As-is Value On New Construction

[Dublin ohio]

Not sure I understand how, "I have a client that just recently has started asking for an as-is value on new construction properties" aren't construction loans.
Maybe I cannot see the forest for the trees, I may be a little slow catching on but, please explain.
What are they doing with the money?

Happens all of the time to me. Buyer contracts with builder to purchase model x on lot y. Buyer is pre approved for purchase. Lender orders appraisal part way through construction or prior to start of construction. Wants to know value when completed. Buyer's lender is not financing construction costs. Builder proceeds to build house using their own money. Builder is paid at closing.

 

[hastalavista]

If i'm describing it subject to being completed, I'm not valuing it as is

That doesn't sound like what the client is requiring?

They want me to add an as is value on a subject to report

They are asking you to provide two values. You can do this in the single report.

Look; this is something new to you- you said it in your post. I get that.
But what they want may be more than what you are willing to do; no harm/no foul. The only issue I see is if you have already finished the report and now they are coming back and, outside of the original agreement, are asking for an as-is value. If that is the case, you can say no.
If you haven't accepted the assignment and you don't want to do the as-is value as requested, decline the assignment.
If you accepted the assignment with this provision and have determined it isn't what you thought you were walking into, stop the assignment and let the client know.
Or, call the client and ask them if they can get this requirement removed.

Those are your options- Good luck!

 

[JoshDavis]

Happens all of the time to me. Buyer contracts with builder to purchase model x on lot y. Buyer is pre approved for purchase. Lender orders appraisal part way through construction or prior to start of construction. Wants to know value when completed. Buyer's lender is not financing construction costs. Builder proceeds to build house using their own money. Builder is paid at closing.

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.

 

[BRCJR]

Happens all of the time to me. Buyer contracts with builder to purchase model x on lot y. Buyer is pre approved for purchase. Lender orders appraisal part way through construction or prior to start of construction. Wants to know value when completed. Buyer's lender is not financing construction costs. Builder proceeds to build house using their own money. Builder is paid at closing.

Under that scenario if the lender wants the as is value they are asking for a complex assignment and probably don't know what they are asking for, just my guess.
It doesn't sound like they truly need, per regulations, the as is value.
It very well may be someone on the lender side is confused about the loan package/commitment because there is construction involved, just not with them.

 

[hastalavista]

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.

Joker- construction projects get valued all along the timeline. And everyone knows that, if 33.5% complete as of the day of the inspection/valuation, construction isn't going to magically stop. But that is irrelevant to the request if that is what the client needs.

No one is trying to mislead anyone here; they've asked for an as-is value which, by definition, cannot be misleading.
This is an assignment requirement you've never seen before (again, no harm/no foul). Pass on it until and unless you develop a comfort level for completing them. Then take'em on. These fees (in my market) are good.

 

[Dublin ohio]

Everything Denis has said is accurate. Like BRCJR. My guess is that somebody at lender is conflating two different scenarios. You might try to talk to client and ask them what part Firrea applies to this scenario and why. But I could be wrong. If you accepted the assignment under the conditions you stated at a specific fee. You can: A-complete the assignment or B-decline assignment. In the future. Make sure you quote them a high enough fee to give them what they want. And I do mean high. Unless they find someone to do a complex assignment like they are requesting for cheap. They will probably balk at the high fee and ask why so high. Then the discussion begins.

 

[Mr Rex]

I don't understand the issue. If the house is complete, the As IS value is the value. If its not complete, then an As-Is and As-Complete value are required.

 

[DWiley]

If its not complete, then an As-Is and As-Complete value are required.

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.

 

[BRCJR]

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.

Point me in the right direction for those Q&A's please.

 

[DWiley]

Point me in the right direction for those Q&A's please.

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