Lender says give no vale to illegal accessory unit

[NC Appraising]

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.
.

That was my point.

J, stick with me on this one. I am only using the excess land as a example. Do not veer of.....


Assuming you are right (I do not agree), if you got a FHA assignment and the subject had excess land, how are you going to handle it?

FHA:
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.


FHA only accepts a as-is appraisal.....
FHA says to use a Hypothetical condition on the excess land......

There is no other box to use, except for the as-is box.......:wink

 

[J Grant]

I've never faced this with an FHA appraisal, but if I did, at least from where I am now, I would decline the assignment, because imo the FHA directive conflicts with limitations of form and MV definition. I see it as an unacceptable assignment condition. (I am trusting your posting of this verbiage/ FHA reg, I don't have the motivation to read through their manual to find it and see if is universal for all FHA excess land situations.)

 

[hastalavista]

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.

Ok, I think I follow you now.
The poster did say it was an FHJA assignment. Here's the original post (my bold for emphasis):

I am appraising a single-family home with an illegal accessory unit. The listing agent described it as a "detached 4-season porch" but it is a 1000 sf structure with a kitchen,bath,bedroom and living room. The main house is 1100 sf. The unit is an illegal use (verified by the city) and cannot be rebuilt as is. I called the client and I have been advised to give no value to the accessory unit. This is an FHA assignment. My question is can I value this property as though it does not have this accessory unit as the client has instructed me? I have never ran into this before. Thank you for any and all help on this.

So my response was in regard to the client telling the OP to give "no value" to the illegal accessory unit. My advice is, for an as-is appraisal, that cannot be done.

Lee Lansford added, "As to the physical components, you are appraising what exists...you can't ignore the accessory unit at the request of the lender."
Then, Jim B. said this:

He didn't say they wanted him to ignore it, he said they don't want it valued. Why can't he comply with that request?

To which I said:

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?

So my statement was regarding the improvements, not FHA's protocol regarding excess land.



Now, in regard to this one:

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.

My opinion is this: Anytime the 1004 URAR (current version) is used and the appraisal is made subject-to an HC, then the "as is" box shouldn't be checked.

FHA allows for an HC to be used (See Appendix D, page D-1: all categories in the "C" group in the summary box are made subject to an HC).

For excess land, FHA protocol is very clear: complete the appraisal using an HC to exclude the excess land from the valuation.
So, I would check the HC box and explain why I did so if I was completing an FHA appraisal with excess land.

:new_smile-l:

 

[hastalavista]

I've never faced this with an FHA appraisal, but if I did, at least from where I am now, I would decline the assignment, because imo the FHA directive conflicts with limitations of form and MV definition. I see it as an unacceptable assignment condition. (I am trusting your posting of this verbiage/ FHA reg, I don't have the motivation to read through their manual to find it and see if is universal for all FHA excess land situations.)

JGrant:
If one is using an HC to value only the primary (non-excess) site area of the subject, there is no "conflict" with the definition of market value whatsoever.
You would be appraising the subejct, as-if it contained no excess land, and providing an opinion of market value for it under that hypothetical condition.

You may not want to proceed, but don't use the "conflict with market value definition" as a reason because there is no conflict.

 

[J Grant]

FHA allows for an HC to be used (See Appendix D, page D-1: all categories in the "C" group in the summary box are made subject to an HC).

For excess land, FHA protocol is very clear: complete the appraisal using an HC to exclude the excess land from the valuation.
So, I would check the HC box and explain why I did so if I was completing an FHA appraisal with excess land.

This above makes sense. NC posted that FHA only accepts an as is appraisal but perhaps their protocol is different per above excess land using an HC. I am going with what makes sense , it's Saturday and I dont' feel like reading the FHA manual to find their section about excess land

 

[hastalavista]

it's Saturday and I dont' feel like reading the FHA manual to find their section about excess land

On this, I don't blame you! :laugh:

 

[CANative]

FHA is exactly dead on in the treatment of excess land. They just don't care if you give them an opinion of value of the excess. Scope of work, intended use, intended user, proper appraisal methodology.

The sun, moon, and stars all line up perfectly on this.

 

[CANative]

FHA allows for an HC to be used (See Appendix D, page D-1: all categories in the "C" group in the summary box are made subject to an HC).

For excess land, FHA protocol is very clear: complete the appraisal using an HC to exclude the excess land from the valuation.
So, I would check the HC box and explain why I did so if I was completing an FHA appraisal with excess land.

This above makes sense. NC posted that FHA only accepts an as is appraisal but perhaps their protocol is different per above excess land using an HC. I am going with what makes sense , it's Saturday and I dont' feel like reading the FHA manual to find their section about excess land

4-4

4-4 UNIQUE PROPERTY APPRAISALS
Appraisers are sometimes faced with unique properties: a log
home, an extra small home, lower than normal ceiling heights,
etc. Eligibility of these properties depends on whether or not
the property is structurally sound and readily marketable. If a
property meets these criteria, the appraiser estimates market
value. However, depending on the uniqueness of a property, the
final determination to accept or reject the property is made by
the lending institution's underwriter.
Excess land is another area in which to exercise caution. Land
is considered to be excess if it is:
o larger than what is typical in the neighborhood
AND
o capable of a separate use
o If there is excess land, describe it but do not value it.
In this instance, the appraisal is based upon a hypothetical
condition. A legal description of the portion being
appraised is required.

 

[NC Appraising]

FHA allows for an HC to be used (See Appendix D, page D-1: all categories in the "C" group in the summary box are made subject to an HC).

For excess land, FHA protocol is very clear: complete the appraisal using an HC to exclude the excess land from the valuation.
So, I would check the HC box and explain why I did so if I was completing an FHA appraisal with excess land.

This above makes sense. NC posted that FHA only accepts an as is appraisal but perhaps their protocol is different per above excess land using an HC. I am going with what makes sense , it's Saturday and I dont' feel like reading the FHA manual to find their section about excess land

I'm still going to disagree. :laugh:

Try turning the report in without the as-is box being checked.....

By what CA Native posted, it says in my opinion to make it as-is, and let the UW decide on what to do.


Here is what FHA allows for a hypothetical condition:

The FHA Appraisal is made
Under the following conditions
A. “As Is”
1. There is/are no repair(s), alteration(s) or inspection conditions noted by the appraiser, or
2. Establishing the “as is” value for a regular 203(k), or
3. The property is being recommended for rejection

B. “Subject to Completion per Plans and Specifications”
1. Proposed Construction where construction has not started, or
2. Under Construction but not yet complete (less than 90%), or
3. Regular 203(k)

C. “Subject to the following Repairs or Alterations”
1. Repair or Alteration Condition(s) noted by the appraiser, or
2. Streamline 203K, or
3. Under Construction, more than 90% complete with only minor finish work remaining (buyer preference items i.e., floor coverings, appliances, fixtures, landscaping, etc.). This eliminates the need for construction exhibits.

D. “Subject to the following Required Inspection”
1. Required Inspection(s) noted by the appraiser



There is nothing to repair/alter or complete.

The intended users understands what is going on; therefore it is not mis-leading in my opine.

If you make it as-is, and comment on the hypothetical condition in the report in a clear and precise way, I think it is correct and best way to do it.

The URAR only gives you four options. Check boxes 2-3 is what it is for lending purposes, repairs and completions.

Just like when I appraise HUD REO homes. I mark as as-is, because I have too. They may need repairs or inspections, but I have to mark it as-is and just comment on it in the report. Intended users.

As for USPAP:
The form and the location of the statement is left to the appraiser, but must be clear and conspicuous to intended users. Nothing in USPAP, that I can find about as-is and hypos.

 

[hastalavista]

I'm still going to disagree. :laugh:

No problem.

Try turning the report in without the as-is box being checked.....

if I run into this situation, I will. :new_smile-l:

By what CA Native posted, it says in my opinion to make it as-is, and let the UW decide on what to do.

I don't get that from what CAN posted?

4-4 UNIQUE PROPERTY APPRAISALS
Appraisers are sometimes faced with unique properties: a log
home, an extra small home, lower than normal ceiling heights,
etc. Eligibility of these properties depends on whether or not
the property is structurally sound and readily marketable. If a
property meets these criteria, the appraiser estimates market
value. However, depending on the uniqueness of a property, the
final determination to accept or reject the property is made by
the lending institution's underwriter.
Excess land is another area in which to exercise caution. Land
is considered to be excess if it is:
o larger than what is typical in the neighborhood
AND
o capable of a separate use
o If there is excess land, describe it but do not value it.
In this instance, the appraisal is based upon a hypothetical
condition. A legal description of the portion being
appraised is required.

(my bold)
I do get that the appraisal is based on a hypothetical condition.

That isn't "as is" in my book.
And you are right, "as is" and "subject to" are not really USPAP terms. So, I'd apply the common usage to as-is (which, for me, means "as is" :laugh.

And while FHA may be an intended user, they are not the only intended user.

But I'll tell you what: if I received written instruction from the HOC to proceed as you describe (or, if it were clear in the handbook to proceed as you describe) I'd do it as you describe (and include that documentation in every FHA appraisal that I completed where that exception was the rule).
In absence of that, I wouldn't check "as is". :new_smile-l: