Heating

[FRANK PERKINS]

Opinion please on how to handle a situation where the home originaly had a wood burning stove which has been removed.
This is in an area with a mild climate where some people who have gas wall heaters or forced air units do not use them.

In this situation the owner indicated they had removed a wood burning stove becuse it was not used.
The owner/borrower was asked what they used to heat the home. The response was: "If we needed heat we would use electrec radiant heaters".

Opinion please: Is is logical note "none" and give an estimate of Cost to Cure to install a wall heater in this situation? The estimated cost (National Building Cost Manual) is $800 to @1,000 for a gas duel wall unit. This is an area of 40 to 50 year old homes, most with gas wall heaters, some have been upgraded to fwa (fau) units.

If this were a purchase would you use the same logic?

 

[Otis Key]

Do the sales that you're planning on using the report have heat? Do the listings in that market have heat?

 

[CANative]

Otis...

most with gas wall heaters, some have been upgraded to fwa (fau) units.

Frank, what else can you do. Adjust downward for the price of a typical heating system for that market plus make a guess in terms of dollars how a buyer might react to having to go to the trouble of arranging for the purchase and installation. I usually make an adjustment of about $1,500 for a wall unit or EBB.

I'll bet if you looked hard enough you would find a sale of a home with no heat.

 

[hastalavista]

Mild climate or not, I don’t think non-heated area qualifies as living area?

Cost to cure is one route, and may be most appropriate. If I were to go that way, I’d also use CB#4, and make a statement such as

“ Per my site visit/interview with owner, I have confirmed that the subject currently has no permanent heating source installed or functioning. I have made an adjustment for this deficiency (Cost to Cure: installation of permanent wall heating source). My adjustment reflects the cost to install such a source and return the home to a functional and marketable condition. The Underwriter is advised that the subject does not have a permanent heating source: This factual condition may be a consideration in my client’s underwriting/lending decision. I have made the appropriate adjustment to reflect the market reaction and to arrive at a credible and reliable Opinion of Market Value. I’ve made this report “subject to” Underwriter reviewing this situation.”

This way I’m covered all the way around. The UW may not like it, but tough! I’ve made the market adjustments I think is correct, I’ll let him/her make the “underwriting guideline compliance” decision.

My 2-cents.

 

[Randolph Kinney]

I believe Fannie Mae has a requirement that the home conforms to the neighborhood (IE, heating and cooling systems) and they want a permanent source of heating the livable space. Space heaters do not qualify.

I did an appraisal where the subject had a wood stove as the source for heating. That is not acceptable here, according to the underwriter. Typically you have wall units or FAU.

As the others have pointed out, make the disclosure and adjustment. Denis has said it the best.

 

[Otis Key]

I wasn't going to just give it to him, but here you go:

XI, 405: Improvements Analysis (06/30/02)

The appraiser must provide a clear, detailed, and accurate description of the improvements that is consistent with the level of fieldwork we require in connection with the appraisal assignment. The appraiser should be as specific as possible (commenting on such things as needed repairs, additional features, modernization, etc.) and should provide supporting addenda, if necessary.

Some of our appraisal report forms require the appraiser to provide a comprehensive description of the improvements, which should include a general overall description and specific descriptions of the exterior, foundation, basement, insulation, interior surfaces, heating and cooling systems, kitchen equipment, attic, amenities, and car storage. If the property that is being appraised includes an accessory apartment, the appraiser should describe it in the "comments" section of the "improvements analysis" portion of the appraisal report form.

XI, 405.01: Conformity To Neighborhood (06/30/02)

The improvements should generally conform to the neighborhood in terms of age, type, design, and materials used for their construction. If there is market resistance to a property because its improvements are not compatible with the neighborhood or with the requirements of the competitive market—because of adequacy of plumbing, heating, or electrical services; design; quality; size; condition; or any other reason directly related to market demand—the lender should underwrite the mortgage more carefully and, if appropriate, require more conservative mortgage terms. However, the lender should be aware that many older neighborhoods have favorable heterogeneity in architectural styles, land use, and age of housing. For example, older neighborhoods are especially likely to have been developed through custom building; this variety may be a positive marketing factor.

In the appraisal and underwriting process, special consideration must be given to properties that represent special or unique housing for the subject neighborhood. Mortgages secured by nontraditional types of housing—such as earth houses, geodesic domes, log houses, etc.—are eligible for delivery to us, provided the appraiser has adequate information to develop a reliable opinion of market value. It is not necessary for one or more of the comparable sales to be of the same design and appeal as the property that is being appraised (although appraisal accuracy is enhanced by using comparable sales that are the most similar to the subject property). On a case-by-case basis, both the appraiser and the underwriter must independently determine whether there is sufficient information available to develop a reliable opinion of market value. This will depend on the extent of the difference between the special or unique property and the more traditional types of houses in the market and the number of such properties that have already been sold in the market area.

• If the appraiser cannot locate recent comparable sales of the same design and appeal, but is able to determine sound adjustments for the differences between the comparables that are available and the subject property and to demonstrate the marketability of the property-based on older comparable sales, comparable sales in competing neighborhoods, the existence of similar properties in the market area, and any other reliable market data—the property is acceptable as security for a mortgage delivered to us.

• If the appraiser is not able to find any evidence of market acceptance and the characteristics of the property are so significantly different that he or she cannot establish a reliable opinion of market value, the property is not acceptable as security for a mortgage delivered to us.


We do not specify minimum size or living area requirements for properties. However, dwelling units of any type should have sufficient living area to be acceptable to typical purchasers or tenants in the subject market area. There should be comparables of similar size to the subject property to support the general acceptability of a particular property type.