Is the assignment type a Purchase?

[alebrewer]

Given that the loan terms are less favorable for refi and/or construction loans, wouldn't the ultimate investor in the loan being supported by an appraisal under this scenario be unhappy if the loan was misrepresented as a "purchase"? Unless "the client" is holding the paper on those loans, their desires don't matter. Checkboxes on the appraisal form have a long shelf life...

There's no misrepresentation if you explain what you're doing and why you're doing it...

 

[Mark K]

Given that the loan terms are less favorable for refi and/or construction loans, wouldn't the ultimate investor in the loan being supported by an appraisal under this scenario be unhappy if the loan was misrepresented as a "purchase"? Unless "the client" is holding the paper on those loans, their desires don't matter. Checkboxes on the appraisal form have a long shelf life...

I'd personally think its should be a construction loan. The OP says its an FHA loan. FHA, the ultimate investor or guarantor, says to call it a purchase. This a client imposed guideline. Do it their way or don't do it, pretty simple.

 

[Mike Ault]

There's no misrepresentation if you explain what you're doing and why you're doing it...

That's a good rule of thumb which I've always tried to follow. However, it would be similar to violating the prohibition against appraising multiple ADU's on one single family parcel because the client told you to do so. The explanation of "why you did it", might not be sufficient to smooth over the outrage sure to be generated from Freddie/Fannie at some future date of their choosing. This is not a "grey area". Unless the owner temporarily deeded the site over to the builder for the project, then the only thing the owner is purchasing is the improvements.

 

[Mike Ault]

I'd personally think its should be a construction loan. The OP says its an FHA loan. FHA, the ultimate investor or guarantor, says to call it a purchase. This a client imposed guideline. Do it their way or don't do it, pretty simple.

I have gotten 30 years of contradictory information back from FHA. Had I relied upon some of that, I would've probably had to remediate lots of crawlspaces at my own expense. I called the FHA technical support center one time because the lender insisted I get a current finding from them regarding wood to ground contact in the crawlspace. The home in question had no concrete piers underneath it whatsoever, and other than the concrete stem wall, the whole floor structure was simply supported by wooden stiff legs. I didn't need to call FHA to know that was a termite hazard, and that form of floor support was unacceptable in our market. However, the cheerful young lady on the other end of the line asked me a couple questions (one of them being "how old the structure was"?) And after finding out that the house was built in the 1930s, she said "what else would be holding the house up? When I explained to her that the home is located in an active termite zone and FHA has never allowed homes to be constructed that way she replied, "Well, the house has been there a long time, and apparently those wooden stiff legs are doing just fine. We will waive that particular requirement on this case number". So, if I used the "someone at FHA told me to do things that way" appraisal protocol, there would be hundreds of FHA loans performed by me sitting out there with defects just waiting to be discovered later. And hundreds of unhappy homeowners when it came time to sell their FHA financed home, only to discover that they had to retrofit their defective crawlspaces to FHA standards. When someone tells you to override your common sense, don't.

 

[alebrewer]

That's a good rule of thumb which I've always tried to follow. However, it would be similar to violating the prohibition against appraising multiple ADU's on one single family parcel because the client told you to do so. The explanation of "why you did it", might not be sufficient to smooth over the outrage sure to be generated from Freddie/Fannie at some future date of their choosing. This is not a "grey area". Unless the owner temporarily deeded the site over to the builder for the project, then the only thing the owner is purchasing is the improvements.

Do you really care, Mike? I mean - after all - it's not your signature on the report...

that said, why can't you appraise multiple ADU's on one single family parcel?

 

[Mike Ault]

Do you really care, Mike? I mean - after all - it's not your signature on the report...

that said, why can't you appraise multiple ADU's on one single family parcel?

That's a long story, kind of interesting though, and I will get back with you on it after lunch!

 

[Tim Hicks (Texas)]

It is not a purchase unless one sales contract includes the home and the land. Boy, I miss Jo Anne Meyer Stratton when these topics come up. You can do what is right or you check can check your spine at the door and do what the client instructs. Hopefully, it will not come back to haunt you some day. The client doesn't care about your license. You should!

 

[CGinMN]

If the assignment type is purchase transaction, the appraiser must enter an amount for the contact price field. The contract section is only for sale contract, not a construction contract. Since there is no sale price, it must be a refi or other.

 

[Mike Ault]

that said, why can't you appraise multiple ADU's on one single family parcel?

So, earlier this month I watched an order for a nonconforming property out of the hinterlands being shopped around everyone on the panel for a while, before I decided to counter with a considerably higher fee than what was being offered. I didn't expect to get it, however the lender said four other appraisers had turned it down so far, and they were going to be very happy to pay my fee, and accept my turn time. Million-dollar new construction property on 5 acres, with a shop, barn, corrals and roping arena on the rear portion of the acreage. Inside the shop building however, there were two separate ADU's, one for their daughter and another for her developmentally disabled son. So far, so good. "Jumbo property" which meant "jumbo investors", with no GSE guidelines to run afoul of. Come to find out however, they were putting $650,000 down and the lender was planning to run the remainder through Fannie/Freddie, as the remainder of the purchase price was well below their loan limit. I appraised the property as it was configured, not how the lender wished it was, and of course, the phone started ringing immediately. Lender, myself, and the builder on a conference call with the builder grumbling, "so, you're not willing to work with us?" (How many of us have heard that through the years?). "Work with you in what way?", I asked. "Well, that's all just opinion anyway, and I did some research with the state and that configuration is legal with them". "Well, it may be legal with them, but it is not acceptable collateral for the GSE that your loan file is being sold to", I replied (lender on the conference call was silent throughout this exchange). It ended with the builder sending the research he had done to the lender, the lender looking it over, and then informing me that I was correct without forwarding any of it over, and we went to Plan B. Plan B entailed surveying the front half of the property with the dwelling, well and septic drain field off from the back portion containing the nonconforming/GSE incompatible elements, and appraising the property according to the new recorded survey. Which left GSE acceptable collateral consisting of a small front house with a different address sitting on 1.73 acres and an appraised value of $425,000. The borrower, although unhappy with the inconvenience involved, had enough cash to overcome the roadblocks, and I think they're going to close on it this week sometime.

The below is guidance on the issue excerpted from the selling guide…

Note: ADUs are not eligible with a 2-4 unit dwelling, or when a manufactured home is the primary residence. Properties with multiple ADUs are also ineligible for Fannie Mae financing.

Accessory Dwelling Units (ADUs) | Fannie Mae

ADUs can add value to a borrower’s home, provide additional space for extended family, or allow a borrower to earn rental income, all while helping address the country’s affordable housing shortage. Selling Guide loan products can be used to purchase homes with ADUs, renovate an existing ADU or...

singlefamily.fanniemae.com

 

[alebrewer]

So, earlier this month I watched an order for a nonconforming property out of the hinterlands being shopped around everyone on the panel for a while, before I decided to counter with a considerably higher fee than what was being offered. I didn't expect to get it, however the lender said four other appraisers had turned it down so far, and they were going to be very happy to pay my fee, and accept my turn time. Million-dollar new construction property on 5 acres, with a shop, barn, corrals and roping arena on the rear portion of the acreage. Inside the shop building however, there were two separate ADU's, one for their daughter and another for her developmentally disabled son. So far, so good. "Jumbo property" which meant "jumbo investors", with no GSE guidelines to run afoul of. Come to find out however, they were putting $650,000 down and the lender was planning to run the remainder through Fannie/Freddie, as the remainder of the purchase price was well below their loan limit. I appraised the property as it was configured, not how the lender wished it was, and of course, the phone started ringing immediately. Lender, myself, and the builder on a conference call with the builder grumbling, "so, you're not willing to work with us?" (How many of us have heard that through the years?). "Work with you in what way?", I asked. "Well, that's all just opinion anyway, and I did some research with the state and that configuration is legal with them". "Well, it may be legal with them, but it is not acceptable collateral for the GSE that your loan file is being sold to", I replied (lender on the conference call was silent throughout this exchange). It ended with the builder sending the research he had done to the lender, the lender looking it over, and then informing me that I was correct without forwarding any of it over, and we went to Plan B. Plan B entailed surveying the front half of the property with the dwelling, well and septic drain field off from the back portion containing the nonconforming/GSE incompatible elements, and appraising the property according to the new recorded survey. Which left GSE acceptable collateral consisting of a small front house with a different address sitting on 1.73 acres and an appraised value of $425,000. The borrower, although unhappy with the inconvenience involved, had enough cash to overcome the roadblocks, and I think they're going to close on it this week sometime.

The below is guidance on the issue excerpted from the selling guide…

Note: ADUs are not eligible with a 2-4 unit dwelling, or when a manufactured home is the primary residence. Properties with multiple ADUs are also ineligible for Fannie Mae financing.

Accessory Dwelling Units (ADUs) | Fannie Mae

ADUs can add value to a borrower’s home, provide additional space for extended family, or allow a borrower to earn rental income, all while helping address the country’s affordable housing shortage. Selling Guide loan products can be used to purchase homes with ADUs, renovate an existing ADU or...

singlefamily.fanniemae.com

Ahh. I was confused. You said it was a violation to appraise multiple ADU's on one parcel, which of course, it's not. I didn't realize you were talking about F/F.