Construction Perm FHA

[Paul Cunningham]

I am doing a construction Perm FHA appraisal. The lot is vacant and they gave me the contract, plans and specs to review. Sounds like a typical proposed construction appraisal that I have done hundreds of times before. However in the past it was always ordered as a purchase. THis time it is being ordered as a refinance. Now I get why, it's because they are going to refi out of the construction loan when construction is complete, but I have always done this as a Purchase in the beginning. How do you handle the contract and sale history sections if it is a refi? Is the home currently for sale? Did you review the contract? Do you report the sale price and date? Is the seller the owner of public record? Is there even a seller? Is there seller concessions? You can't just ignore all these questions.

 

[RSW]

Who owns the land currently?

 

[Paul Cunningham]

The builder. I know, how can you refi when you don't own the land. That is just how they have the loan structured. A secondary lender (lender A) is fronting the construction costs during the construction without an official closing or title transfer, and I am appraising the home subject to when the home is complete and the construction costs have been dispursed. I am doing the appraisal for lender B, who will hold the mortgage at the end. It doesn't seem right. I don't know what kind of collateral or protection lender A has during the construction process if there hasn't been a deed recorded and it is still in the builder's name. Usually there is a closing in the begining with lender A and a refi at the end with lender B.

 

[RSW]

Sounds like an underwriter issue and not an appraisal issue.