Lender says give no vale to illegal accessory unit

[Webbed Feet]

One of the things that has convinced me that this trade has very little hope of any improvement in the trade is the outrageous numbers of appraisers that cannot differentiate between "giving" or "not giving" value as an appraiser versus comprehending a Scope of Work that is using hypothetical conditions.

 

[NC Appraising]

But it's all moot if the improvements represent an illegal use because the property is ineligible for an FHA insured loan. That problem has to be solved before moving forward.

Help him solve the problem.

It is a illegal use and the subject must meet FHA/HUD guidelines.

So what is the correct way to handle this per HUD/FHA requirements?

- As soon as the appraiser found this out, stop the appraisal and contact the lender? I though I read this somewhere for certain situations.

-Made the report subject to the accessory unit being torn down?

- Completed the appraisal as-is, give value to the accessory unit and recommend rejection?

- Completed the appraisal as-is, valued the accessory unit, and commented that the accessory unit is illegal. Let the UW handle it from there.


Please provide documentation from HUD. I would like to keep it in my files. The thread poster can also use it to send to the AMC.

Thanks.

 

[NC Appraising]

What if it has value in the market... how can the request be completed when the appraisal is as-is, and the fee simple (presumably) ownership interest of the land + improvements (as-is) is being appraised? :mellow:

Denis,


FHA and excess land for discussion:

Using the 1004 Form, the appraiser would have to mark it as-is, and then state the hypothetical condition, say in the site section or additional comments section of the report?

If the plot contains excess land, the appraiser should describe it but not value it. In this instance, the appraisal is based upon a hypothetical condition in which only the value of the readily marketable real estate entity is estimated. A legal description of the portion being appraised is required.


So who is wrong? FHA or USPAP?

 

[J Grant]

excess land and an illegal, aka non permitted unit are two different problems. FHA, if I recall correctly, allows appraisers to value illegal (aka non permitted) additions or ADU's, if they can show the value is returned in the market, and if they provide similar comps with illegal ADU or additions.

 

[Webbed Feet]

Over-simplification

Denis,


FHA and excess land for discussion:

Using the 1004 Form, the appraiser would have to mark it as-is, and then state the hypothetical condition, say in the site section or additional comments section of the report?

If the plot contains excess land, the appraiser should describe it but not value it. In this instance, the appraisal is based upon a hypothetical condition in which only the value of the readily marketable real estate entity is estimated. A legal description of the portion being appraised is required.


So who is wrong? FHA or USPAP?

What is wrong is real estate appraisers failing to ask themselves the entire question versus an incomplete one.

As long as those of you asking these questions just seem to INSIST on asking what you ask, while completely leaving out the Fannie Mae 2005 pre-printed scope of work prohibitions against modification of those scope of work statements that YOU sign, you're not bothering to ask the entire question.

What you should be asking is not is FHA or USPAP wrong. What you should be asking should be what entity has the authority to over-ride the authority of your state appraisal board regarding YOU signing a misleading appraisal report?

 

[NC Appraising]

What is wrong is real estate appraisers failing to ask themselves the entire question versus an incomplete one.

As long as those of you asking these questions just seem to INSIST on asking what you ask, while completely leaving out the Fannie Mae 2005 pre-printed scope of work prohibitions against modification of those scope of work statements that YOU sign, you're not bothering to ask the entire question.

What you should be asking is not is FHA or USPAP wrong. What you should be asking should be what entity has the authority to over-ride the authority of your state appraisal board regarding YOU signing a misleading appraisal report?

That is Fannies form when using Fannie guidelines.

This is a FHA assignment using Fannie forms.

You are aware that FHA and Fannie has a different level of scope of work and guidelines? You are aware that Fannie mae allows lenders to add more guidelines, scope of work and requirements.

So any appraiser that has a FHA assignment and is using Fannies form is going to be in trouble with the state board??

That is silly.


I guess those USAPians winked when they gave a "PASS" on the URAR because it still say's "Summary" on the report.

Yeah, there is no longer a Summary appraisal report.....but since is says appraisal report, your good......:laugh:


Toooooo many barking orders from toooo many people with toooo many opinions, rules, requirements (fannie, FHA, USPAP, state boards, AMC's, lenders)...

Then they all want us to use ONE FORM!!!!!

Yeah, you wonder why appraisers are lost? :new_all_coholic::new_all_coholic:

 

[hastalavista]

Denis,


FHA and excess land for discussion:

Using the 1004 Form, the appraiser would have to mark it as-is, and then state the hypothetical condition, say in the site section or additional comments section of the report?

If the plot contains excess land, the appraiser should describe it but not value it. In this instance, the appraisal is based upon a hypothetical condition in which only the value of the readily marketable real estate entity is estimated. A legal description of the portion being appraised is required.


So who is wrong? FHA or USPAP?

Neither (if I understand you correctly?).

FHA states that the appraisal is to be completed using an HC. That's fine.
Otherwise, value the property as-is (I think I'm missing the main point of your question, however? Sorry if so; dumb it down for me so I can get it! :laugh.

 

[Webbed Feet]

T<....snip...>

So any appraiser that has a FHA assignment and is using Fannies form is going to be in trouble with the state board??

That is silly.


<....snip.....>

I appreciate all the frustration. But again, over-simplification while not being open about what it is you are actually putting your signature on.

If we want to over-simplify, that is easy. Do what you say and say what you do. Don't sign something that says "I did this," but you did not do it. Nor sign something that says "I did not do this," but that is exactly what you did. Nor should you sign a document that says you did two completely opposing things in two different places of the document, so that readers have no idea which one was true and which one was the lie.

While we can moan and groan about boards, USPAP, Fannie, Freddie, FHA, AMCs, and lenders, it will not change that if we don't follow the above we signed a misleading report.

 

[NC Appraising]

Neither (if I understand you correctly?).

FHA states that the appraisal is to be completed using an HC. That's fine.
Otherwise, value the property as-is (I think I'm missing the main point of your question, however? Sorry if so; dumb it down for me so I can get it! :laugh.

Maybe I'm reading it wrong.



I was reading your posts when you and Jim were going back and forth.

Just did not get the below.

"What if it has value in the market... how can the request be completed when the appraisal is as-is, and the fee simple (presumably) ownership interest of the land + improvements (as-is) is being appraised? "


The poster said it was a FHA assignment.

So just wondering if you think that one could not mark the appraisal as-is, and use a hypothetical condition? That is why I used the excess land example. There is no other check box option (hypothetical condition) on the 1004 URAR.


Just not sure what you meant

or

Just should I have stayed out of it? :laugh:

 

[J Grant]

We can not mark "as is" and have a HC on a URAR form report. On non URAR or private assignment, likely we can, providing the value definition is provided that is consistent, make an "as is" report and use an HC.

If using a lender purpose URAR form, if appraisers introduces an HC, the report can not at the same time be "as is" The report is made subject to the HC being completed or repaired or satisfied with inspection.

The lender sounds confused, or is asking for something unnecessary. Fannie and FHA both recognize contributory value of ADU or additions that are "illegal", as long as they don't constitute a safety hazard and appraiser uses comps with similar illegal ADU or addition , to show market acceptance and that such illegal/non permitted additions or ADU are typical for area. After that, the value is addressed, either the market shows contributory value, or not.

If a lender has their own proprietary guidelines or is funding with a program that does not accept properties with illegal additions/ADU as collateral, that is a lender issue, not an appraiser issue. They can't expect an appraiser to manipulate a property with an HC that part of it does not exist, or create a misleading report to slide a property into acceptance .