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Basic and not so Basic questions

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Suzanne K Hansen

Sophomore Member
Joined
Aug 31, 2002
Hi,

I have some basic and not so basic questions on an appraisal that is coming back for a second chorus. This is a duplex on a lot one block from the ocean. It is owned by 2 people, one lives in one side, the other lives in the other side. It is in the process of being renovated, most of the work is complete and nicely done. Each side is 350 sq ft!!

The issues:

When is a property as-is and when is it subject to?

When does one add cost-to-cure for a property and how is that done?

When a property is owner occupied as this one is, does it also get a 1025 form that includes the income property approach?

What is the value of an owner occupied property versus a rental? It seems to be an important point for getting this loan according to the new broker that is now working on a refi for this propert? The first time I appraised it as "as is" and noted the elements to be finished, but did not consider that I had anything more to do. The loan did not go through. They're trying again, having finished much of what was needed (haven't done second inspection yet). Now the broker wants me to do cost-to-cure, and to appraise it as "Owner Occupied."

I don't understand:
1) significance of "owner Occupied" ,
2) as-is vs subject to, when to apply
3) when to apply cost to cure and how to do it?

Please help, my Newbie stripes are showing.

Suzanne[/list]
 

Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
1) significance of "owner Occupied"
In this case, to me, it would have no significance. It's a highest and best use thang. The likely future buyer will be an investor, so you have got to consider the income approach applicable. Just check the Owner Occupied box rather than Tenant Occupied, and do what you would nomally do for a duplex.

2) as-is vs subject to, when to apply
Depends on the lender, and the purpose/use of the report. If for a lender that will escrow, some items (usually up to a few thousand dollars) may not be an issue. They just will ask you to give an estimate, and the lender will hold back 1.5 to 2 times that amount in escrow.

3) when to apply cost to cure and how to do it?
When repairs are needed, and doing the appraisal "As Is"....... assuming you have curable depreciation. For a cost to cure, you will need some experienced help (ask your mentor). Don't just swag it. Many "as is" reports I see are wayyyyy off due to missing the real cost to cure. When I give an estimate, it is based on my experience since I do remodeling on foreclosures.
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
Suzanne you are more than welcome to make such posts as your duplex question in the "General Appraisal" pond... though you may get some nicer more gentle answers from the folks who occasional peruse the Newbie forum... Some of the ones who will jump you in the general forum are nasty, but develop a thicker skin and go for the deeper water... mainly because you will get a greater bredth of answers...
~~~~

Mel nailed it as to 'doesn't matter, it is what it is! but here are a few facts and thoughts:

The primary reason the broker wants a owner occupied report is because of the difference in funding for OO properties vs. rental property, which are generally lent on at a 'business rate' rather than 'residential primary residence' rates.

IF in fact both resident/owners are occupants... are 'they' getting this loan as co-signitors? Or is one side 'rented' (even at no cost) to the occupant without him/her being on the ownership papers?

Be careful of this sort of thing... it can bite you. You are not a detective and some folks get real touchy when you have to ask questions about thier personal lives... I won't even go into asking whether or not the borrower(s) are same sex, that adds a whole different set of curves to the issue, particularly in terms of possible discrimination suits :roll: .

Point being either one side is rented to an 'occupant' or both sides are occupied by folks who own the property. It's either "A" or "B" no other way to call it! Either feel your way carefully, or stright out bluntly if you think you are being 'shined on!" Whther they are licensed to live togethre doesn't matter: who owns the thing?

Mel has a VERY valid point with regard to cost to cure... either get a remodeling estimator which is time and area specific and learn how to use it correctly, or get some one to estimate the remaining repairs who does have the experience. There are some very good and reasonably accurate estimating books out there, but you need no small amount of experience to use them correctly... One recent poster tried to indicate that women are the worst offenders in terms of guessing on repair costs: I find it is folks unaccustomed to bids that get in trouble (regardlesss of sex). :evil:
 
Joined
Jan 13, 2002
Professional Status
Retired Appraiser
State
Florida
Good replies. Kudos to Mell and Lee Ann!!!

Plus, Suzanne, where is your mentor/supervisor?
 

Suzanne K Hansen

Sophomore Member
Joined
Aug 31, 2002
Hi All,

Thanks for your advice. Still not sure I get it, though I just posted in the watercooler and maybe that'll explain my well ground density.

So, there are two unrelated, owners who are not in cohabitation of the same unit. Each one has a unit (and a separate squeeze). They are refinancing, not selling. In this case the advantage to the owners is to get a lower finance rate if I check owner occupied, right? Do I still do a 1025 or, because it is owner occupied, do I use a 1004? Yikes do I feel dumb.

So does the lender tell me it's to be as-is? do I ask up front? Or do I make the decision myself (as I have been) and change it later if the client requests it?

Okay, so if the place is in good condition, but they haven't finished remodeling it (eg, sink for one bath is laying on the counter, heaters are in boxes in the living room, etc.), do I need to do more than explain the as-is status by doing a cost-to-cure. Since I'm familiar with costing for this type of work, I could do it. Should I, do I need to? when do I need to add cost-to-cure.

I know, I know, my mentor is supposed to be helping with this...so much to say, so little annonimity, and what a good story for trainees and non-trainees alike!!. (Is it possible to sign in twice with a pseudonym and you're real nym?

Suzanne
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
well ground density.
SCOS...
Thankfully, mine has been filtered!

Do I still do a 1025 or, because it is owner occupied, do I use a 1004?

It depends... You CAN do a duplex on a 1004, Fannie says so. since you CAN check the OO box, I htink this should be left up to the lender... but remember for competency reasons you had better make SURE you cover the income approach.

BUT!!! Do these folks own both sides on a single deed with all 4 names on the deed, or does each couple own 'half' of the duplex? Find out it may affect how you want to proceed!

Yikes do I feel dumb.
Nahh eveybody is new at their job once , even the crustiest musties on this forum ~ who would have you beleive they emerged from the womb with tape measure and computer in hand... then they fess up, t'was a pencil and paper fer Pete's sakes, been telling their lie's about experience so long they got the story mixed up :wink:

So does the lender tell me it's to be as-is?
do I ask up front? Or do I make the decision myself (as I have been) and change it later if the client requests it?
WHEN my dear, no matter whcih way you chose, and even IF you ask up front be prepared to change it (remember to add a comensurate fee adjustment made after the initial presentation... :evil: because this thing IS probably NOT going to go gently into that good night, best plan on 're-visits'. And possibly one or two re-writes no matter WHAT they told you the first time :roll: It isn't quite a square peg in a round hole, but it certainly isn't a perfect fit for the standard loan process either.. most lenders would STILL call it a 'rental'.... I have dealt with similar situations usually with related parties, most typically Mom & Pop on one side and either a kid or a parent on the other...

Okay, so if the place is in good condition, but they haven't finished remodeling it (eg, sink for one bath is laying on the counter, heaters are in boxes in the living room, etc.), do I need to do more than explain the as-is status by doing a cost-to-cure. Since I'm familiar with costing for this type of work, I could do it. Should I, do I need to? when do I need to add cost-to-cure.

1.Does the extent of the 'missing' remodleing, in YOUR opinion, adversely affect value to a significant extent?
2. Would the missing sink, fans preclude a buyer from purchasing the property?
3.Are you competent to extimate the degree to which a potential buyer would discount thier offer for the unfinished work...
4. and most importantly (I fear) is does the 'as is' value permit them to close their deal... :roll:

What you lack experience you say? MENTOR TIME :twisted: . Seriously, this really isn't something you shuold be hashing out too much more here, hopefully you have the right questions and direction to go wwith the concept as a whole... but this is beyond a true 'newbie' analysis, with out some on-site and direct handholding!!
....
Now for all the USPAP screaming about pre-determined values, sometimes you just have to apply your experience to a matter like this, come up with some 'approximations' of value with and without completed repairs ...and then have some frank discussions with the lender...

I can tell you in advance that they want YOU to make their problem 'go away'... don't do it :evil: .

(Is it possible to sign in twice with a pseudonym and you're real nym?
Yeah, but the guy who owns the playground (quite justly) objects to the practice... Takes up additional space and just isn't quite fair... And he can TELL if youa re doing that... some folks have even been *Banned* and since you seem addicted, that would cause you great distress whether or not you had supercharged coffee to salve your pain...
...
Besides you'd lose your stars, and start over as a rank newbie subject to tons of abuse and disparagement :lol: you don't want to go there, do you???
 
Joined
Jan 13, 2002
Professional Status
Retired Appraiser
State
Florida
Ahhh, Lee Ann! You are a superstar!!!

Be careful on this one Suzanne. It's a complex assignment.

... this is beyond a true 'newbie' analysis, with out some on-site and direct handholding!!

Lee Ann is quite right about that. Without actually seeing this property, it's very difficult to give you good answers to your questions.

Please try to get some sleep tonight!
 

Suzanne K Hansen

Sophomore Member
Joined
Aug 31, 2002
Ok, the coffee is kicking in and your comments are making sence to me. I'm gittin' it. Mostly I'm gitting the point about my needing first-HAND help...that's just the problem and I'd love to tell the story, I just don't think I can risk it. Ain't it fun!!!

It'll all work out and yes I am addicted to this forum for moral support, for laughs, and especially to get the square holes to fit into the round pegs!?!... well maybe I'm not quite able to do that yet.

Thanks,

Suzanne
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
:lol:
Pam, don't forget that she is three hours behind you and two behind me... heck the sun just drooped over the horizon a few hours ago for HER... what are YOU doing awake bsides gripeing about unreasonable realtors :wink: I'm going to call it a night meself.

I will be dealing with my OWN set of 'issues' on the morn, for I also have 'blown a perfectly acceptable normal and reasonable DEALl' for NO good reason other than THINKING I am competent to do my job...

and I don't even have the excuse of being a newbie who can correct the error of my ways :oops:

Suzanne go check the general forum, newbie or what we would like to think of as 'experienced' ... sometimes is is SSDD in this job. :(
 

Suzanne K Hansen

Sophomore Member
Joined
Aug 31, 2002
Night Night Ladies,

What are you doing up so late?!!

Thanks for your insights and concerns. I'm listening.

Back to work on an easy one....

Suzanne
 
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