Foreclosure Appraisal Question

[Riick]

I don't see the problem.
You "know" (or were told) there's a leak.

• Listing Broker and Seller both know same thing.
• Selling Broker knows same thing
• Presumably, Buyer knows same thing
• If you inform them, Lender knows same thing.

SO... What is being hidden? Nothing.
Who are you protecting? No One.

The buyer is buying cheap because the property has problems.
The buyer presumably will fix them, or live with basement and 1st floor awash with water.
Which do you think is more probable?

again.... Who are you protecting? No One.

 

[Em Tee]

I'm with you on this one. Our client is the lender, the person lending the money, do they really want to loan on a property that has a sustantial leak which could damage the structure of the home? I think not. Who cares about the seller, borrower or agents involved, they are not our client or the ones funding the loan.

If the seller refuses to repair prior to selling, let the parties involved set up an escrow situation so that the lender makes sure the repairs are made ASAP after settlement.

These sellers of foreclosure properties, it is amazing how much they will cooperate once they see that this the only way to close the deal, stand fast. Clients can not negate minimum property standards for Fannie/Freddie or FHA.

And what are those "minimum property standards" (show me where Fannie/Freddie says that)? They want it valued as is, there's nothing that says it can't be valued that way. I've done lots of foreclosures/REOs that were in less than ideal condition. State the condition, adjust for it, and be done with it.

 

[Goosegirlz]

Be careful about how you word "check the systems..etc.." unless you are a home inspector. Also, if this is a conventional loan..you don't have to worry about the utilities being turned on. Only FHA requires that.

 

[JSmith43]

Be careful about how you word "check the systems..etc.." unless you are a home inspector. Also, if this is a conventional loan..you don't have to worry about the utilities being turned on. Only FHA requires that.

I'd sure want to recommend that plumbing and electric and other items affected by the utility shutoff be inspected or warranted in some way, since if the place leaks like a sieve or needs a now electrical service, it could have a significant effect upon value.

The client needs to know that the inspection happened when utilities were off.
That darned Fannie form is a PITA, since you really need an EA and checkbox marked (subject to inspections or conditions).

 

[angdw]

Thanks for all the replies...As to the one questioning whether or not this was an FHA deal...no it is not; however, FNMA Guidelines, in regards to existing properties, state that an appraisal must be made "subject to" and complete any repairs that may affect the structural intergrity or soundness of the property, which is why I did so in regards to the plumbing leak. Yes, when the utilities are off, we generally make an extraordinary assumption that they work properly, but were not able to test and many times we are sent back for a final after the utilites are turned on. In this case, the water was turned off and I was told in advance of the substantial leak. I agree with TJSum's response, regarding my duty to the client/lender. Any feedback is greatly appreciated. I want to take care of my client, but I also want to follow and adhere to guidelines. Say someone turns on the water and the water is on 24 hours or so before anyone enters, at which time the house is now flooded and I completed and "as-is" appraisal, knowing of this leak...what now?

 

[angdw]

FNMA Guidelines...Chapter 2 #202: Status of Construction----

Section 202 - Status of Construction​

For proposed construction, the appraisal may be based on plans and
specifications if the lender obtains a certification of completion before
it delivers the mortgage to us. This certification should be completed
by the appraiser and must be accompanied by photographs of the
completed improvements. The appraiser must certify that the
improvements were completed in accordance with the requirements
and conditions stated in the original appraisal report. Minor items that
do not affect livability may be incomplete (if weather-related
circumstances prevented their completion) as long as the lender has
arranged for an adequate escrow to guarantee their completion. (We
consider funds equal to at least one and one-half times the cost to
complete the items as a reasonable amount to escrow.)
For existing construction, the improvements must be complete when
the mortgage is delivered to us. The appraisal may be based on the
"as is" condition of the property if minor conditions that do not affect
the livability of the property exist--such as minor deferred
maintenance--as long as the appraiser's estimate of value reflects the
existence of these conditions. The lender must review carefully the
appraisal for a property appraised in an "as is" condition to assure
that the property does not have any physical deficiencies or
conditions that would affect its livability. If there are none, the lender
does not need to require minor repairs to be completed before it
delivers the mortgage to us. When there are incomplete items or
conditions that do affect the livability of the property--such as a
partially completed addition or renovation--or physical deficiencies
that could affect the soundness or structural integrity of the
improvements, the property must be appraised subject to completion
of the specific alterations or repairs. In such cases, the lender must
obtain a certificate of completion from an appraiser before it delivers
the mortgage to us. The certification does not need to include
photographs of the property unless those that accompanied the
original appraisal report are no longer representative of the
completed property.
Generally, the original appraiser should complete the certification of
completion; however, the lender may use a substitute appraiser. In
such cases, the substitute appraiser must review the original
appraisal and certify that the appraiser's description of the property
was accurate and the estimate of market value was reasonable on
the date of the original appraisal report. The lender should note in its
files why the original appraiser was not used.​

So, I based my "subject-to" appraisal based on the above guidelines...am I wrong here???

 

[Kali the Boston Terrier]

1) Its not for a loan, so the FNMA guidebook, which is a tool for underwriting a loan is inapplicable.
2) Call for the entire plumbing system to be replaced if this is of such concern, because if the entire livability of the home is in question because of a leaky pipe or toilet...than the entire plumbing system might as well be replaced to let you sleep easier at night.
3) Stop thinking like you are doing a lending assignment...these are REOs different SOW, different expectations.

Are you sure you have done these before?

 

[angdw]

Actually, this specific assignment is for a conventional loan...the buyer is financing the property for 30 years (not your typical investor purchase). Am I missing something here?

 

[Em Tee]

I recently inspected a foreclosure property, which was Winterized and the water was turned off, due to a leaking toilet.

I still don't see how that would affect the soundness or structural integrity of the property unless it was one hell of a severe leak!!! Unless it's been flooding the house and caused major damage, do it as is, put in a cost to cure, and be done with.

 

[Riick]

The OP clearly wants to do it his way,
and given that, I wish him well, and say
DO IT YOUR WAY.

Mods.. is it time to close this thread?