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"as-is" vs subject to

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Michael Pecora

Thread Starter
Freshman Member
Joined
Jun 7, 2004
Professional Status
Certified Residential Appraiser
State
Pennsylvania
Hi everybody, haven't posted here in awhile so I hope someone can shed some light on my question.

I recently did an FHA appraisal and there were some conditions found so I made the appraisal subject to. The lender wants me to keep the required conditions in the appraisal but to change it to "as-is". I told him in the FHA manual it specifically states that an appraisal be made "as-is" only if it has no repairs/conditions or if it is being rejected for FHA. A 1/2 dozen calls to some local appraisers indicate they are doing it the same way as I am and that the lender is wrong. What say you? Wouldn't checking "as-is" indicate that the property meets minimum FHA standards (which is obviously doesn't right now).
 

Hamlet

Elite Member
Joined
Aug 14, 2006
Professional Status
Certified Residential Appraiser
State
Ohio
Hi,

You are correct that “as is” for only those that have no condition problems, or if it is being recommended for rejection.

Subject to completing construction under a regular 203k with less than 90% complete. Subject to repairs is for the streamline 203k, or more than 90% completion on construction.

Copy the page out of D.
 

Mr Rex

Elite Member
Joined
Jan 12, 2004
Professional Status
Certified Residential Appraiser
State
North Carolina
From Mortgagee Letter 2005-48

Repair Requirements

As stated in Revised Appendix D, FHA now permits an “as-is” appraisal for existing properties that serve as security for FHA-insured mortgages when minor property deficiencies, which generally result from deferred maintenance and normal wear and tear, do not affect the safety of the occupants or the security and soundness of the property. FHA no longer requires repairs for these types of minor cosmetic deficiencies to bring a property into compliance with FHA Minimum Property Requirements.



Examples of minor property conditions that no longer require automatic repair for existing properties include, but are not limited to:

· Missing handrails
· Cracked or damaged exit doors that are otherwise operable
· Cracked window glass
· Defective paint surfaces in homes constructed post 1978
· Minor plumbing leaks (such as leaky faucets)
· Defective floor finish or covering (worn through the finish, badly soiled carpeting)
· Evidence of previous (non-active) Wood Destroying Insect/Organism damage where there is no evidence of unrepaired structural damage
· Rotten or worn out counter tops
· Damaged plaster, sheetrock or other wall and ceiling materials in homes constructed post- 1978
· Poor workmanship
· Trip hazards (cracked or partially heaving sidewalks, poorly installed carpeting)
· Crawl space with debris and trash
· Lack of an all weather driveway surface

Examples of property conditions that may represent a risk to the health and safety of the occupants or the soundness of the property for which FHA will continue to require automatic repair for existing properties include, but are not limited to:

· Inadequate access/egress from bedrooms to exterior of home
· Leaking or worn out roofs (if 3 or more layers of shingles on leaking or worn out roof, all existing shingles must be removed before re-roofing)
· Evidence of structural problems (such as foundation damage caused by excessive settlement)
· Defective paint surfaces in homes constructed pre-1978
· Defective exterior paint surfaces in home constructed post-1978 where the finish is otherwise unprotected.




.
Inspection Requirements

FHA no longer mandates automatic inspections for the following items and/or conditions in existing properties:

· Wood Destroying Insects/Organisms: inspection required only if evidence of active infestation, mandated by the state or local jurisdiction, if customary to area, or at lender’s discretion
· Well (individual water system): test or inspection required if mandated by state or local jurisdiction; if there is knowledge that well water may be contaminated; when the water supply relies upon a water purification system due to presence of contaminants; or when there is evidence of:
Corrosion of pipes (plumbing)
Areas of intensive agriculture within ¼ mile
Coal mining or gas drilling operations within ¼ mile
Dump, junkyard, landfill, factory, gas station, or dry cleaning operation within ¼ mile
Unusually objectionable taste, smell or appearance of well water
(superceding the guidance in Mortgagee Letter 95-34 that requires well water testing in the absence of local or state regulations)
· Septic: test or inspection required only if evidence of system failure, if mandated by state or local jurisdiction, if customary to the area, or at lender’s discretion
· Flat and/or unobservable roof

Examples of conditions that will continue to require automatic inspections include, but are not limited to:


· Standing water against the foundation and/or excessively damp basements
· Hazardous materials on the site or within the improvements
· Faulty or defective mechanical systems (electrical, plumbing, or heating)
· Evidence of possible structural failure (e.g., settlement or bulging foundation wall)

 

TXCBoy36

Junior Member
Joined
Oct 3, 2007
Professional Status
Certified Residential Appraiser
State
Colorado
I would have to agree with making the property "as is" only if you found no repairs needed on the property.

JC
 

Alison Swain

Senior Member
Joined
Sep 13, 2005
Professional Status
Certified Residential Appraiser
State
Florida
I had my first FHA where the frame siding (cypress panels --- the old 80's style) had rotted in several places, including one spot where the damage had eaten through to the studs and wiring was exposed. I called for inspection for structural damage and repair of the siding. Went back and all the siding had been replaced and painted. Even the wood deck with loose and rotting planks had been replaced. Beautiful job. But, hey........what about that inspection? Now what? I told the lender it has to be done, even if it means he has to pry off some panels.

When this is finished, how do I convert this to a legitimate "as is" report? I've been lucky so far --- all my FHA's have been in fairly good condition, so I'm rusty (no pun intended) on what gets done with a home with issues which have been corrected.

Thanks for your help.
 
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