Hypotehtical condition

[gorillakimchi]

Couldn't said it better myself.
However, I would immediately contact the client/lender and tell them the situation.
Client/Lender will tell you to do appraisal as-is, subject to, or lender will not do the loan.

Got it!

 

[Dublin ohio]

I will see the property condition and let the client know. It's holiday weekend, so I'm not sure that they will respond promptly

Why not just ask the borrower where they are in the remodeling. I can't imagine them lying to you since you will be seeing the property if the lender decides to proceed or you could just not tell the lender upfront and at the minimum collect an inspection fee

 

[Fernando]

Whenever you have a question, let client/lender know.
Such a home in need of repair probably be a portfolio lender or hard money.

 

[sputnam]

1. Should I appraise it "as is" or under a hypothetical condition?
2. If it’s a hypothetical condition, could you please share some useful tips?

1- You should appraise it the way your Client has requested. Unless the owner is also your Client, they have no say in the matter.

2- In the case you describe, it's simple. You pretend like the remodeling is already complete. Make sure to clearly state the work that will be done, check the correct box in the reconciliation section (if it's a form report or clearly state the hypothetical condition if it's not a form report), and to include the statement 'The use of a hypothetical condition might affect assignment results.'

 

[J Grant]

If you make it subject to remodeling, you have to make the report subject to completion of the remodeling. (and them someone inspects it or signs off that the work is completed. When that happens, normally the lender does not fund the loan until the work is completed.

Definitely ask your client, but most likely, they want it done as is. We can't literally follow an owner's instructions about how they think the property should be appraised. We can't stop them from telling us, but we have to take it with the view that they do not understand the process.

The owner is trying to borrow money to put in a new kitchen, and in their mind, it should be appraised as if the kitchen is complete. I've literally had owners say things like that to me at an inspection -I am getting new windows next week, so the windows will be in the appraisal right? Wrong.

 

[Tom D]

I was arranging an inspection appointment and had a brief conversation with the owner.

He mentioned that the property (quadplex) is currently under remodeling and that I need to appraise it as if it’s remodeled.

Your first mistake was having only a 'brief conversation' with the owner after they mentioned doing remodeling. Remodeling to the owner may mean painting only. But your imagination is thinking what. Might be nothing, or something. Unless you desperately need a trip fee i would have more knowledge of what remodeling, maybe yes, or no, affecting your appraisal.

I have direct lenders who appreciate knowing ahead of time a possible major problem, or maybe it's just my problem perception of a no problem in reality.

Normal conv/FHA financing is either 'as is or subject to'.

 

[J Grant]

If you make it subject to remodeling, you have to make the report subject to completion of the remodeling. (and them someone inspects it or signs off that the work is completed. When that happens, normally the lender does not fund the loan until the work is completed.

Definitely ask your client, but most likely, they want it done as is. We can't literally follow an owner's instructions about how they think the property should be appraised. We can't stop them from telling us, but we have to take it with the view that they do not understand the process.

The owner is trying to borrow money to put in a new kitchen, and in their mind, it should be appraised as if the kitchen is complete. I've literally had owners say things like that to me at an inspection -

 

[gorillakimchi]

1- You should appraise it the way your Client has requested. Unless the owner is also your Client, they have no say in the matter.

2- In the case you describe, it's simple. You pretend like the remodeling is already complete. Make sure to clearly state the work that will be done, check the correct box in the reconciliation section (if it's a form report or clearly state the hypothetical condition if it's not a form report), and to include the statement 'The use of a hypothetical condition might affect assignment results.'

Thanks for your detailed explanation

 

[Sadie]

If the as is appraisal comes in lower than needed for the refi/equity loan, you will be asked to use a HC. Make sure you charge appropriately for that and have plans and specs in writing. Make sure you have a convo with you client so they know what the owner has told you. This may be a surprise to them, or not.

 

[gorillakimchi]

If you make it subject to remodeling, you have to make the report subject to completion of the remodeling. (and them someone inspects it or signs off that the work is completed. When that happens, normally the lender does not fund the loan until the work is completed.

Definitely ask your client, but most likely, they want it done as is. We can't literally follow an owner's instructions about how they think the property should be appraised. We can't stop them from telling us, but we have to take it with the view that they do not understand the process.

The owner is trying to borrow money to put in a new kitchen, and in their mind, it should be appraised as if the kitchen is complete. I've literally had owners say things like that to me at an inspection -I am getting new windows next week, so the windows will be in the appraisal right? Wrong.

Haha, yeah I heard similar things