• Welcome to AppraisersForum.com, the premier online  community for the discussion of real estate appraisal. Register a free account to be able to post and unlock additional forums and features.

Help....new Construction Experts!

Status
Not open for further replies.

EricKirby

Freshman Member
Joined
Feb 13, 2003
I recently did an appraisal on a new home that was under const. and based the appraisal 'subject to completion per plans and specs'.


I had to go out and again to verify completion, etc. Since my inspection was under construction I based it on the specs and upgrade sheet. Since that time the new owners added some additional upgrades (additional fireplace, corian counters). Now the adjusted sale price has increased $5,300. My initial appraisal came in at $350,000 and the original SP was $348,000.

I've jsust started doing new construction. How should I handle this? Just update the origninal appraisal with the new updates and an adjusted price based on these upgrades? Is the 442 form not needed since there has been changes? And what would be a typical fee to charge for this. Just a trip charge? Any help would be greatly appreciated. Thanks.


USA.....USA.......USA
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
Eric:

Jo Ann Meyer Stratton is the resident expert on updates and how to use them... I did a quick search and could not locate the specific one I was looking for but I will cut and paste a portion of one that I think is applicable to your situation AND suggest that you research the source material she cites: I have severely edited her response for clarity and applicablity to YOUR question... and couldn't figure out how to get you directly to that post :redface:

Originally posted by "Jo Ann"


http://www.adfinet.com
or
http://www.allregs.com/efnma/index.asp

Advisory Opinion 3 of 2003 USPAP

http://www.appraisalfoundation.org/html/US...PAP2003/toc.htm

A ...{snip}... {...Lee Ann adds... "final inspection"}only confirms that the home was completed or remodeled to the original plans and specifications and that the value that was in the original report was valid for that original effective date. ...{snip}...

An "Update of a Prior Assignment" is for a current opinion of value and would require research and analysis of current market data as of the new date. Fannie Mae requires at least an exterior view of the subject property. ...{snip}...
Several of the software vendors have a form in their packages...{snip}...that is titled Appraisal Update. ...{snip}... That Appraisal Update form, with some additional items required by 2003 USPAP, could be utilized in that situation. AO-3, option 3 requires seven items to be covered. The form lacks an intended use and intended user. Compare the form to Option 3 of AO-3. Also select the one that includes a signed certification required by Standards Rule 2-3.

So, if you have a client that plans to sell the mortgage to Fannie Mae:...{snip}... If the value has not declined, then a letter or an Appraisal Update form like the software vendors have developed could be used--

If ...{snip}... something has happened to the property--...{snip}... remodeled, etc, etc,--than a completely new 2055 or 1004 could be done (Option 1 of AO-3). If minor items, than option 2 of AO-3 might be applicable. ...{snip this part moved}...Market data could be either retained in the appraiser's files or a comparison sales grid could be attached to the letter/form, comparable photos, location map could also be attached (appraiser's choice or specific lender requirements).

...{snip}...prepare an update to a prior assignment in compliance with USPAP and everybody is happy.
 

Bill_FL

Senior Member
Joined
Aug 23, 2002
Professional Status
Certified General Appraiser
State
Florida
Call your client. Are the borrowers in need of additional money? IF not, complete the 442 with a note that the home appears to have been finished with somewhat higher quality materials than originally called for in the specs and that it has no negative affect on value.

That should be plenty. If they do want a new appraisal, then do one. But 99 times out of 100, they do not.
 

Jo Ann Meyer Stratton

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Arizona
There are a whole batch of comments in the Urgent-Help forum--the sticky by recerts.

You do need to talk to your client. If all they want to know is if the home was completed to at least the minimum of the plans and specs, then just a simple 442 that the home was complete (do NOT say a single word about value). Even if they did install expensive ceramic tile instead of very cheap sheet vinyl that was called for in the plans and specs. If the original plans and specs called for expensive flooring for example and they installed cheap materials, then it has not been completed to plans and specs and the 442 would have those problems disclosed.
That is one assignment and one invoice.

Next question: do they want to know if today's value has declined since the original effective date, and if the answer is no after looking at current market activity, then follow Advisory Opinion 3, option three (since you are the original appraiser and the original lender is involved) for an Update to a Prior Assignment and either write a letter that has everything that AO-3 requires or use the Appraisal Update form in Day One, Ala Mode or ACI with an attached addendum that covers the requirements in AO-3 that the form does not include. That is a second assignment and a second fee.

If their question is: has the property value increased since the original effective date due to the upgrades, changes, etc--then you could follow Option one of Advisory Opinion 3. You could complete either a 2055 or a 1004 to report current improvement and market conditions. That should be the situation also if they went cheap and the value as of the new effective date would be less than the original appraisal report, although that Appraisal Update form that the software companies have does ask if the value has declined. So you decide what would be the most applicable response and you decide what the appropriate fee would be. That would be the second assignment and the second fee in that situation.

If the lender doesn't like your fee, thats tough, they can go have a new appraisal done by a new appraiser--which would probably be more expensive and take longer than if they accepted your terms.

Remember, if the appraiser mentions anything about value, they have completed an appraisal--and Standards 1 with all its requirements applies!
 

Bill_FL

Senior Member
Joined
Aug 23, 2002
Professional Status
Certified General Appraiser
State
Florida
The only disagreement I have with JoAnnis about mentioning value. From experience with underwriters, I have found that if you mention any change from the original specs, they want to know if it has negatively affected the value. You can do this in compliance with AO3 on the 442.
 

Jo Ann Meyer Stratton

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Arizona
When the underwriter wants to know if those changes have a negative effect on value--they are asking for an appraisal. So then the appraiser has to figure out how they can be in compliance with Standard 1--the whole chapter. One line on the 442 doesn't do it--because you are writing an appraisal report with that one line--so then Standard 2 kicks in. So if you decide to have one line on the 442 (the old writing a report on a paper napkin thing), then you have to have a very thick work file to be in compliance with Standard 1 that supports that one line. Standard 2 then requires items that are binding to be in a report--so then you have a very thick addendum attached to that one line to be in compliance with Standard 2.

So I still stick with my statement of do not say a word about value on the 442--if you do, you are completing an appraisal for free. Now a statement on a 442 that plans and specs included a swimming pool that was to cost $10,000 per plans and specs has not been installed would be okay. But if you say the total value of the property is now on the new effective date $100,000 because the property lacks a swimming pool instead of the $110,00 value on the original effective date, which included a swimming pool---you have just completed an appraisal. It is up to the underwriter to decide what they are going to do with that missing swimming pool, either lower the mortgage amount to whatever they decide or make sure that swimming pool is installed--but the appraiser wouldn't be involved. Unless they decide the swimming pool is to be installed, then they would order a second 442 from the appraiser after the pool is completed.

So if the underwriter wants to know what negative or positive effect on value the lack of or the addition of something has on value--they will have to order an Update to a Prior assignment, although they would probably be using terms like "recert" or "drive-by" or "opinion of value"--but it would be an update regardless.
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
I typically list the changes and then say, no change in value. Sounds like they want to you to change the appraisal to include the changes...new appraisal, new effective date, new bill.
 

Michael Giampa

Freshman Member
Joined
Dec 14, 2002
If you dont change the value to accurately reflect the changes in value the borrowers will have to come up with the difference in cash! Why do that to your client or borrower? Let's do it the EASY way. Say the subject propery was complete with changes at the time of the inspection on your 442. Add the changes to your page 2, obviously the changes should reflect a higher value (FP has a data field of its own and put an Additional Features data field in the last data field in the grid to account for the Corian etc and adjust your comps accordingly) and the new inspection date should match your 442 date. Youve charged 75-100 for the 442 so get it out! Jeez, it's not rocket science.
 

Jo Ann Meyer Stratton

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Arizona
Michael: You have just described an update--so make sure what you did is in compliance with Advisory Opinion 3.
 
Status
Not open for further replies.
Find a Real Estate Appraiser - Enter Zip Code

Copyright © 2000-, AppraisersForum.com, All Rights Reserved
AppraisersForum.com is proudly hosted by the folks at
AppraiserSites.com
Top

AdBlock Detected

We get it, advertisements are annoying!

Sure, ad-blocking software does a great job at blocking ads, but it also blocks useful features of our website. For the best site experience please disable your AdBlocker.

I've Disabled AdBlock
No Thanks