Appraisal Requirements Suspended for California Fire Areas

[TerryRohrer]

"To help facilitate recovery efforts from wildfires and straight-line wind damage in Los Angeles County, California this year, four federal financial institution regulatory agencies today temporarily paused certain appraisal requirements for real estate-related transactions.

This action is expected to allow banks and credit unions to work with families and businesses without obtaining an appraisal. Banks and credit unions will still be required to determine that the value of the real estate supports the institution’s decision to enter into the transaction."

 

[glenn walker]

This makes sense as in burn areas the lot and land is where the value is and we don't have enough real comparables yet.

So far only one or two building permits have been approved since the fires. The local bankers know the area and all small lots are a minimun of $1 million plus.

The buyers are not Fannie Freddie FHA types most have a million or more cash to put down and many have all cash.

 

[Mark K]

How else will they conjur up outrageous appraised values when the cost to rebuild will probably be double of what it was prior to the fires.

They should just go back to the Liar's Loans model and base the loan on what the borrower says the value is or what the builder says. Keep the appraisers out of it completely.

 

[djd09]

only congress can pass laws...

 

[glenn walker]

How else will they conjur up outrageous appraised values when the cost to rebuild will probably be double of what it was prior to the fires.

They should just go back to the Liar's Loans model and base the loan on what the borrower says the value is or what the builder says. Keep the appraisers out of it

Not a problem most are cash sales or buyers putting 50% or more down. Nobody's walking on a new build in those areas.

 

[George Hatch]

Nobody does land loans in excess of 50% LTVs. I also doubt the loan production types at these smaller lending institutions are going to take a deal to their loan committee without an appraisal. These homes will start at $3+M. None of these smaller lenders can afford to take undue risks with construction loans in those prices.

This is a situation where an appraiser who isn't savvy with their CA can really mess up with the contractor's bid. If the contractor didn't bid enough then they'll run out of money before the construction is complete and then the lender has to come up with more funds. An appraiser could get the "subject to completion" value right and still mess up the assignment if they're costs are too far out of line.

Some years ago a friend of mine went to work as chief appraiser at a small commercial bank. They ended up with a delinquent loan (I forget what property type it was) in the $3M range and a borrower who pulled out all the stops to fight them. They ran the legal and court fees up. By the time it was all over that one deal very nearly took the bank down. They did prevail in the end but everyone there was sweating in the meantime.

These smaller lenders don't get bailed out. They get merged or sold, and it will be at a discount if their balance sheets are hurting.

 

[glenn walker]

Not

Nobody does land loans in excess of 50% LTVs. I also doubt the loan production types at these smaller lending institutions are going to take a deal to their loan committee without an appraisal. These homes will start at $3+M. None of these smaller lenders can afford to take undue risks with construction loans in those prices.

This is a situation where an appraiser who isn't savvy with their CA can really mess up with the contractor's bid. If the contractor didn't bid enough then they'll run out of money before the construction is complete and then the lender has to come up with more funds. An appraiser could get the "subject to completion" value right and still mess up the assignment if they're costs are too far out of line.

Some years ago a friend of mine went to work as chief appraiser at a small commercial bank. They ended up with a delinquent loan (I forget what property type it was) in the $3M range and a borrower who pulled out all the stops to fight them. They ran the legal and court fees up. By the time it was all over that one deal very nearly took the bank down. They did prevail in the end but everyone there was sweating in the meantime.

These smaller lenders don't get bailed out. They get merged or sold, and it will be at a discount if their balance sheets are hurting.

Not Land loans constuction loans most buyers up there have cash for the lots. Then they can build a new home with insurance or construction loan.

 

[George Hatch]

They're up to 27 closed sales for the land parcels. Except for the 2 low sales, the median price for the rest of the dataset is $2,898,000.

22 parcels of 5200-10,000sf
3 parcels of 12,000-15,000sf.

9 pendings
167 actives

 

[glenn walker]

They're up to 27 closed sales for the land parcels. Except for the 2 low sales, the median price for the rest of the dataset is $2,898,000.

22 parcels of 5200-10,000sf
3 parcels of 12,000-15,000sf.

9 pendings
167 actives

There ya go no problem valuing a lot in those areas. You could do desktops for lenders who need a lot value for a construction loan. Or drive bye it.