FHA Septic & Well Appraiser Lawsuit

[Fernando]

First off, I don't do appraisals with septic.
Hard to believe but I do have typo errors in my appraisal reports.
When I have such an error, good reviewers would point it out and ask if that is correct.
I would research the issue if I made the mistake. If so, I correct it on my form. Problem doesn't need to be escalated.

 

[Zoe]

In these cities locally that have expanded their jurisdictions, there is no way a builder could get a building permit without the City approving it being on public sewer. Usually local real estate agents that represent buyers or sellers pick up on that where it is mandated that they hookup if it is available at the street where subject is located.

 

[Zoe]

We have like a state property disclosure that seller fills out that discloses things like sewer system and real estate agents are required to make the seller fill it out in most cases.

In a few cases the seller don't have to fill it out in the sales contract.

 

[shrubberyvaluation]

Again - 'concealed' implies intent - so far, you've shown nothing that would demonstrate that the appraiser did anything intentionally. A better term would be 'failed to indicate'...

What would even be the incentive. I'd wager a mistake 99.9%+

 

[alebrewer]

What would even be the incentive. I'd wager a mistake 99.9%+

Of course it was.

 

[shrubberyvaluation]

Really!
Someone here defended this type of Appraiser. Never happened. You might be referring to Facebook Appraiser forum. If so should have said it that way.

I don't recall anyone defending. I remember people saying the buyer still should do their due diligence and its an error. People thinking an appraiser shouldn't have to pay for anything that happens after the fact to a property because of a mistake on an appraisal with no impact on the value is defending them is silly.

 

[glenn walker]

What would even be the incentive. I'd wager a mistake 99.9%+

Whats most glaring is that HUD reviewed this appraisal and made the appraiser take a 7 Hour FHA Class and no removal from "fee panel" that kinda says it all from the HUD reviewers perspective.

 

[chad hampton]

All that being said, do you think an appraiser who accepted an appraisal to be used in underwriting an FHA insured loan has a duty to accurately comply with FHA appraisal requirements? And it seems there might be a highest and best use issue or zoning/legality of use issue if the property is too small to have a legal septic system.

Sure, sounds like the appraiser overlooked it or maybe didn't check the correct box. He made an error it sounds like. But to claim you didn't know when your RE agent and Home inspector said the home was on septic??

Was the borrower even the appraiser's client?

I'm not aware of the zoning issue. And not going to go back and read all the pages. If there is a H&BU issue regarding a non-residential zoning, etc, then that's an issue was well.

Up until about 5-8 years ago, the general consensus among our peers was that appraisers are not the permit police. But like everything else, scope creep has swallowed that up an now we are expected to check for permit compliance. I mean, I don't, but I'm old school. And all for a fee that in most cases starts with a 2.

 

[Overimprovement]

It is apparent you don't, or at least I hope you don't perform FHA appraisals or you would know "grandfathering" is not allowed per FHA, instead the property must either meet FHA minimum property requirements OR be updated to meet them in order for the loan to fund.

In this case the property did not and cannot physically meet the distance requirements on septic and well to qualify for an FHA loan which was not determined because of the APPRAISERS failure to report the system.

The APPRAISER is the only person required to determine and disclose property specific characteristics that determine eligibility to the lender.

You make me question the entire appraisal industry.

See below for your obvious CE needs.

https://appraisersforum.com/forums/...nd-grandfathered-override-known-FHA-d.198800/

"Grandfathering" is not the relevant issue here. Compliance with Minimum Property Requirements is the issue. This property fails MPR. Just report the condition. The DEU will decide if correction is feasible. If not, they will reject the property.

See HUD Handbook 4000.2

2-6 GENERAL ACCEPTABILITY STANDARDS FOR PROPERTY. There are minimum property standards for existing and proposed construction. A property is considered "existing construction" if it was completed more than one year prior to application. See HUD Handbooks 4905.1 and 4910.1 for additional information on existing and proposed construction, respectively.
Underwriters bear primary responsibility for determining eligibility of a property for FHA mortgage insurance. However, the FHA appraiser is the on-site representative for the Mortgagee and provides preliminary verification that these standards have been met. The “Notice to the Lender” requires the FHA appraiser to report the physical conditions that are readily observable on the date of the site visit and to detail the repairs needed to establish and/or maintain the marketability of the property, protect the health and safety of the occupants, and protect the security of the property. These criteria must be addressed by the Mortgagee before closing.
When examination of existing construction reveals noncompliance with the General Acceptability Criteria, an appropriate specific condition to correct the deficiency is required if correction is feasible. If correction is not feasible and only major repairs or alterations can effect compliance, the Mortgagee will reject the property.

Your conclusions and assumptions line up perfectly with someone who only wants to deflect their own responsibility onto others. YOU should have ensured there were adequate inspections. Honestly, your responses remind me of a certain current VP.

And yes, if a system DID meet local code regulations when installed, but does not now, then grandfathering absolutely IS an issue.
It is NOT some random FHA loan funding requirement that is pushing your remediation costs close to 6 figures (according to you), it is local codes. If you did not have a loan on this house at all, would the cost to remediate your issue be any different? Honest question...

 

[Huds_Harm]

Your conclusions and assumptions line up perfectly with someone who only wants to deflect their own responsibility onto others. YOU should have ensured there were adequate inspections. Honestly, your responses remind me of a certain current VP.

And yes, if a system DID meet local code regulations when installed, but does not now, then grandfathering absolutely IS an issue.
It is NOT some random FHA loan funding requirement that is pushing your remediation costs close to 6 figures (according to you), it is local codes. If you did not have a loan on this house at all, would the cost to remediate your issue be any different? Honest question...

HONEST QUESTION. Can you show me where it was my responsibility to verify the property meets minimum property requirements?

AND HONEST REQUEST
On behalf of the general public and your E and O insurance (assuming you have one) please do us and yourself a favor and decline any FHA appraisals until you are competent in minimum property requirements.

The link in the previous post from your colleagues specifically says, Do well to septic distances being insufficient and grandfathered override known FHA distance requirements?

https://appraisersforum.com/forums/...nd-grandfathered-override-known-FHA-d.198800/

Your continued defense and attempted blame shifting is an embarrassment to your industry.

But just for fun I will answer your question.

I WOULD NOT HAVE A LOAN ON THIS HOUSE HAD IT BEEN A COMPETENT APPRAISER AND MY REMEDIATION COSTS WOULD BE ZERO.

Re read that if you have further questions.