provide a "cost ta cure" :?: to the LO;

I'll go out on a limb here if this 20 year old Roof looks "shaby" it'll be reflected in the Buyers offer, IF the Roof is new everyone will be promoting the "New Roof" - so your comment "it can usually be said that it adds value if the market "says so" - I think is an understatement. The cost of the Roof is similar to that of a remodeled Kitchen -what I mean is, you can buy $10,000 cabs & counters; But you can also buy $4,000 cabs & counters, which one do you think will provide the best Return for the money Ventured :?:

Me casa, u casa, where do we go for pasta :lol:

8)