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FHA Question:

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Mike Boyd

Thread Starter
Elite Member
Joined
Jan 18, 2002
Professional Status
Retired Appraiser
State
California
Ok, I know I could search through the 4150.2 and find the answer. But, I'm lazy and know that one of you out there can answer this in a split second.

I inspected a house yesterday that was a bank foreclosure. The buyer is seeking an FHA loan.

It looks like one of those houses that just barely survived the flooding in New Orleans after Katrina. It is still upright and attached to the foundation but it is soaking wet inside. No signs of a leaking roof. No obvious broken water or waste lines. Not in a flood zone. Mildew and/or mold on most walls, water stains on some walls, exposed electric wiring in several areas, thermostat not working so furnace cannot be tested, newer water heater not strapped down and no pressure relief valve. Septic tank has been exposed and little ditches have been hand dug to drain water way from the house, exposed water lines half buried running from the house to the well, which appears to be less than 30' from the septic tank. Could not tell where the leach lines were. Siding appears to be ok but nail pops are everywhere. Many examples of dry rot, gutters and downspouts missing in areas or disconnected.....but what is there is not old. Kitchen cabinets: Only the lower cabinets have been installed, upper cabinets are just sitting on the counter tops. Some counter tops are missing. Cabinets appear to be nearly new. Asphalt tile under carpet is damaged in various areas, Carpet is soaked and sqwishes when you step on it. Carpet is not secured and appears to have just been flopped down. Crawl space not accessable. A look through the vents shows 18" clearance where it could be seen but it is below natural grade. I did not look in the attic as I was afraid of what I might find. The house is 58 years old and typical for the neighborhood. Grading is bad and possibly the cause of the water intrusion. Purchase contract says buyer is purchasing "as is."

In the old days, I would have rejected the house because of its condition and too many unknown factors. My son, Jeff inspected it with me. He is also FHA approved and we think damage and deferred maintenance could be around $100,000.

Whaddaya think?
 
Joined
Jan 13, 2002
Professional Status
Retired Appraiser
State
Florida
Geez Mike! I hope you wore a mask or got out of there very fast!!!

As far as I know, you can write a letter, I add photos, and explain why this property does not currently meet FHA minimum standards without what appears to be well over $5,000 in repairs.

I bill $100 or more for that and include a copy to FHA.
 

Mike Boyd

Thread Starter
Elite Member
Joined
Jan 18, 2002
Professional Status
Retired Appraiser
State
California
Geez Mike! I hope you wore a mask or got out of there very fast!!!

As far as I know, you can write a letter, I add photos, and explain why this property does not currently meet FHA minimum standards without what appears to be well over $5,000 in repairs.

I bill $100 or more for that and include a copy to FHA.

Pam.....do you complete the report? So it would be the regular fee and add the $100 to it?

I may have egaggerated the mold/mildew a bit. The walls were not black with it....just signs of mold on parts of the walls. No mask and I had to be in there long enough to make notes of all the needed repairs.
 
Joined
Jan 13, 2002
Professional Status
Retired Appraiser
State
Florida
No appraisal or report. Just the letter and photos of why this property does not qualify for FHA financing without major repairs being completed and an invoice.
I might be wrong, but I think the amount for repairs to be able to stay within normal FHA financing is $5K max.
 
Last edited:

Kevin A. Spellman

Senior Member
Joined
Aug 30, 2003
Professional Status
Certified Residential Appraiser
State
Massachusetts
Mike I have read several of your posts and I do not believe you need to seek an FHA comment or statement to complete this assignment.

I would complete the report and place a significant functional adjustment for the cost to cure that could easily exceed the cost of replacing the home. In the past when I’m exposed to a similar situation I provide land sales, as these sales can be the only reliable indicators of value. Without a contract for the cost to bring this property up to market standards, you may only be able to demonstrate the land value and in respect to the removal of the current improvements if zoning permits the removal.
 

Brad Pack

Junior Member
Joined
Jan 15, 2002
Professional Status
General Public
State
California
FHA Mandate

National HOC Reference Guide:

"Properties in Poor Condition: If the subject property is in such poor condition that it may be cost prohibitive or impractical to bring it up to FHA's minimum property requirements, the appraiser should recommend rejecting the property and contact the Lender before continuing with the assignment. If continuing:


Complete the appraisal on an "AS IS" basis, clearly marking the report as recommended for rejection for Section 203(b) and provide reasons for the rejection;
Provide a list of all major deficiencies and state that the list should not be considered all-inclusive. Additional items may be required before acceptable for FHA Insurance; and
Provide photographs of deficiencies to support recommended action."

You may also alert your HOC and provide them with the case number.
 

Lobo Fan

Elite Member
Joined
Nov 28, 2004
Professional Status
Certified Residential Appraiser
State
New Mexico
Sounds like there are several deal killers in this one. I wonder what genius decided that an FHA loan would be a good idea for this property. Sounds like bulldozer bait. I would hope that city water/ city sewer would be available. I would not be too sanguine about well water from a Katrina flood area.
 

Mike Boyd

Thread Starter
Elite Member
Joined
Jan 18, 2002
Professional Status
Retired Appraiser
State
California
Thanks, Brad. I will do just that.
 

Mike Boyd

Thread Starter
Elite Member
Joined
Jan 18, 2002
Professional Status
Retired Appraiser
State
California
National HOC Reference Guide:
"

You may also alert your HOC and provide them with the case number.

Brad....I spoke with Ed Flores at the Santa Ana HOC. He did NOT want a copy of the Recommendation of rejection and said just to send it to the lender.
 

Brad Pack

Junior Member
Joined
Jan 15, 2002
Professional Status
General Public
State
California
Brad....I spoke with Ed Flores at the Santa Ana HOC. He did NOT want a copy of the Recommendation of rejection and said just to send it to the lender.

Mike -

Thanks for the heads up. Notifying the HOC is just an option. However, I do want my staff to accept any/all information/documentation offered by an appraiser in a case such as this. So if you would, please send a copy of the appraisal to my attention or simply provide me with the FHA case number.

I appreciate it.
 
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