"AS IS" appraisal & cost to cure?

[Pamela Crowley (Florida)]

Oh boy! Here we go!!!

Why, Steven?

 

[Marcia Langley]

I agree, no cost to cure on "as is". If they want to know the difference in value, they need another appraisal "subject to" repairs.

I think Fannie, FHA, et al changed this part of the form (and guidelines) for precisely the reason that they no longer wished to rely on appraiser's estimates of cost to cure. According to FHA there was a major disconnect between appraiser's estimates and actual costs. It was never the cost to cure that they actually needed, anyway, it was the difference in value.

When there is a real need for a realistic cost of repairs, they should come in the form of a bid from an actual provider of repairs that will commit to their bid.

Clients tend to ask for things they used to get and may not realize that this was a fairly significant change with the new forms.

 

[CANative]

I don't like these at all.

Cost to cure what? Who's decision is it to make about what items could or should be "cured" and what does cured mean anyway. Are they going to make the homeowner "cure" these things or are they simply going to hold back proceeds of the loan or change the LTV?

To what degree of completion and quality should the "cure" be. I don't like to be put in the position of recommending what a homeowner should do or not do to their house so that their loan will go through.

 

[Christine Marie]

Good verbage. Ok to borrow?

certainly....

watch how you use it though.....???

 

[Chris Colston]

That is good verbiage.

But, Dougs question is whether or not a CTC is necessary on an "As Is" appraisal and report.

No, it is not. If they want a CTC, they can ask for that ahead of time or pay for it if they want it after the fact.

Sometimes it is, sometimes it's not. Remember the popped up pool from a couple of weeks ago? Per the client's instruction and my SOW, that report was completed AS IS with a cost to cure to set the pool back into the ground. I got three bids from pool contractors and gave a range on the cost to reset the pool.

USPAP 2006 reminds us that the assignment conditions are constantly changing and client communication is key. Let the client decide what needs to be cured, do your research to find out what it really will cost and SCOPE IT AWAY.

 

[Marcia Langley]

I don't like these at all.

Cost to cure what? Who's decision is it to make about what items could or should be "cured" and what does cured mean anyway. Are they going to make the homeowner "cure" these things or are they simply going to hold back proceeds of the loan or change the LTV?

To what degree of completion and quality should the "cure" be. I don't like to be put in the position of recommending what a homeowner should do or not do to their house so that their loan will go through.

Exactly. They want to reduce the opinion of value that you have already provided (double dipping so to speak) in order to squeeze some more $ out of the borrower. Either that or the next thing they will want is a "completion certificate" of repairs you never called for in the first place.

 

[Christine Marie]

Sometimes it is, sometimes it's not. Remember the popped up pool from a couple of weeks ago. Per the clients instruction and my SOW, that report was completed AS IS with a cost to cure to set the pool back into the ground.

excellent contribution Chris...
but, i think part of the problem for this particular scenario appears to have been a lack of communication between appraiser and client, whenever i encounter deferred maintenance or 'whatever' i readily obsvered, I notify client on how to proceed. We, as if now, don't know how this thing actually played out in sequence.....


boy do i remember that above ground pool, Yikes!

 

[Chris Colston]

I edited and added more to my original "contribution".

Either that or the next thing they will want is a "completion certificate" of repairs you never called for in the first place.

Is another fee such a bad thing? It allows the lender to fund part of the loan rather than holding up the entire funding for a SUBJECT TO condition. If it's SUBJECT TO, don't you also have to do a completion certificate?

 

[Fred]

Oh boy! Here we go!!!
Why, Steven?

Not because of 06 USPAP.

Imagine you are a prudent and rational buyer looking at two properties that are otherwise similar, but one is very beat up. Which one is worth more?

 

[Marcia Langley]

Chris,

It is my understanding that the "holding back in escrow" is one option for what occurs when the opinion is subject to completion of repairs. I very well may be misunderstanding the lender's end on this.

I don't understand why they would only fund part of a loan package that included an "as is" opinion of value and withhold the remaining funding until a cure had been implemented. This still looks like "double dipping" on the value consideration that impacts the borrower's terms. Once the repair is complete, the opinion of value may (probably) be higher. That higher opinion would have accompanied the "subject to" scenario.

I guess part of my hang up is the Fannie Mae guideline (which I'm assuming is applicable to O. Doug's case), that if repairs are necessary, then the HC box needs to be checked.

If the deficiencies do meet Fannie's threshold of "subject to" then "as is" with cost to cure is not applicable.

If the deficiencies do not meet that threshold, then what are good reasons for "as is" with cost to cure. I know we don't necessarily have to know the lender's mind on these things and "because that's what I want" may be reason enough. I guess I'm overly concerned that the borrower may get taken advantage of. Maybe that's not my business.

As to the extra trip fee, yes, I conceed that is usually a good thing. But if I add the time spent getting three contractor bids to the "subject to" final inspection, then there is actually a loss in $/hour and a potential increase in liability for having provided the cost to cure.

I see some down side for the appraiser but still don't see the up side for the lender unless it is more profitable terms.