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Lender Request To Not Give Garage Any Value

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redcedr

Sophomore Member
Joined
Mar 7, 2009
Professional Status
Certified General Appraiser
State
Wisconsin
I have a Lender that sells to Fannie Mae that wants me to give no value to the garage at the rear of the subject site. This portion of the site is in the flood hazard area, it never floods and the garage does add value. Would this be Hypothetical Condition? It really doesn't cover all these....

A hypothetical condition may be used in an assignment only if:
• use of the hypothetical condition is clearly required for
legal purposes, for purposes
of reasonable analysis, or for purposes of comparison;
• use of the hypothetical condition results in a credible
analysis; and
• the appraiser complies with the disclosure requirements
set forth in USPAP for hypothetical conditions.
 

BRCJR

Elite Member
Gold Supporting Member
Joined
Sep 20, 2005
Professional Status
Licensed Appraiser
State
Virginia
Last edited:

Jim Bartley

Senior Member
Joined
Jan 20, 2002
Professional Status
Certified Residential Appraiser
State
Virginia
I think you can do it via HC.


I think it's a reasonable request. The lender doesn't want to lend on a garage that is in a flood plain.
You are still disclosing it, just not valuing it.
As long as you disclose what you are doing, I think you are OK with USPAP.


I've seen similar situations where someone bought 5 acres and put a doublewide on it while he built a new house. The house is complete and they are getting a new loan and the DW is going to be removed. Obviously the lender doesn't want to lend on something that won't be there next week, so no value is given to the doublewide.

I do have a problem when they tell you ignore something. But that's entirely different.

See the attached from Fannie Mae...

a non-residential detached structure attached to the land on a property securing the mortgage loan has any part located in an SFHA, Flood insurance is not required on the non-residential detached structure.

https://www.fanniemae.com/content/guide/selling/b7/3/07.html

 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
How about just saying no?
 

BRCJR

Elite Member
Gold Supporting Member
Joined
Sep 20, 2005
Professional Status
Licensed Appraiser
State
Virginia
I think you can do it via HC.


I think it's a reasonable request. The lender doesn't want to lend on a garage that is in a flood plain.
You are still disclosing it, just not valuing it.
As long as you disclose what you are doing, I think you are OK with USPAP.


I've seen similar situations where someone bought 5 acres and put a doublewide on it while he built a new house. The house is complete and they are getting a new loan and the DW is going to be removed. Obviously the lender doesn't want to lend on something that won't be there next week, so no value is given to the doublewide.

I do have a problem when they tell you ignore something. But that's entirely different.

See the attached from Fannie Mae...

a non-residential detached structure attached to the land on a property securing the mortgage loan has any part located in an SFHA, Flood insurance is not required on the non-residential detached structure.

https://www.fanniemae.com/content/guide/selling/b7/3/07.html
Are they not asking the OP to ignore something? The value of the improvement......if they do not want to loan on the improvement they can lower the amount they are willing to loan, without all the hide and go seek being played.
 

Vermonter

Senior Member
Joined
Mar 21, 2007
Professional Status
Certified Residential Appraiser
State
Vermont
I do have a problem when they tell you ignore something. But that's entirely different.

See the attached from Fannie Mae...

a non-residential detached structure attached to the land on a property securing the mortgage loan has any part located in an SFHA, Flood insurance is not required on the non-residential detached structure.

https://www.fanniemae.com/content/guide/selling/b7/3/07.html

Excellent reference. However it doesn't say anything about excluding the value of the improvements in the flood plain.

I would forward to the client and hold firm on the as-is value.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
I think you can do it via HC....
The lender doesn't want to lend on a garage that is in a flood plain.

Certainly the property can be appraised using an HC to exclude the garage, but I don't think employing such a HC is consistent with the intended use of the assignment (if it is for mortgage finance and must be completed consistent with all the GSE guidelines that go with that).

The lender can loan on the garage in a flood plain and I don't see why it wouldn't if this is a garage that is part of the primary residential improvement's configuration (rather than an outbuilding).
It is just that the lender and the GSE/investor might require the borrower to obtain flood hazard insurance. The flood insurance will protect the lender's extension of credit allocated to the value of the garage, no?

Other than trying to enable the borrower from skirting a requirement to get flood insurance, what is the reasonable lending-objective to exclude this from the value? :huh:
 
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