"as Is" Versus "subject To"

[Ariba]

I received a STIP on a recently completed appraisal report: "Appraiser to remove the comment on the garage being in "fair" condition"

I explained again what was in the report and what I observed and therefore reported, including an estimate the cost to cost to cure. Furthermore, I told them I would not remove anything from the appraisal report as submitted.

Second go around

"We have reviewed the updated appraisal/comments our staff, and either the appraiser needs to remove the value for the garage completely, or the work has to be completed/done that makes it a typical garage...the garage must be noted as a subject-to item to be in average or better condition if value is going to stay on the report for this amenity."

This is a 2-car detached garage, with dirt floor (atypical for market), inoperable garage doors, cracked window, All this was documented in narrative form, photos, and estimated amount to cure the fair condition to average was given. There are no safety, soundness, security, etc issues with the garage and/or house.

Why is the underwriter determined to push issue this to the wall and basically ordering me to make the appraisal "subject to"? Can't the underwriter either require the seller to cure the garage condition and/or waive the issue, or lower the opinion of value?

It appears to me more and more that underwriters don't want to make the call and blame any failure of the loan not closing on the appraiser.

 

[J Grant]

I can see their point...it sounds like the garage is non functional and close to worthless...so seems like for "as is", they are determining the garage contributes no value...which is different than ordering you to make it subject to.

At the end of the day it's their money, so they dont' want to lend on a non working garage in such poor condition...so they either want the value contingent on subject to making it a functional garage/repaired, or keep your comments and leave thegarage in tehre but it contributes no value due to the poor condition...not saying you should do it, but those are your choices.

You can make it subject to repair, and then it becomes the homeowners problem. They can repair the garage and get the loan, or refuse and not get the loan. It's not your problem if they don't get the loan, you did what the client wanted to bring the house including garage into a marketable and functional condition.

 

[Noreen]

Would this structure be considered functionally obsolete? If the doors don't work and it has it's life as a garage compromised to this extent, is it now a larger shed or does it have a characteristics of a small barn?

 

[Ariba]

I can see their point...it sounds like the garage is non functional and close to worthless...so seems like for "as is", they are determining the garage contributes no value...which is different than ordering you to make it subject to.

Are they qualified and /or compto make this determination?

Would this structure be considered functionally obsolete? If the doors don't work and it has it's life as a garage compromized to this extent, is it now a larger shed or does it have a characteristics of a small barn?

I gave them the cost to cure to make it a functional 2-car garage. Even in its current condition it has a contributory value.

If they feel so strongly about it, why don't they just reduce the opinion of value and move on?

 

[hastalavista]

I feel your pain.
I assume in their engagement agreement, they make no assignment-conditions referencing that anything in C5 or lower condition must be made subject-to?

This is a lending thing (which impacts how we do our work if we are not told up-front what their property-requirements/standards are).
It isn't so much an issue to provide them what they want... the issue is that to provide them what they want you have to do additional work which isn't being compensated. Again, if they made their requirements clear at the beginning, you would have made the report subject-to per the lender condition-requirements. Now, you are faced with the option of reworking the appraisal or telling them to go take a hike.

If they feel so strongly about it, why don't they just reduce the opinion of value and move on?

That is probably not an option for them and, in the big picture, we probably don't want that option available to them.

You have these choices as I see it:
A. Tell them sorry- it wasn't in the original engagement-agreement. I gave you what you asked for... where's my check?
B. Whoops... it was in your engagement agreement and I missed it. I'll make the fix.
C. Ok, I'll do it this time. You've been a pretty good client and going forward, I'll assume you want things subject-to if they are in fair condition.
D. I'm happy to do what you need... it will take me X days and the additional fee is $Y. Is that agreeable to you?

What I wouldn't do is lose too much sleep over it.

Good luck!

 

[Mike Kennedy]

OP "This is a 2-car detached garage, with dirt floor (atypical for market), inoperable garage doors, cracked window,"

Permanently attached to the site? If so how? Would typical buyers not utiize it as a detached storage shed for ex. lawn, yard maintenance equipment?

 

[djd09]

Do you have a sale without a garage?

 

[J Grant]

"Why is the underwriter determined to push issue this to the wall and basically ordering me to make the appraisal "subject to"? Can't the underwriter either A require the seller to cure the garage condition and/or waive the issue, or B lower the opinion of value?"

This above is from your own post. I inserted A and B in red into it to help clarify. The UW in fact is act asking you to either A) require the seller to cure the garage ( make subject to repair) or B Lower the opinion of value (give the poor condition garage no value) . You want the UW to do it, but the UW wants YOU to do it. If the UW could do it without us, we would not have a job (crappy as our job is sometimes)

So its your call at this point, Denis also outlined a series of choices and Mike Kennedy bought up a possible issue how a buyer might see it.

Perhaps the problem is that this garage is not in fair condition, it is in poor condition? Dirt floor etc...it sounds so inferior to what buyers expect of a garage that it may in fact have little to no value except some residual value of the outer walls...

 

[RSW]

"Why is the underwriter determined to push issue this to the wall and basically ordering me to make the appraisal "subject to"? Can't the underwriter either A require the seller to cure the garage condition and/or waive the issue, or B lower the opinion of value?"

This above is from your own post. I inserted A and B in red into it to help clarify. The UW in fact is act asking you to either A) require the seller to cure the garage ( make subject to repair) or B Lower the opinion of value (give the poor condition garage no value) . You want the UW to do it, but the UW wants YOU to do it. If the UW could do it without us, we would not have a job (crappy as our job is sometimes)

So its your call at this point, Denis also outlined a series of choices and Mike Kennedy bought up a possible issue how a buyer might see it.

Perhaps the problem is that this garage is not in fair condition, it is in poor condition? Dirt floor etc...it sounds so inferior to what buyers expect of a garage that it may in fact have little to no value except some residual value of the outer walls...

I wouldn't consider a dirt floor a condition issue. I would consider it a quality of construction issue. It could be that the subject property has an old house sitting out in the country (Rural) and it is not uncommon to see detached garages with dirt floors.

 

[J Grant]

The OP said in his post the dirt floor is atypical for the market...so if the comps garages all had concrete floors the dirt floor is a deficiency in construction quality for sure. I don't know what OP called for in cost to cure or what value he attributed to the garage.