New construction: as is vs subject to

[J Grant]

OK maybe its "Nutz", but you are right... I don't understand, so please enlighten me. I'm not being antagonistic here, and from an appraisal perspective I'm seeing black and white (stamp out any fuzzy shades of grey!).

1) If they agreed to not install landscaping in the contract, then I check "as-is". (They have completed what they are contractually obligated to)
2) If they agreed to install landscaping in the contract, then I check "subject-to". (They have not completed what they are contractually obligated to)
3) If they change the contract after the effective date (to exclude the landscaping), that is fine and with some revision to multiple parts of the report it could be "as-is".... but it also changes the "as-is" value, because as of the effective date I am changing this report to value a home without landscaping, and the contract documents have changed.

Those seem like the viable options to me. I still feel like option 3 is a little shaky, and is basically doing a 1004d in the addendum. Am I messing this up (and if so how)?

You got it all right !

they are going for option 3 - due to bad weather preventing landscape done to close by X date, in order to close by X date they changed the contract to exclude landscaping ( so the home is now delivered as is/no landscape ) BUT they are also holding back money to install the landscape at a future date, so the house will have the landscaping as the original contract intended.

As far as impact on value, can choose not to adjust because the escrow ensures the landscaping will be done, - the simpler option, or adjust it for no landscaping impact on value -up to appraiser imo

 

[residentialguy]

The real issue is many don't read an entire post and suddenly interject opinions which often have no validity.
The scary part is appraisers are supposed to be detail oriented but 50% on here just shoot from the hip. Also in many of these situations there is no right or wrong answer and its simply a business and risk reward decision the appraiser has to make . I chose the "as is" route because it seems like the most logical but others may differ. In 90% off all these situations we are often our own worst enemy and can turn a mole hill into a mountain.

Fine. I'll go with EA!

 

[Tim Hicks (Texas)]

You got it all right !

they are going for option 3 - due to bad weather preventing landscape done to close by X date, in order to close by X date they changed the contract to exclude landscaping ( so the home is now delivered as is/no landscape ) BUT they are also holding back money to install the landscape at a future date, so the house will have the landscaping as the original contract intended.

As far as impact on value, can choose not to adjust because the escrow ensures the landscaping will be done, - the simpler option, or adjust it for no landscaping impact on value -up to appraiser imo

If the contract changes after the effective date, then it should be treated as a new assignment as the new contract is after the effective date of the appraisal report.

They always send us out to do the final in this situation, so the proper way is subject to with a final inspection.

 

[Dublin ohio]

they are going for option 3 - due to bad weather preventing landscape done to close by X date, in order to close by X date they changed the contract to exclude landscaping

Source?

 

[TruJa]

It seems like there are other potential issues depending on where you live. Option 3 would be fine in some places, but there are some municipalities which require landscaping (at some level - maybe just groundcover, maybe to spec) to be installed prior to issuing the final and certificate of occupancy. In which case this may take option 3 off the table.

 

[Dublin ohio]

OK maybe its "Nutz", but you are right... I don't understand, so please enlighten me. I'm not being antagonistic here, and from an appraisal perspective I'm seeing black and white (stamp out any fuzzy shades of grey!).

1) If they agreed to not install landscaping in the contract, then I check "as-is". (They have completed what they are contractually obligated to)
2) If they agreed to install landscaping in the contract, then I check "subject-to". (They have not completed what they are contractually obligated to)
3) If they change the contract after the effective date (to exclude the landscaping), that is fine and with some revision to multiple parts of the report it could be "as-is".... but it also changes the "as-is" value, because as of the effective date I am changing this report to value a home without landscaping, and the contract documents have changed.

Those seem like the viable options to me. I still feel like option 3 is a little shaky, and is basically doing a 1004d in the addendum. Am I messing this up (and if so how)?

No. You are fine. JGrant is confusing how she thinks it is being done (phantom contract addendum). As opposed to how it is being done (no contract addendum).

 

[J Grant]

Then they should have provided an addendum to the contract. Is the appraiser to assume that it involves a contract change? Or is it really a change to the funding conditions of the loan.

If they are asking landscaping $be held in escrow, that normally is a contract amendment page for it. The OP needs to ask their lender client for it.

 

[Tim Hicks (Texas)]

You got it all right !

they are going for option 3 - due to bad weather preventing landscape done to close by X date, in order to close by X date they changed the contract to exclude landscaping ( so the home is now delivered as is/no landscape ) BUT they are also holding back money to install the landscape at a future date, so the house will have the landscaping as the original contract intended.

As far as impact on value, can choose not to adjust because the escrow ensures the landscaping will be done, - the simpler option, or adjust it for no landscaping impact on value -up to appraiser imo

double post

 

[Dublin ohio]

If they are asking landscaping $be held in escrow, that normally is a contract amendment page for it. The OP needs to ask their lender client for it.

In most new construction contracts I have seen. That problem is addressed in the original contract. I have never seen a contract addendum concerning anything about escrow.

 

[Mark K]

If they are asking landscaping $be held in escrow, that normally is a contract amendment page for it. The OP needs to ask their lender client for it.

Never the case around here. They don't modify the contract to hold $ in escrow for unfinished items. The lender makes the call and the builder has no option. Generally they hold 1.5X the $ amount of the unfinished item to encourage the builder to come back and finished the job. $3,000 for sod, $4,500 held back in escrow. No contract amendment needed.

Many times I've included the estimated cost to complete in the final inspection. Concrete walks, patios, decks, lawn/landscaping, irrigation, etc.