Are the cracks severe enough to make the condition of the property fair? I would be careful about using CB4 and assuming when it comes to structural issues. Sometimes it's appropriate to use fair condition when there are very obvious problems, rather than making assumptions based on inspections that may very well render negative results, or involve a "Skippy" engineer who wants to collect a fee (they are everywhere).
Repeat this 3 times: Appraisers are not home insepctors
Appraisers are not home inspectors, Appraisers are not home inspectors. If an appraiser see cracks that are not typical, how is he qualified to determine if these cracks present a major structural problem or just a minor problem that is easily reapired? Why would an appraiser even try to make such a judgment?
If the lender hires a skippy engineer and an u/w signs off on the conditions, that is really not the concern of the appraiser as long as the appraiser made the proper disclosures and properly conditioned the appraisal report on an insepction and required repairs to be made by a certified structural engineer.
This has been one of the most difficult transitions for me between the fee and staff worlds.
Think about it from this perspective: There are wicked cracks that may seriously compromise the structural integrity of the improvements. The appraiser is only interested in covering him/herself and approaches the assignment from that perspective so he/she uses CB4 and appraises the property "as if" in average condition, subject to an inspection. How does that do anyone any good? What is the true condition of the property? Is it a few typical settlement cracks that every property in the neighborhood has, or is it the floor is sloping and the foundation islikely failing?
Good appraisers who know the neighborhood can usually tell the difference and will be able to rate the condition of the property accurately. I recently drove properties with my upper management and was mercilesslly criticized for using CB4 when I should've called the properties fair or poor ... lesson learned ... :laugh:
You have got to be kidding me...repeat after me 3 times.....appraisers are not structural engineers, appraisers are not strutural engineers, appraisers are not structural engineers.
The lender is concerned with the true condition and marketability of the property. The two sides are approaching the problem from different angles and they rarely meet. After being inside the lending world I've finally grasped the value of the "as is" appraisal.
Just how does the lender know about the true condition of a property with significant cracks unless a structural engineer looks at the property? I recently did an appraisal on a property that had some unusual foundation cracks that did not look that bad by themselves, but I noticed a 1-2" gap between the concrete front porch and the rest of the house that set off alarm bells and I ordered an engineer's inspection. The engineer's report found a serious strutural problem which required $25,000 to address.
If the cracks are significant and compromise the integrity of the structure then it's FAIR (or even poor) condition.
(again, in all but obvious cases how would an appraiser determine if the cracks compromise structural integrity?) Lenders generally don't want properties that have structural issues, for obvious reasons. If the appraiser makes the appraisal "subject to" any inspections or conditions then the UW is free to waive them to make the loan.
(if an underwriter waives an appraisal condition, it is hard to see how that somehow makes the appraiser liable) When the condition is fair or poor the loan generally won't be made, with no weasel room for the LO or AE. A list of "subject to" items can be buried and THAT'S when the appraiser's *ss will be on the line. Think about where the true liability lies ... :new_smile-l:
I have thought about it and have concluded that the true liablity lies where appraisers act like they are structural engineers.
CB4 is (my guess) Fannie's way of tossing the problem to the lender (and appraiser!) as an out for buying back the loan if it goes bad. In turn, lenders want to know the straight up condition of the property, without all the CYA. Tell the truth and you won't be sued, seriously.
Telling the truth will reduce liability, but making judgments about things that an appraiser is not qualified to judge will most certainly lead to more liability.
The communication is broken and the chain of reporting rests on liability, rather than the truth about the property. Turn time pressure is secondary when I can finally call "fair" and "poor" like I see 'em ...
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