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HUD 203k Rehabilitation appraisal?

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BigBlueGA

Thread Starter
Junior Member
Joined
Mar 13, 2002
Professional Status
Certified General Appraiser
State
Georgia
Anybody ever done one of these? How much would you charge? Anything weird about them that I should know about? (The HUD website is having issues so I can't get the docs on them that I was referred to)
 

Travis McGee

Senior Member
Joined
Sep 18, 2004
:D Has there been a work right up or a specification of repairs. If not you will need it before you can proceed with the appraisal. You do the appraisal subject to the hypothitical condition that all repairs listed in the work right up are completed. Attach the VC sheet with only that condition and make the work right up an addenda to the VC sheet. It is not any more difficult than any FHA appraisal.

:lol:
 

Wally Jones

Senior Member
Joined
Jan 23, 2002
Professional Status
Certified Residential Appraiser
State
Florida
Brandon,

Review Appendix B of 4150.2 if you haven't already. You might want to review the 203k consultant's write-up and visit the site before you quote a price to your client. Some of these can be quite complex and require a bit of research on your part. Also, check with your client to see if they need interior pictures. Seems that most do and it's easier finding that out now that having to revisit the property.

Good luck.
 

Leon Stewart

Member
Joined
Jan 15, 2002
It's best to know someone who has done these types of Reports before, and it's generally not a good idea to do any HUD Appraisal when you don't know how to do it. There has always been a problem with 203K's over the years and they (HUD) have changes the program two or three times and it has always been saturated with ambiguities, confusion and fraud. The Appraiser has to be careful while doing HUD work since it's considered that everything is the Appraisers fault. My personal feeling is that if you haven't done a 203K, leave it alone. The Appraiser has to keep his/her head off the chopping block as often as they can.

leon
 

Ben Vukicevich SRA

Senior Member
Joined
Feb 9, 2002
Professional Status
Certified General Appraiser
State
New Jersey
Brandon,

Consider 203k's like FHA new construction appraisals. There are no VC Sheets or HBS to fill out-they are not required for a 203k.

Complete your typical FHA inspection of the property listing all MPS deficiencies. Some lenders want you to inspect the home with the 203K Consultant and the buyer. I don't.

Next, review the 203K consultant's proposal. These are the "plans and specs" that you will appraise from. If any of your MPS repairs listed at the time of your inspection are not in the 203K consultant's proposal, STOP and call the lender. Your MPS repairs will have to be added to the consultant's proposal and the cost figures redone. Yes, 203k consultants do miss basic FHA MPS required repairs so look over the consultant's proposal carefully.

Appraise the home "subject to completion, etc" and place this statement by the value: The appraisal being performed is a 203(k) as improved per plans & specifications. A copy of the plans, specifications, work write-up and other conditions upon which the value was based are attached as part of the appraisal package. I put the statement in the Reconciliation section.

Good luck.

Ben
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
Ben and others who are doing these:
I was told several years ago that one had to attend specific 203 classes and be specially authorized to do 203k's .

I am pretty confident that I could do those competently, although very few are being done in this area, I was recently made aware that some one 45+ miles away comes over to our town to do them (I am dead sure I wouldn't go to over to KC due to comeptence concerns)... Of course the deals flew :roll: .

any pointers?
 

Leon Stewart

Member
Joined
Jan 15, 2002
Lee Ann:

You are right, there were many training programs offered by private vendors a few years back, and it was my understanding that an Appraiser had to be registered with HUD to do 203K's and the related Plan & Review Work. When this revised 203K programs resurfaced about 3 or 4 years ago many of us registered since Lenders had to know who HUD considered qualified to do that type of work. At that time (In my Community) there were only a handful of lenders making these types of loans, but after a year or so HUD revised the program and eliminated the Investor Participation in the program and made it owner occupant "only", and the program pretty much vanished after that, since the Investor's were the main part of the program.

I think there are a few 203K deals now from time to time, but it's still not practical to put significantly more into a property than what the market shows. Some people call that "overimprovement", but for the most part that's what the 203K does.

But like I said earlier, if a person (Appraiser) is not skilled at a certain type of work, he/she should pass on it. Plus the fact that HUD has mentioned on several occasions in the past that if they find errors in one of their Reports they will notify the Licensing Authority to get your License Supended or Revoked, and since you might only do one or two of these appraisals a year, it's not worth the risk, and in my area the lenders are having some difficulty getting appraisers to do any FHA Appraisals. The only Appraisers that are doing that type of work are the one's that are doing a large volume of FHA's. That way it would be worth their time, but one Appraisal is not worth your license.

leon
 

Ben Vukicevich SRA

Senior Member
Joined
Feb 9, 2002
Professional Status
Certified General Appraiser
State
New Jersey
Lee Ann,

I don't know the answer to your question. I've always done 203k's from the day there was an FHA roster panel. But I don't think there is a special panel for 203k's as they aren't any more difficult than new construction to complete. In the old roster days, there were separate panels for new construction, condos, 235's and 203k's. I think that stuff is long gone via USPAP competency.

If there was a special panel still in existence for 203k's, it makes me wonder how the lender was able to choose Brandon, if he wasn't on the so-called 203k approved list? So, it's probably up to the appraiser to accept or decline the assignment.

Maybe Brad 1 or Brad 2 will know the correct answer to your question

Ben
 

Leon Stewart

Member
Joined
Jan 15, 2002
Ben:

It's quite evident that Brandon's lender don't have a setup to do 203K, and that's why Brandon got an assignment he dosen't know anything about. Back in the day you could just "Wing-it", but with all the problem that the Appraiser is experiencing today about quality, I wouldn't advise Brandon to do something that could cost him his license. Things are not like they use to be. Brandon didn't even indicate who did the Plan & Review portion of the 203K that's required prior to completion of the first appraisal inspection, or did his lender expect him to complete that part also? That's the Spec writing part where a detailed set of Spec's with quality price estimates are done, and they have to be done by a different person than the Appraiser.

In my area when HUD was pushing this program they maintained a roster of Appraisers who specialized in "Plan & Review" and a roster of Appraisers who did just the related Appraisal. The first group had to show some background in spec writing. When a borrower made an application for 203K financing he/she would be given this list of "Plan & Review" individuals where the borrower selected a person to evaluate his/her project. There is a Form's Package that the Plan & Reviewer has to complete along with his set of spec's.

The 203K is not the same as a typical 1004 or 1025, the Plan & Review Section alone can cost at least 600 or $ 700 for a single family, and there is a before and after process with the Appraisal Report.

Back in the day when 235's and the old 203K were first introduced, neither program worked very well and they had to put them on the shelf. The 235 to me was always a silly idea, because it's suppose to show that an individual can own a house on a "Fixed Income" when few if any would be able to pay the monthly note while food clothing and utilities cost are increasing daily, and what are they suppose to do when the furnace breaks down in the middle of the winter. On a fixed income you don't have extra money for stuff like that, you are usually living month to month, and many don't even make it from month to month.

The 203K is also a worthless program, since it deals with overimprovement. Who in their right mind would put more money into an item than what they could resonably expect to get for it? In many cases the repairs on an older urban single family dwelling can be around 50,000, but the Market Value of a similar property in the community of the Subject can be only $ 40,000, so in order for the deal to fly the Appraiser has to inflate his value estimate to $ 50,000. What, an FHA Program that incourage an Appraiser to inflate the value of a property, you know, hitting the number and all that, no I don't think so.

leon
 

Ben Vukicevich SRA

Senior Member
Joined
Feb 9, 2002
Professional Status
Certified General Appraiser
State
New Jersey
Leon,

I think if Brandon is capable of completing a typical FHA appraisal, he should have no problem with a 203k. But that's my personal opinion.

He completes his inspection as he normally would for a typical FHA and works up the usual list of required MPS repairs. He then reviews the 203k consultant's plan to insure that all of the MPS repairs on his list are also covered by the 203k consultant. If they are not, he calls/faxes the lender with his additional list of repairs so the 203k consultant can place those repairs along with the costs to cure in his work proposal. The cost figures are then revised for the lender to work with and supplied to the appraiser to work from.

Brandon then takes the final spec list (just like plans and specs for new construction) and completes the appraisal with the hypothetical condition that the 203k consultant's proposal has been completed.

That's it. I don't think anyone should be afraid of a 203k-it's not as frightening as determining a 223E location(well, to me, of course). As you state, the competency provision comes into play (USPAP) so if the appraiser is uncomfortable with the assignment, it's best to turn it down.

You remember 235's??? You're giving away your age!!! I did a bunch in Camden, NJ way back in the 80's and when FHA asked me the REL, I told them 5 years before they were vacant and boarded AGAIN even with the subsidies. They bugged-out, couldn't lend on the 5 year REL and 223E'd them so I could state the home would physically "stand" for 40 years. And so it goes.....they'll make a loan via some "program" no matter what.

And with REAC essentially closed and the AQA review program shut down, I wouldn't worry about FHA "gripping" you up. They've gone back to the claims and defaults method of review-AKA they start looking when you start screwing-up too much. I'm sure Brad Ellis or Brad Pack could better explain what's happening with FHA field reviews of appraisals. It would probably be nice to discuss it as a separate thread in the FHA forum.

Ben
 
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