Conventional loans - subject to repairs

[Terrel L. Shields]

I thought an appraisal was an appraisal,

We have a "Scope of Work" requirement in Uniform Standards meaning the lender can impose individual requirements. Final inspections are usually going to be in the secondary market. The "in house" lenders make a lot of loans but these are known as "non-conforming conventional loans" whereas "conforming" loans go to secondary market. Both the lender and the appraiser have to conform to those under the FNMA selling guide, or FHA 4000.1 document. Regulated lenders (FDIC, etc) not selling to secondary market are under the IAG - Interagency Appraisal Guidelines.

They even updated our contracts to say if the windows are fogged or do not stay up on their own, it cannot be considered a defect. Unless you just mean broken glass?

Your contract does not matter to the secondary market. Fogged double pane windows indicate the seal is broken between the plates. There is some individual judgment too. I mean exactly when does it rise to the level of a defect and to who does it matter? Some non-conforming lending banks want it to a standard that if it came handy, they can sell into the secondary market. So even they may want it to comply with FNMA.

 

[Niki Dransfeldt]

We have a "Scope of Work" requirement in Uniform Standards meaning the lender can impose individual requirements. Final inspections are usually going to be in the secondary market. The "in house" lenders make a lot of loans but these are known as "non-conforming conventional loans" whereas "conforming" loans go to secondary market. Both the lender and the appraiser have to conform to those under the FNMA selling guide, or FHA 4000.1 document. Regulated lenders (FDIC, etc) not selling to secondary market are under the IAG - Interagency Appraisal Guidelines.

This is really great information. We have our own set of things we have to learn and I generally try to stay in my lane. But knowing a little bit more about appraisals and lending is always useful to avoid problems during the transaction. I had no idea that the appraiser knew ahead of time whether it was conforming or non-conforming. That makes a lot of sense to me why things are done the way they're done now.

Your contract does not matter to the secondary market. Fogged double pane windows indicate the seal is broken between the plates. There is some individual judgment too. I mean exactly when does it rise to the level of a defect and to who does it matter? Some non-conforming lending banks want it to a standard that if it came handy, they can sell into the secondary market. So even they may want it to comply with FNMA.

Yes, I understand our contract makes no difference as far as the appraisal goes. But for my own knowledge I need to understand how these appraisals are working because I can't ask for a fogged window to be fixed by a seller when it's already in the contract that it won't be considered a defect. And that might not even be something that's flagged, but our contract has a handful of items that cannot be considered defects. However, and appraiser very well may consider them defects. I feel my biggest role as a real estate agent is to help my client navigate the process mitigating as many issues as possible before they become serious problem. So I'm learning a lot with this thread. I honestly did not understand the difference between conforming and non-conforming loans. That's extremely informative for me. It's not like when we get pre-approval letters they tell us this is a conforming or non-conforming loan. Thank you!

 

[Tiffany Gibbons]

I think my struggle is where does it end? What is safety, what isn't? There's no GFCIs in this house. They didn't flag that there are no smoke detectors in it which is required in Illinois. There's no set list for a conventional loan of what needs to be fixed and it's a total crap shoot of what an appraiser is going to call out. It's just a difficult conversation to have with sellers and buyers. "This may or may not get called out depending on the appraiser that comes to the house.". This is especially difficult on a conventional loan as many of the sellers in this area are selling as is.

I guess I just wish there was some sort of norm across the board. Where I could say hey put a valve discharge pipe on this because it's going to get called out. Well this is the first one I've ever had called out on a conventional loan in 5 years.

Do you not recommend to your buyers to get a professional home inspection? I only do VA appraisals, and this is not in my wheelhouse at all unless I could tell it would not meet county code with an overflow tank, no pan or obviously leaking. Why would you not want your buyer protected? VA defers to County or State Code on handrails but most realtors recommend a $50 rail be installed if 3 stair treads from the ground, just in case underwriting calls for it based on the Lender's safety guidelines. The last house I sold was on conventional and the buyer required all the GFCIs be replaced, small amount of chipped paint be fixed, and the brand new sink sprayer have higher pressure. We were only able to refuse to fix the sink sprayer pressure. Everything else was legit per The Home Inspector the buyer hired. As the seller had already had purchased another house, we had to do it. Market may be correcting itself, lenders will not want buyers in this price range hit with unexpected epairs just like VA or FHA.

 

[JTip]

Bank's money, bank's rules.

We get our instructuons/checklist (scope of work), that we simply follow.

As for buyer surprises, perhaps the lender should disclose the requirements prior to the buyer putting in an offer and even have the buyer's agent review these requirements prior to submitting a binding offer.

 

[sputnam]

I've done dozens of conventional loans with this same lender and have never had the appraiser call out a TPR valve discharge pipe. There is nothing wrong with the valve, they just want it discharged closer to the floor. And I completely understand that. I've been to an home inspections to understand the purpose. It's just never been flagged conventionally for me before. And unfortunately, it's probably 50/50 whether a house has one in my area.

I understand that. Then it should be called out on every single appraisal. It's the hit and miss on these appraisals that I'm really struggling with. A standard across the board would be nice.

Many appraisers.... and probably most of the general public... don't have a clue about TPR valves. The only reason I do is that I had a CE class once with a guy who helped found ASHI. He also talked about radon and granite counter tops... but I don't remember most of that.. Your TPR valve is supposed to be tested at least once a year. If it fails the test, you drain the water heater and replace it.

The one thing you can count on is that what Lenders 'call out' will change over time. My half serious theory is that it changes when underwriters, reviewers, or mananagement come back to work after a new class.

 

[Niki Dransfeldt]

Do you not recommend to your buyers to get a professional home inspection? I only do VA appraisals, and this is not in my wheelhouse at all unless I could tell it would not meet county code with an overflow tank, no pan or obviously leaking. Why would you not want your buyer protected? VA defers to County or State Code on handrails but most realtors recommend a $50 rail be installed if 3 stair treads from the ground, just in case underwriting calls for it based on the Lender's safety guidelines. The last house I sold was on conventional and the buyer required all the GFCIs be replaced, small amount of chipped paint be fixed, and the brand new sink sprayer have higher pressure. We were only able to refuse to fix the sink sprayer pressure. Everything else was legit per The Home Inspector the buyer hired. As the seller had already had purchased another house, we had to do it. Market may be correcting itself, lenders will not want buyers in this price range hit with unexpected epairs just like VA or FHA.

Of course I recommend them. But this is a very competitive market and many buyers are foregoing inspections otherwise they can't get a house under contract.

That said, you can't just ask for a $50 pipe. There are stipulations to our contract that only some repairs are allowed. Many homes are being sold as is and the seller will not allow any repairs. If the buyer asks, the seller says no and they go to the three backup offers they have waiting.

 

[Niki Dransfeldt]

Many appraisers.... and probably most of the general public... don't have a clue about TPR valves. The only reason I do is that I had a CE class once with a guy who helped found ASHI. He also talked about radon and granite counter tops... but I don't remember most of that.. Your TPR valve is supposed to be tested at least once a year. If it fails the test, you drain the water heater and replace it.

The one thing you can count on is that what Lenders 'call out' will change over time. My half serious theory is that it changes when underwriters, reviewers, or mananagement come back to work after a new class.

You're definitely right on that. I have come to the conclusion that appraisers have certain hot button issues. For whatever reason the TPR valve happens to be this appraisers hot button. I just wish there was a way to keep up with it so I could get ahead of it, but there's not as it's ever changing. And I don't know anything about radon in regards to granite countertops. I don't think I want to know. Lol

 

[Niki Dransfeldt]

Bank's money, bank's rules.

We get our instructuons/checklist (scope of work), that we simply follow.

As for buyer surprises, perhaps the lender should disclose the requirements prior to the buyer putting in an offer and even have the buyer's agent review these requirements prior to submitting a binding offer.

I sure wish they would! All of the lenders I have ever worked with seem just as surprised as me when something comes back from the appraiser. I don't even think the le.ders or processors know what underwriterimg requires.

 

[Tom D]

you can go to home depot and buy a made screw in pvc discharge pipe, used to be $5, more now. simple to cut to length and screw in. i'm assuming that is what is needed. the pressure relief valve itself isn't changeable. on a conventional loan it is an anal fix, because like other's have said. it's a used house, you can find lots of minutia repairs. now FHA is a different issue, mostly main big issues, then add on the smalls one if you like.

 

[Niki Dransfeldt]

you can go to home depot and buy a made screw in pvc discharge pipe, used to be $5, more now. simple to cut to length and screw in. i'm assuming that is what is needed. the pressure relief valve itself isn't changeable. on a conventional loan it is an anal fix, because like other's have said. it's a used house, you can find lots of minutia repairs.

This is exactly my point. It's an anal six. It's not that it's a difficult fix. It's the point that it got called out on a conventional loan. I'm surprised by that. Especially considering this particular house didn't even have smoke detectors. That is something that is always called out. So that wasn't, but this pipe was.

now FHA is a different issue, mostly main big issues, then add on the smalls one if you like.