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New Construction that's a 1-2 months from completion

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EricKirby

Freshman Member
Joined
Feb 13, 2003
I'm new to this forum and I'm glad I stumbled acorss it. Great tool for fellow appraisers!

I've just started doing appraisals for a lender that deals with lots of new construction. I've done appraisals that are new homes that are completed but not for any that are under construction. I have an appraisal that I'm going to do this weekend that's a couple months out from completion. Any suggestions on anything that I may over look? I have the building plans and purchase agreement with the upgrades, etc. I'm assuming I just appraise it based on the info. I have (subject to) and once it's complete do recert letter confirming the value? Also what would be a fair price for a recert letter? Any help would be appreciated.

Gracias
 

Jo Ann Meyer Stratton

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Arizona
I going to start a tempest in a teapot again. Yes, you would do it subject to completion. When it is complete, you would do a final observation of the property and report to the lender that it is complete on a form 442 (provided it is complete). (unless this is a FHA-different ballgame & set of rules). You would NOT "recert" the value. A final has nothing to do with the value, it only reports whether the home was completed to plans and specs. The final is one order and only use the 442 form that doesn't have any writing at the bottom. If the client has a question about value--that is a second order or assignment. If the loan is to be sold to Fannie Mae and the final is four or more months after the original effective date, then Fannie Mae wants an update to a prior appraisal assignment completed (see Section 201 of Fannie Mae's latest guidelines). And 2003 USPAP Advisory Opinion 3 says that would not be an extension of the prior assignment, but a new assignment. The new assignment / appraisal could be reported in one of three ways per AO-3, a complete package by itself or a package with a copy of the original report attached or a letter format that incorporates by reference if the original lender is involved. A recertification of value would NOT apply in this situation because the lender/Fannie Mae is asking for a new effective date by asking the appraiser to consider market data since the original appraisal date. And the lender will be very confused and order a "recert" when they actually are ordering an update, so you provide an update regardless of what term they use. Go to the various websites and make copies of Section 201 of Fannie Mae Guidelines and Advisory Opinion 3 of 2003 USPAP.

For Fannie Mae guidelines: http://www.adfinet.com
you have to register, but it is free and you can read/printout the entire set of guidelines, chapter/section by chapter/section

For 2003 USPAP: http://www.appraisalfoundation.org/html/US...PAP2003/toc.htm
look for Advisory Opinion 3--it is 2 1/2 pages long
 

Frederick R. Ruffell

Senior Member
Joined
Jan 21, 2002
Professional Status
Certified General Appraiser
State
California
Jo Ann,
Do you ever get tired of repeating yourself? I gotta hand it to you, you are on the job when it comes to keeping us on the right track with the new USPAP & FNMA rules and Regs.
 

Frederick R. Ruffell

Senior Member
Joined
Jan 21, 2002
Professional Status
Certified General Appraiser
State
California
Eric,
Subject to Plans & specs.
442 after completion.
We do not discuss fees here because it could be misconstrued as price fixing.
 

Jo Ann Meyer Stratton

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Arizona
I have raised six kids and have six grandkids so I am in the habit of repeating things 12 times!
 

Verne Hebert

Senior Member
Joined
Feb 25, 2002
Professional Status
Certified General Appraiser
State
Montana
New construction is a specialty I really enjoy.

A couple of things I have learned that work well.

On the front end counsel the builder or owner that when they call for final it should be done. And I mean done, finish grade, trim, shower stall ceramic tile, etc.

And if I have to come back twice, I am billing you twice.

Also, counsel them on making gross changes to the P & S. This can be a big problem also.

This will help alot.

I have never, I mean never, been out to one that is finished.

In terms of billing, think it out in the manner that makes sense to you-------it is all time and mileage. You have to schedule it usally when it is not convenient. Review the file. Travel to the site. Inspect it. Travel back. Process the 442. Mail it. And babysit the invoice to get paid.

I consider a 442 a loser at market fees (and my fees are higher than yours).

I allow 30 miles round trip, in my market. Beyond that it is .45/mile on asphalt, .55/mile on gravel.

Good Luck.
 

Jo Ann Meyer Stratton

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Arizona
I would also offer a piece of advice when you go do the final. Even if the home looks likes the plans and specs--measure the completed structures! Compare every little finishing touch to the specifications. If there is a major descrepancy between what they said they were going to build and what they really did build--talk to your client. You might have to do a completely new appraisal assignment and appraisal report. Builders and home owners like to move a wall here and a wall there, sometimes move them everywhere except where they said the walls would go on the plans, change their minds on materials, etc, etc. I had one where they completely changed everything, builders 4 times, building materials three times, floor plan totally different and in a little tiny town 75 miles from my office. Wasn't aware of any of those changes until I got to the site, everyone standing around waiting for me to do the final, drive the 75 miles back to the office and give the report to the client--so they could all collect their money. Didn't work as planned--had to start over with a new appraisal assignment, as is this time--almost the same comparables because of the isolated area, but a different final opinion of value three days later. That experience taught me to always measure when the home is complete!
 

EricKirby

Freshman Member
Joined
Feb 13, 2003
Everybody, thanks so much for your help. I called a buddy of mine and he echoed the same things that was posted here. Thanks again.
 

EricKirby

Freshman Member
Joined
Feb 13, 2003
Thanks again. That form 442 I can't find on my WinTotal forms. Is there another name I can look under? There's so many forms I probably passed right over it.
 

Conrad

Freshman Member
Joined
Feb 4, 2002
It is a Satisfactory completion certificate and it's under Other forms and Addenda
 
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