Help with sneaky borrower and builder...

[Tater Salad]

I have run into a "unique" situation for me and I'm not sure how to proceed.

New construction per plans and specs. All seems fine, value not an issue.

I am sent out to do the 442, and some things are missing. There is no sod, no deck, no patio, no inground sprinkler system.

The borrowers happen to be doing their walk through and are as happy as clams. They say that the builder fell behind and is going to be finishing these things up after closing. I do my 442 showing that about 15k is incomplete. The lender agrees to close with this money in escrow, all seems to be going smoothly.

The borrowers protest the escrow! It turns out that they never intended for the builder to complete the items. They had an "agreement" with the builder to include these items in the sale price and contract, and the builder was to cut them a check at closing for the 15k. Unbelieveable.
Still, if they were truly planning to do these things, escrow should be ok, right?

Instead, they do a change order today removing these items. I have never had this happen before. Is this common?

Question: Do I do a new appraisal? Do I just state the new opinion of value on the 442 and keep data to support it in my workfile?

I never appraised a house without grass, either, and I suspect this is some sort of cureable functional adjustment with hopes that the yard doesn't wash away before they get around to it.

Of course these people are closing on Monday, and heaven forbid that their own trickery should delay the closing. HELP

 

[larryhaskell]

Calotz:

Sometimes items are added following the inspection/appraisal (usually upgrades in new homes) or in this case something is taken away. I think you would call this an update. If you gave value to those items you will need to reconsider the sales utilized in the report and very likely one or more may need to be changed. Certainly your adjustments will change. Doing an update can take more time than you might suspect so charge accordingly.

 

[larryhaskell]

Calotz:

A second thought. You will need to reinspect the property to verify any and all changes made. There could be some they didn't tell you about. I'm sure you know to change the inspection date in your report. And by the way, the parties involved will likely do everthing possible to get you to accept responsibility for what has taken place. Properties closing after the desired date happens all the time. While it may be an inconvenience, its seldom fatal.

 

[Tater Salad]

Thanks for the quick response.

I thought about an update, but thought the physical changes would prohibit. I'll just disclose the changes and regrid. Sounds good.

You bet I'll charge accordingly, for a "please rush because I lied to you" appraisal. Thanks again

 

[larryhaskell]

Calotz:

Because I'm a proud member of AARP, I don't think of everthing at once. Include a statement in your report indicating that it is an update of a report originally completed on 00/00/02. Inform the reader to review this report in conjunction with the one submitted earlier and explain every change made in the improvements and your report.

 

[Anonymous]

If the estimate of value in your report was based upon completion of the items in question and the items are then deleated I would insist on doing a new appraisal. It is quite possible that the lack of a lawn may reduce the value of the improvement.

 

[rtubbs]

Calotz, take a look at Fannie Mae Selling Guide (Section 201 and 202) and USPAP A0-3).

The property has undergone a change since the original appraisal. The selling guide (primarly discussing if the age of the appraisal is over 4 months old) indicates that a new appraisal has to be made. A0-3 says that one of the conditions that must be met for an update is that the real estate has undergone no significant change since the original appraisal.

Your situation smells of corruption. If it were me, I would prepare the 442 and specify what is lacking and inform the client that the items remaining do impact value. Let them stick their neck out.

 

[Tater Salad]

rtubbs

That is exactly what I did. I stated that the items impact value and the agreed upon cost of these items per the contract totalled $15k. I didn't state the amount of the impact, but it was enough for the lender to require escrow for these unfinished items. It's a good thing, too. The broker that engaged me had no idea this was happening, either. I guess the builder just thought the appraiser would look the other way. The broker must be defending me because I haven't gotten any irrate calls from the borrower or builder.

The broker told me to do whatever I need to to make this right, including a new URAR if required. I wanted to hear what others do in this situation to make sure that I'm covering my, uh, bases.

 

[Pamela Crowley (Florida)]

I absolutely would do a new URAR and believe you must - legally.

 

[George W Dodd]

If there is no intention of completing these items then I agree that you should do a new appraisal, because the subject has significantly adverse change and may have marketing problems. I had a situation similar a few years back on new construction that a homeowner was doing. When I went out to do the final I found that the upstairs had not been finished and instead of a three bedroom cape the subject was now a one bedroom house.
The lender required a new appraisal on the spot.
Makes you wonder who was doing the construction inspections?