Construction Inspection Problems

[Birdman]

Ok here we go. I did an original appraisal per plans and specs. Then the bank wanted me to do construction inspections. According to their schedule we would complete 3 inspections. Recently the bank fax me a request to do an inspection, but not for a construction draw. When I contacted the owner, he told me he had fired the contractor on the job because he was greedy. After looking at the property I could not figure out what progress had been made for the last 4-6 weeks. Then the contractor called me and told me that the owner has been adding THOUSANDS OF DOLLARS OF EXTRAS TO THE HOUSE (MANY). All these extras are on the rough in phase of the project. Electrical, Security and heated floors, according to the contractor approx 25-30K. The owner was not borrowing the whole amount for the construction of the house. I'm VERY CONCERNED whether this guy will have enough money to finish the house. According to the fired contractor this owner has several screws loose, and I've had that feeling all along. The owner has already called the licensing board of contractors and try to get his license, but had no just cause. This guy is a loose cannon. How would you handle this guy and the bank? The contractor told me to be very carefull.

 

[Dee Dee]

Stephen,
It will be interesting to see how others respond to your post, but here's how I would handle it.
Just report what you see at the site.
It is not your job to do anything other than that, and passing on what may turn out to be false information to the lender as to what the borrower may or may not be doing may cause you more grief than it's worth. You may want to inform the borrower that the first general contractor has been terminated, and give them his phone number if they want to hear more details. Let them deal with sorting out whether or not there is a problem that could have an impact on their loan.

 

[Oregon Doug]

Stephen - sounds as though you did your job. You completed an appraisal based on plans & specs for your client (the bank) and you agreed to provide progress inspections to them (only 3?) based on those plans & specs.

The specs have been changed so that basically your appraisal is now nul & void. Your client (the bank) could request that you re-appraise the home based on the new specs (new fee too) if they are so inclined.

Your job as the appraiser is to provide valuation services to your client - not to be concerned about the borrower, his financial status or emotional condition. Personally, I would collect my fee for the first appraisal and inform my client that I was much to busy right now to re-appraise the modified home within the turn time they require and go on my merry way.

Remember Uncle Remis & the tar baby?
Oregon Doug

 

[Pamela Crowley (Florida)]

Stephen,

Make sure you take lots of pictures, explain what you've been told by the contractor and the borrower, (just the facts, not the emotions or feelings or psychological assessments), send in your construction inspection with photos. I think I would include a statement that there appears to be enough changes from the original plans and specifications that you cannot complete any more inspections on this property and that it no longer matches the original appraisal that was based upon the original plans and specs. I think I might decline any new appraisal assignment on this or else I would charge triple to do it again.

If you are living in fear of any of your reports being turned in to the state with a complaint, I do feel for you. Get rid of that fear by doing every appraisal and report as though you know it's going to be reviewed. It just might be and you never know where it's going to end up.

 

[Richard Carlsen]

Stephen;

They don't pay you enough to worry if the guy will have enough money to finish the job or not. They don't pay you to do that at all. Report what you see, report what you know and leave it at that. If people claim to be making changes, don't worry about it. You are doing the draws according to the plans and specs. If they change on you, note it in the draw reports and forget it.

I charge $75 to $100 for a basic draw inspection. If they want me to worry about there being enough money in the coffers to finish the job, my fee goes up to about $1800. Get the idea? Only do what you are contracted to do. Let the owner and his builder worry about the budget.

Richard

 

[David S. Roberson]

I don't see a problem & here's why: If you are giving the bank a "percentage of completion" form, report what is complete & what isn't. If, for example, Electric rough-in is 1.5% of the total cost and he went WAY over budget for this item, too bad for him. He still only gets 1.5% for this item in the construction draw. The lender doesn't get further into the loan than they need to be. If the appraised value was legit and the bank lent a reasonable percentage of value, they should be covered if this guy defaults. Maybe this wiil cool his jets, too, if he realizes the add-ons are going to come out of his pocket.

 

[xmrdfghap]

.......if he realizes the add-ons are going to come out of his pocket.

<span style='color:brown'>Either that, or he renegotiates the loan.......either way, it is not your concern. As you are the "eyes" for the bank on this project, you should relate any information you may aquire to the bank, but be the eyes.....report what you see and learn, don't make ANY judgements.</span>

 

[Jeff Horton]

For the first time I have to disagree with Pamela. I agree with basically what everyone else has said. Your job at this point is to report to them how much work is completed, nothing else. Look at this way.

They hired you to do an Appraisal per plans and specs which you did. Now he changed it. So what? Doesn't change what you did.

Now they are hiring you to tell them how much and/or what is done construction wise. This is not Appraising! This is a sideline job. I love doing them. Good easy money and a no-brainer. You report what you see done and thats it. Changes do not effect your constuction inspection nor your appraisal.

Now when they ask for a Final Value then you might have an issue. Mean time just collect those checks.

 

[Verne Hebert]

First thing. As a courtesy, inform you client as to the situation--believe me it will likely become a problem--at some point.

Run your first inspection and note compliance and percentages--if your first on a three-draw is to "rough", Is it to "rough" or not?

I don't have time today to review other posts, I hope this is of some help.

In summary, the most radical one I have ever had off of an appraisal, actually had no draws but only a final (FNMA 442). Guess what? The habited home I appraised off of drawings was a completely different improvement. I told the client. They said how is that possible? I performed another appraisal (after 12 months).

 

[Mike Garrett RAA]

Aviod commenting on "loose screw" "loose cannon" or anything else of that nature. Report what you see only. You are in a "no win" situation here. I quit doing construction draw inspections about a year ago. Was way more work than the going rate of $50 per inspection.