Another Foundation'problem'

[Farm Gal]

Collective experience/wisdom:
We have a nearly identical situation just rise up and bite us: I am going to quote Jim... as it is faster than retyping...

The only difference in our scenario is that this Ya-hoo managed to lay 2x4's across what was (assumption on our part) an existing {but possibly damaged} slab foundation. Not other reason in the world I can conceive of for doing what he did?!?!?

~~~~~
Like Jim, we have no legal reason why the house could not be built as such: the local market itself would recognize no value difference, and it meets the all important 'pretty' factor! That top 1/64" of value that means so much

Anyone know of any specific cases of Fannie reject?
I have no specific proof that Fannie will not accept this property

(of course this one is starting out as an FHA <_< no problem there: automatic reject!)

I agree that this forum is a incredible resource: so wisdom of many please HELP!!!

Jim's post

Originally posted by Jim Plante@Aug 7 2003, 08:03 AM
There's no county zoning; city zoning concerns itself only with land use; there's no local building code. City building permit costs $10; building inspector is a fee collector. If he knows anything about building codes, he keeps it carefully concealed. AFAIK, there's no legal reason that the house cannot be built as it is.

The remainder of the house is of average construction with many above-average features, especially inside.

...snip...It cannot be affirmatively shown that our market of rednecks pays any attention to such matters; they'd pay the same for this house as they would for one with a proper foundation.

But this foundation is defective, and I know it. Despite the fact that rednecks in the market don't know any better, I must deduct for low-grade construction of the foundation some way or another. Morally and professionally, I can't do otherwise. But this condition isn't deferred maintenance; there's no settlement or cracking. Somehow functional obsolescence is a square peg in a round hole.

And like Jim we have no exact knowledge that fannie WON'T lend on it!
DOES ANYONE HAVE ANY DIRECT FANNIE FEEDBACK ON THIS SORT OF THING?!?!?!?

There is not a darn thing in the Fannie guide (other than one weaselword sentence about atypical construction) to help a poor appraiser out!

 

[Patrick Egger]

Lee Ann ...

Local juristictions may not have adopted specific building codes but generally the state will have and hence the local is subject to, at minimum, what's been adopted by the state.

I would check the state website/legislature for what might have been adopted as a minimum requirement by the state at some point in the past.

Not a FNMA reg, but you could hang you hat on the state requirements.

 

[Farm Gal]

Patrick:

Good thought but we have many areas where there are signs indicating 'building permit required'...
(implication that the neighboring area does NOT need permits)
and to the best of my knowlege all decisions of such nature are local jurisdictional issues.

SO (despite the fact that I am going to check to see if maybe something has changed at teh State level...)

we still have what is undeniably a problem, but cannot determine other than by heresay that Fannie will/won't accept this house in a traditional lending path!

And I am a little skeptical as to how mmuch attention lenders are paying to this type of issue, as I knw of two or three pre-76 "trouses" that have sold lately, purportedly to Fannie lenders .

 

[Mountain Man]

Lee Ann, I don't know if Fannie really cares....... as long as it doesn't effect marketability. But then, there in lies my problem with the situation. Like I posted in Jim's string... the "Knowledgeable buyer" (not the ignorant redneck) would expect it to be fixed, or else.

 

[Patrick Egger]

OK … let’s look at this from another point of view. The object I believe is to point out the potential foundation problem and to CYA in the process. Why not use an extra-ordinary assumption. If neighboring areas are posting signs “building permit required” it would seem to me that people are becoming aware of the need for permits, construction standards, etc.

If this is in fact a trend, is it reasonable to assume that it will continue and as it does, increase the awareness of the populace as to the potential problems of un-permitted construction and in doing so, create the perception that the subject (with it’s lack of permits and obvious problem) is below standards and hence potentially impact the marketability and long term security expectation of the client?

It would seem to me that although the market may not be totally focused on the lower quality of construction of the subject and other sales in the area, that as an appraiser, you still have to report on trends and advise the client appropriately.

As such, the comps are the comps and they will provide you with the value, provided they have same/similar conditions and or the subject is market acceptable as built. Your task is to report that value and provide the client with an understanding of the market environment and trends that affect the subject.

I would value the subject and use the EO, posting it prominently as required within the report. In doing so you have clearly let the client know what they need to know to underwrite the potential risk.

 

[JSmith43]

Are the 2x4's treated wood?

 

[JSmith43]

Here's what I'm getting at: If a person really wants to install hardwood flooring over concrete, that's the way it is done. The concrete is sealed, a vapor barrier is installed (6 mil+ poly overlapped, possibly embedded in asphalt mastic) & either 2x4 treated wood sleepers are installed for a nailing surface or the proper grade plywood.

Slab on grade OK; below grade is seriously frowned upon. Moisture test with rubber mat on the dampest day before deciding the installation is prudent. If puddled water forms under the mat, forget it! It might be kind of dumb to do this in a termite area, don't know as I am in MN. Do termites like treated wood? MMMM, guess so??

 

[Farm Gal]

The rest of the story: the rush "someone messed up order" seems to have been assigned to three other local appraisers before us... DUH ... wonder why they were all 'too busy' to finish it.

~~~
Re the above: in order of appearance...

Most of the buyers ARE ignorant, redneck or not...
and some of the ignorant strongly resemble that 'You might be a redneck if- ' thing.

~
Not sure exactly how or why one would use an EO:
"EO that there is and will continue to be available 'normal financing for this atypical construction type?"

There is not a sinlge comp for this piculiarity in the 5 county area we cover (of which I am aware, anyway)! Ain't GOT no comps for this issue.

~
Can't see the underpinnings of the thing, only view was mostly by feel through a small notched section of missing wallboard in the laundry area, and the observation that it felt a bit more 'springy' than a typical slab floor home would feel. In other words no clue if the conncrete/wood contact is direct nor if the wood is treated. This IS a termite area, and haven't a clue if the floor was properly installed for a 'wood on slab' application... The fact that the interior walls are full height would indicate that they are framed on whatever subfloor system is extant! Problem is wood on slab with no air movement would potentially ... make that probably!!!... lead to moisture issues in our climate.

It just ain't normal!

But the buyers would probably never notice unless someone told them.

But a smart bet would be on a more traditionally framed house.

Guess we gonna tell someone, wish it WAS the buyer. Precisely how to figure OUT if there is a dimunititon in value is a bit more tricky.

HAVE considered asking every local appraiser we know if they have seen any more of these things... bet the answer is nope, dope!

 

[xm39hnu]

Try something like this:

"During inspection of the subject, the appraiser observed that the floor system is constructed upon a concrete slab (below/at/above) grade. Upon this slab are laid 2 x 4 lumber (flat/on edge). The appraiser could not determine whether a moisture barrier was present below the 2 x 4 lumber. The subfloor is laid upon the 2 x 4 lumber, and the finished floor is laid upon the subfloor. These conditions were observed through a small (X" by Y") opening in the floor in the (whatever) room. The rest of the floor system could not be directly inspected. This method of construction is atypical for other similar homes in this area.

This appraisal is performed under the extraordinary assumption that this foundation and floor system is stable and is consistent with prudent building practices, and is thus the equivalent of other, more typical, methods used in this area. The basis for this assumption is that the house is (x) years old, and there is no evidence of settlement or abnormal foundation performance. Nor is there evidence of moisture intrusion into the living space.

This appraisal is performed under the further extraordinary assumption that the 2 x 4 lumber upon which the floor system rests is of treated wood of the proper grade to be in direct contact with masonry. The basis for this assumption is that there is no evidence of wood rot or other compromise of the floor system based solely upon examination of the exterior surfaces of the dwelling. There are no points evident at which the walls or floor sag, and there appear to be no soft spots in the floor.

The appraiser is not qualified to make a substantive determination concerning the suitability or adequacy of foundations. If a subsequent inspection by a qualified expert later proves these assumptions to be untrue, the appraiser reserves the right to alter her opinion of value accordingly. The client is advised that additional charges may be incurred if such a change in the opinion of value becomes necessary, since the true nature of these conditions could not be discovered during the normal course of an appraisal inspection."

(Lee Ann, you do have a statement in your Assumptions and Limiting conditions about the extent of inspection, don't you?)

The sense of what you're trying to convey is that 1) the foundation is unusual; 2) it seems to be working OK for now; and 3) you have no idea whether it will keep working for the economic life of the house because you aren't an expert; but you assume that it will be adequate, because nothing suggests to you that it won't be.

In re the floor system itself: Could be raised to allow plumbing and wiring to be passed under the floor. Could be raised just because owner/builder didn't like the idea of walking on concrete. This type of floor can be done, but as others have stated, it must be done correctly: thick moisture barrier on concrete, treated wood (and only treated wood certified for direct contact with earth). Durn space should be vented, though, even with the moisture barrier and treated wood, IMO.

Rather than being as specific as I have in the extraordinary assumptions, you may want to generalize more. Say instead that you assume that the floor system and its support are stable and adequate, on the basis of .... etc.

Again, as I told Pam when discussing my own foundation problem, I don't "reccommend" inspections. I simply describe the conditions, disclaim expert knowledge, and assume that the world is fair. My opinion of value is contingent upon the world being fair. If it later turns out that somebody cheated, then the opinion is no good. Let the LO or UW decide whether to take the risk, or order inspections by experts.

 

[Farm Gal]

WOW!

Jim: I thank you for that pretty all inclusive boilerplate!


I am going ot have to give soem further thought to your comment about limiting the word count (and contingent liability)... I keep vacilating between calling for inspections or not and am starting to lean more towards your POV on let the UW take the risk...

My opinion of value is contingent upon the world being fair. If it later turns out that somebody cheated, then the opinion is no good. Let the LO or UW decide whether to take the risk, or order inspections by experts.

AND, NOW, the rest of the rest of the story:

This thing started out as an FHA.
We assumed that it would be an automatic decline.
We ASSumed wrong, based on conversation with HUD.
(they really did throw the baby out with the bathwater)
HUD said basically what you said.

Absent any PROOF that the foundation system (though atypical) was inadequate, we were not even to call for an inspection!!!! <_<

The GOOD thing is after all the fuss and bother that the borrower apparently had some 'issues' (reportedly got tossed from prior housing unit due to non-payment ).
Thankfully, the appraisal was cancelled prior to completion.
Inspection fee only.
Well, since we hadn't really gone any further than that,
(pending conversation with HUD) this is just fine and jolly with us!

Hope they don't call again when it DOES get sold!