Fire damage discovered during pre-foreclosure exterior/driveby.

[spittman]

Client is not sure what type of appraisal they want and neither do I.

So initially I received an order for a 1004 HUD PFS (pre-foreclosure) property. This was for a default property with an FHA reverse mortgage. Like many assignments before, I called the contact number but failed in gaining interior access, therefore, the AMC downgraded the order to a 2055 exterior only. Before setting my driveby appointment, I let the client know that there was a possibility I would not be able to see the front of the property since it was in a very private gated community. They tell me to proceed and to provide a picture of the gate with an explanation. When I do my research, I find a listing of the Subject Property which expired less than a year ago ... beautiful home!

Not satisfied with just getting a picture of the gate, I successfully gain access beyond the walls of this private community by scheduling showtimes with several "potential" active comps within the same neighborhood. I go and take pictures of all the comps and on the way out I drive by the Subject and voila! ... the garage is totally destroyed by fire and affixed with yellow warning tape. When I leave, I ask the gate guard about it and he says the fire occurred just a couple months after the owner passed away last year. He also said the fire was contained to the garage only and that insurance people and contractors had came out to look at the property also. Looking at my photos, it does appear most of the damage was done to the garage, but I do notice traces of soot along all the windows including the top floor. I don't know, I think a full interior floor to floor deep cleaning at the very least so not just damage to the garage.

I go ahead and let the client know and send pictures of the exterior. Now to be honest, I was fully expecting them to cancel the order and just pay a trip charge fee. Weeks later, still on hold, and several emails back and forth, they messaged me that they may possibly need a land appraisal. Now my experience with fire damage is a total of exactly 1 that I did a decade ago and I was fortunate enough to have a near match with a fire sale just a few blocks away. With this assignment I feel the circumstances are different. Without giving it much thought, I told them that proceeding with any appraisal would require extensive SOW and of course a higher fee. Their response was do I still want the assignment or not?

Well ... do I???

My biggest fear is that I will dragged into some type of litigation between the lender and the heirs, if any (have not confirmed this). I don't know if the loan was accelerated due to the owner's death or because of some other reason. I also don't know if the insurance company was brought in by the lender, the family, or some other 3rd party.

Other concerns are:
-if they still want me to proceed with a 2055 with an as-is value which I don't think I could do without knowing how much damage was done to the inside.
-if they ask for retrospective appraisal day before it burned (of course I don't know the date and they would have to provide me with that info).
-and if I proceed with a land appraisal do I use unimproved vacant lots and make an adjustment for razing the Subject or would I just use a hypothetical like nothing is there plus a lot of extraordinary assumptions since I only did a driveby?

Sorry for the long post, but just wanted to rant.

 

[Tim The Enchanter]

A 2055 is not appropriate for what you now know.

Land value only or something better, I would want to see it in person.
Actually I would not want to do it at all. Cancel.

 

[Carnivore]

WOW! I see the problem here is you being unable to communicate directly with the Client because of the AMC. It does not matter what you tell the AMC they will screw that up. Fee and turn time is always the 1st consideration with them. I am sure your right about legal stuff taking place, simply because their is an estate in progress. There is most certainly an Insurance company involved who also is getting some form of valuation on the property.

You can get the actual Date of the Fire from the Fire Department. The security Gate people will likely have a Log in the Gate house. Someone has a key to the house, most likely the Executor of the Estate. You can bet there is one.

Smoke damage could very well be extensive on the interior. There may likely be extensive attic damage.

The real problem I see is the language in the 1004/2055 cert/limitations page. I also find it strange that they initially wanted a 1004, but now all of a sudden their good with a 2055, even though you now you can get access. Then again, do you really want to enter a house where there is fire damage. Insurance companies pay much better than AMC Phone Monkey Dot Com just because of the hazard to you.

Walk away from them. I know some here will say I am being overly cautious. Yep! I am. AMC's have a poor track record! HECM is a strange program. In all the HECM REO I have done, the Mtg History recent amount was surprisingly high compared to the MV of the Subject. FTR, i am almost certain there will be another Appraisal done after your's. I can not say publicly who will be doing that assignment, it won't be going through an AMC.

 

[J Grant]

why all the fear and paranoia? And if you do /did your job, even if the remote chance you are "dragged into litigation", it will be dismissed. This is a simple request.
They want to know land value, and that needs a separate land appraisal.

Either do it or not, if you do not want to , explain you do not feel competent enough about land appraisals for assignment, or are backed up a month and can not deliver it in a timely manner, can they reassign it,

 

[Carnivore]

I appraised a vinyl village REO quite awhile back. When I was taking exterior photos on the back where the Zero Clearance FP was located the exterior wall was damaged fairly well. It appeared to be caused by the FP. Looked strange to me so i called a very good friend who was a High up Charlotte FP Department Employee. I sent him the photo and address. About 30 minutes later he called me back and said that was an arson attempt by the people who got foreclosed. He told me the people were pretty slick trying to make it look like a defective FP, but they were amateurs. They had built a wood fire right next to the outside wall of the FP. The Fire Department quickly determined it was arson. LOL people do desperate things sometimes.

 

[Mr Rex]

You could do it as a land appraisal but be sure to do a H&BU analysis as unless the cost of repairs to the main structure exceeds the contributory value of it "As Is" then H&BU is to repair. FWIW, if its only smoke damage, a deep clean, fresh paint, and floor coverings would likely be all that is required. Hardly enough to require razing. MHO.

FWIW, my mom left something on the stove and caught the cabinets on fire. Heavy smoke residue throughout the house. A company like ServPro or similar came in, pulled out all the floor coverings, cleaned everything, repainted and put in new floor coverings and kitchen cabinets. Roughly $25k cost to the insurance company.

 

[J Grant]

with respect, if they want a land appraisal , not our issue to address an unknown cost of repairs - we have no idea of interior fire damage , whether or not enough cause to tear down the property vs repair it.

" Purpose of appraisal -opinion of market value of the site ( legal description x) There is an existing dwelling on the lot, an exterior drive by showed fire damage to the garage. The interior was not inspected, condition of interior unknown. "

HBU would include assumption a buyer is more likely to demolish for site vacant, then go on to appraise it for land value (or decline assignment )

 

[Mr Rex]

Quite an assumption, since H&BU is so important. Ask Lee.

 

[J Grant]

Quite an assumption, since H&BU is so important. Ask Lee.

It is important, but since appraiser did not inspect interior, should appraiser open themselves up to the other assumption- that interior damage may not warrant a tear down?

We simply do not know - I personally would not want the liability of assuming interior damage can be repaired for X $ costs, or is limited to X...can reference that an appraisal for value of dwelling and site if dwelling interior damage is not enough to warrant demolish . Either way the assignment is based on an assumption. .

Appraiser state they did a prior subject service within past 3 years - the first drive by inspection ( or the appraisal if it was completed )

 

[Mr Rex]

Making the assumption that it should be demolished could be misleading. Unacceptable assignment condition if you can't inspect interior or are provided with a estimated cost of repairs. MHO