As-is Value On New Construction

[BRCJR]

I will, but will be unable to do that until Monday. Traveling.

Thanks, I would like those for my reference library.

 

[Terrel L. Shields]

This is what's happening. In no way does an as is value of a half completed property apply. The property is never going to be sold partially completed. If the buyer backs out, the builder is still going to complete the property and sell it.

Half done properties get sold all the time and dozens if not hundreds were sold here when builders went belly up and buyers reneged in 2007-2009. In general they sold for the lot value and depending upon the stage of construction, perhaps 30-50% of contributory value of the % done. I did some in 2009-2010 for a lender whose client builder folded. He hired another builder to complete the project and the bank became builder and the builder liked one house so well he bought himself. Said his wife taught school just around the corner and was ideal size for them. Great job as we did weekly inspections plus updated appraisals.

 

[The Bob]

The estimate of market value should consider the real property’s actual physical condition, use, and zoning as of the effective date of the appraiser’s opinion of value. For a transaction financing construction or renovation of a building, an institution would generally request an appraiser to provide the property’s current market value in its “as is” condition, and, as applicable, its prospective market value upon completion and/or prospective market value upon stabilization.25 Prospective market value opinions should be based upon current and reasonably expected market conditions. When an appraisal includes prospective market value opinions, there should be a point of reference to the market conditions and time frame on which the appraiser based the analysis.26 An institution should understand the real property’s “as is” market value and should consider the prospective market value that corresponds to the credit decision and the phase of the project being funded, if applicable.

Page 9...

https://www.FDIC.gov/news/news/financial/2010/fil10082a.pdf

 

[JoshDavis]

That is true if the lender is financing the construction. But if the lender is only financing the purchase that will occur after completion, no "as is" value is required, regardless of the completion status.

There is a lot of confusion on this. Many think an "as Is" value is always required, but that is not correct. The InterAgency Work Group actually published Q&As on this topic a few years ago.

Thank you, you seem to understand what I'm getting at. I'd also like to see that Q&A

 

[hastalavista]

I will just add that some lending institutions, who do not sell to the GSEs, will ask for an as-is value in such a scenario because they interpret their regulations (IAEG) to always require an as-is value in an appraisal for new money financing. Call it an abundance of caution in regard to regulator audit-risk.

 

[JoshDavis]

i found this old post from DWiley

https://appraisersforum.com/forums/...-and-as-is-values.200968/page-14#post-2479826

 

[hastalavista]

i found this old post from DWiley

https://appraisersforum.com/forums/...-and-as-is-values.200968/page-14#post-2479826

Joker-
I'll say this as the last word from me.
If you can get your client to change the requirement, all's well that ends well. But I am telling you (and everyone else) that some banks will require an as-is value if (a) they don't plan to sell to the GSEs and (b) because they are being overly cautious. Whether the regulations require it or not, a specific institution may want it because that's what is required for their internal lending guidelines.
I am saying this based on first-hand knowledge from the lender's side.

Again, I hope you resolve this in your favor: good luck!

 

[DWiley]

i found this old post from DWiley

https://appraisersforum.com/forums/...-and-as-is-values.200968/page-14#post-2479826

Thanks. I forgot that i had posted it before. Of course, Denis is right - if a lender requires it as an “overlay” they can, but it should be communicated on the front end

 

[Carnivore]

I assume you have been given plans and specs....If you haven't then you absolutely need them ....another item and its important is the CURRENT draw inspection schedule. This will give you a rough idea how far along the current as-is condition has progressed.

The only nice thing about these assignments is if your business is slow then this will put a lot of cash into your pocket. Draw inspections are probably going to be expected. Make sure you fee is pretty stiff for them. Individual General Contrator's are a PITA. They schedule stuff, you go to the site and wait because they have not buttoned up something because the Municipal Inspector has not completed his inspection.


depending on where the at in the construction phase it sounds like another appraiser may have bailed out on them.

One more important point. Find out when projected completion date is expected. Reason is this may really interfere with your future scheduling, possible vacation time's etc.

Don't take this personally, but if you don't feel your competent then tell them that and withdraw from the assignment.

 

[JoshDavis]

Thanks. I forgot that i had posted it before. Of course, Denis is right - if a lender requires it as an “overlay” they can, but it should be communicated on the front end

You wouldn't happen to have a source for that would you?