What a lousy document.
If you do a great deal of FHA appraisals, here is a mortgage letter to keep by your side ml-48 .
This is from Appendix D: Valuation Protocol:
"
<....... snip........>
NC,
You know, cherry picking documents doesn't exactly do the job of answering the questions.
The way I understand FHA is that, if repairs are needed, the report should be completed "subject to" these repairs. The repairs in this case are safety issues, including lack of railing on a deck and a loft area on the 2nd level. I have a lender that won't accept a "subject to" appraisal. They want the appraisal to be marked "as is" with a cost to cure for the repair items noted. Can it be done this way?
I'll happily take the exact same document you used and do my own cherry picking.................
The FHA Appraisal is made
[FONT=Times New Roman, serif]Under the following conditions[/FONT]
A. “As Is”
- There is/are no repair(s), alteration(s) or inspection conditions noted by the appraiser, or
- Establishing the “as is” value for a regular 203(k), or
- The property is being recommended for rejection
B. “Subject to Completion per Plans and Specifications”
- Proposed Construction where construction has not started, or
- Under Construction but not yet complete (less than 90%), or
- Regular 203(k)
C. “Subject to the following Repairs or Alterations”
- Repair or Alteration Condition(s) noted by the appraiser, or
- Streamline 203K, or
3. Under Construction, more than 90% complete with only minor finish work remaining (buyer preference items i.e., floor coverings, appliances, fixtures, landscaping, etc.). This eliminates the need for construction exhibits.
D. “Subject to the following Required Inspection”
1. Required Inspection(s) noted by the appraiser
Section "C" above clearly indicates that "
Subject To" requirements by an appraiser are allowed regarding matters of repair or alteration that call for such conditions. You borrowed what you copy and pasted from the FHA Quick Tips wherein it stated
" The lender will determine which repairs for existing properties must be made for the property to be eligible for FHA-insured financing. " as if this means all appraisers are prohibited from making subject to conditions for existing properties and it is the lenders responsibility to determine them. However, we drop down more into the document and we find ......
Required repairs will be limited to necessary requirements to:
- protect the health and safety of the occupants (Safety)
- protect the security of the property (Security)
- correct physical deficiencies or conditions affecting structural integrity (Soundness)
A property with defective conditions is unacceptable until the defects or conditions have been remedied and the probability of further damage eliminated. Defective conditions include:
- defective construction
- other readily observable conditions that impair the safety, sanitation or structural soundness of the dwelling
Who in the heck is FHA/HUD speaking to here in the above? This document is written with the understanding in it that " [FONT=Times New Roman, serif]
This section provides specific instructions for completing appraisal report forms. " [/FONT]
Well, if this is all about instructions for completing appraisal reports who is do the requiring for "Required" repairs? Who are they speaking to here? The lenders or the appraisers?
We continue on to the site section where we find...............
If hazards or nuisances are observed, the appraiser must describe the condition(s) and make a requirement for repair and/or for further inspection, and prepare the appraisal “subject to repairs” and/or “subject to inspection” in the site section of the report. Supporting documentation provided by the appraiser may include extra photos or copies of site studies or analyses, property reports, surveys or plot plans, etc.
The red fonts and bolding of them are mine. This section strongly implies it is, in fact,
the appraisers responsibility to make the call when "
subject to" conditions are to be required in the appraisal report. Now then, as to WHY this appears in the section discussing site and not ALL items of Safety, Security, and Soundness regardless of the appraisal report section they belong in becomes more than just a little bit of a mystery and oversight if anyone were to ask me!
Next, is another interesting conflict right off the bat in this document....
- [FONT=Book Antiqua, serif][FONT=Times New Roman, serif]The appraisal process is the lender’s tool for determining if a property meets the minimum requirements and eligibility standards for a FHA-insured mortgage.[/FONT][FONT=Times New Roman, serif]Underwriters bear primary responsibility for determining eligibility; however, the appraiser is the on-site representative for the lender and provides preliminary verification that the General Acceptability Criteria standards have been met.[/FONT][/FONT]
Personally, I think these are VERY confusing statements to be making to appraisers and underwriters both! .. Questions must be asked! Why are underwriters requesting statements out of real estate appraisers that both, or either, the MPR or MPS have, or are, met by the subject property? This document strongly makes it appear such statements are NOT our job! Our job is to outline repairs we believe are needed according to this document. AFTER that it is............................
The lender will determine which repairs for existing properties must be made for the property to be eligible for FHA-insured financing.
which I have to stress is NOT the appraiser making that determination UNLESS it becomes a Safety, Security, Soundness issue! This document says the appraiser only performs a preliminary verification of GAC.
In conclusion, once again I find documents, supposedly written for appraisers to follow, by secondary market players to be poorly written, hard to understand, and containing conflicting appearing statements even in singular documents. Let alone comparing different documents from the same sources. This documents author can't make up their mind what is the lenders responsibility and what is the appraisers, nor make it clear where one parties responsibility ends and the other begins. It implies compliance with MPR and MPS is NOT the appraisers call, it is the lenders underwriter's call and is to be based on the appraisers factual reporting of the property condition and issues.
Regardless of all of the above, I support the O.P.'s call to "Subject To" those second story missing safety railings under the "Safety" concept. The act appears fully supported by this document as we certainly have an example of doing so in the Site section and Table provided on page D1. I do not believe that once an item rises to this standard that any Cost to Cure is required as it MUST be done and the appraisal report is no good for funding a FHA loan unless it is completed because the value is now based on a hypothetical condition that the item is completed per the subject to conditions. It is a required item making the property completely unacceptable until the defect has been remedied. So what is the point of a C2C? I believe this next section supports my stand on this.....
If the condition is clearly a health and safety violation, contact the lender for further instructions before completing the appraisal. The lender must clear the condition and may require an inspection or reject the property. If there is any doubt as to the severity, report the condition and submit the completed report. For those conditions that cannot be repaired, such as site factors, the appraised value is based upon the existing conditions.
So if anything, the O.P. should have refused to complete the appraisal report until the client agreed to the "Subject To" condition or cleared the condition and called for a new appraisal assignment. Also, in my opinion, there is no way to proceed if severity is in doubt unless CB4 is used thereby calling for a third party inspection and employing an EA regarding the items is used. If there are unrepairable site factors involving Safety, Security, and Soundness, then most likely it constitutes a VERY complex appraisal assignment that requires a bunch of third party reports in order to proceed.
Webbed.
