Appraisal Calls for Roof Repair/Replacement - Options?

[JerLon]

I just received an appraisal back today on a home I am looking to purchase.

I was well aware that the roof was an issue and for the sake of this thread, I am not concerned about the roof. I will do a tear off as soon as I own the home.

The inspector checked item #1 on the USDA Inspection/Certification ("Check here if list of repairs/improvements is attached.") and noted "Repair roof shingles per HUD Guidelines, see addendum." He included photos of a front porch where the shingles are deteriorated and several spots on the back of the roof (near the eaves and peak) where the shingles are curled.

In the addendum, the appraiser stated "Appraiser made a visual inspection of subject's roof from the ground. The exact number of roofing layers could not be determined by the appraiser. There were areas of deterioration of the aphalt shingles noted, as previously setforth. Based on HUD Handbook 4905.1;Section 2-12; HUD allows a maximum of Three layers of existing roofing. However, if more than Two layers exist ,and roof repairs are required, then all the old roof shingles must be removed as part of the re-roofing. When re-roofing is needed for a defective roof already consisting of three layers shingles must be removed prior to re-roofing. Estimated cost to repair roof is $9000."

What are my options? My lender has suggested I get a roof certification letter from a roofer stating the roof has over two years of life left. Given this statement by the appraiser, I can't imagine USDA will approve this, would they?

I'm confused as to the cost estimate to repair. This roof would cost $9,000 or less for a tear off. Is the appraiser saying the only option is a new roof based on this?

Help?!

 

[JerLon]

One option I just thought of is to go with a Conventional Mortgage. Is the appraisal process substantially different enough that the roof would not be an issue?

 

[hastalavista]

Given the condition of the roof, I'd say the appraiser is going to make the appraisal, at a minimum, subject-to a roof inspection. Or, if the roof's replacement isn't really a question, then subject-to roof repairs/replacement;
(the exception is if the appraisal is made "as is" with the known damage which isn't an option for a loan that needs to meet the FHA guidelines).

The practical outcome is the same: if the roof needs an inspection, then a roofer is going to have to eyeball it and state what condition it is in, and if it needs to be replaced or not. If the appraisal is subject-to repairs, the roofer is going to do the same type of inspection and determine what, if any, action is necessary; it could be no repairs are necessary (doesn't sound like it).

The appraiser is identifying a potential condition issue that affects a significant component of the improvement (the roof). Any appraiser would do this in any kind of residential mortgage appraisal.
The appraisal has three choices (which may be dependent on the loan program, like FHA would require a fix first, or the lender, who may or may not require a fix first):
A. Identify the issue, and value the property as-is.
In this case, what is the value of the property with a roof that is presumed to need replacement.

B. Identify the issue, and value the property as-if it isn't significant, but make the appraisal subject-to an inspection of the issue by a qualified inspector (in this case, a roof contractor).
The appraisal values the property as if the roof doesn't need replacement, and an inspector goes out and determines if it does or doesn't need replacing. If it does, the lender will likely require it to be fixed/replaced. If it doesn't, then the appraisal value reflects that condition (no repairs needed).

C. Identify the issue, and value the property as-if the roof was replaced.
Sometimes a roof may look so-so, and we appraisers aren't sure if it needs work or not; in that case, we might use option B. But if it is clear that the roof is shot and needs replacement, then (again, depending on the loan program or lender requirements) we will value the property as-if there is a new roof, and the lender will require a new roof to be installed.

Identifying what condition the roof is in is the appraiser's responsibility. Sounds like you and the appraiser agree about the condition.
What to do about the roof's condition is a lender or loan-program decision. Your lender (or the loan officer) is telling you to try to get a roof cert that says 2-years remaining economic life; you and the appraiser don't sound convinced that is the case. I suppose you could ask a roofing contractor what he or she thinks, but I doubt if you'd be surprised that he/she would say, "...this thing won't last through the winter".

So, here are your choices (none of these have to do with the appraser, all have to do with the lender):
1. If you don't want the roof fixed as a condition of the loan, find a lender who will loan on the as-is condition.
2. If you want a loan that requires the roof to be serviceable for at least 2-years, see if a roofing contractor will agree to that and provide you with a certification that says so (we rightfully assume they will be honest; it is their license at stake).
3. If the loan you want requires the roof to be fixed, then have it fixed.

Good luck!

 

[Restrain]

FHA will not allow for escrow for repair. That being said, the UW can waive any or all requirements set forth by the appraiser.

If you are going to replace the roof, a conventional local lender may allow for an escrow.

Finally, you could up the sale price to cover the roof, if you feel it is still in market ranges, require the borrower to replace the roof. Or you could use the appraisal as a lever to get the seller to replace the roof.

 

[redfish]

If your loan/mortgage "professional" can't answer your questions and provide you with the guidance you need, you may want to consider dumping them.

As an appraiser I am not qualified to answer your question.

 

[Howard Klahr]

FHA will not allow for escrow for repair.

FHA will allow a Streamline 203K though

 

[Noreen]

FHA will allow a Streamline 203K though

This would be what I would think too. We do FHA/USDA and we have to affirm that the roof has normal wear & tear but when there are obvious "deficiencies" we have to affirm that there is two or more years of "functional utility" of that component. I often defer to a roofing contractors certification but FHA/USDA wants an expert in "that discipline" to make that call for them, not the appraiser. We are just the "eyes" in the field/ on the ground so to speak. But the appraiser cannot ignore an obvious deficiency. We can lose our ability to appraise for government loans.