Opinions Please-condition Rating, C5 Or C4

[MNRural]

Subject built in 1950's with little to no updating. There were some issues that the borrower took care of like fixing a door off hinge, repairing a broken window, 'patching' a vinyl floor, adding trim around a replaced front door, etc.

Borrower is still in the process of updating the bathroom. It has a fiberglass shower surround, but there it a tile wainscot. The borrower has not grouted the tile, there is no trim in the bath, and the floor is original and damaged from the ongoing remodel. UW wants me to go back and reinspect to see if I can change condition rating to C4.

Would you still consider this a C5 condition due to the ongoing remodel of the bath? That's my opinion, just looking for reassurance.

The definitions are still too vague. "The improvements feature obvious deferred maintenance and are in need of some significant repairs. Some building components need repairs, rehabilitation, or updating. "

 

[J Grant]

can't say without knowing more about floor damage...is it just a few broken tiles, or is it a sagging floor with holes in it or rot?

If it is only the floor in that one room and the damage is very minor, it might be a c 4, but it is serious damage and the whole bathroom floor imo a c5, depends on rest of house too...sounds like borrower did some recent cheap patch work... but what about the roof or other systems, has this owner replaced anything in a house built in 1950?

If you decide to stick with your c 5 it is what it is...lender can decline to lend ( if that is their decision) or with the lender knowledge make appraisal subject to repair or replace X to bring it to C 4 condition. Don't "fudge" a condition rating to make an UW deal work...

 

[chad hampton]

Other than C1, the C ratings are very vague. I hate when I come across a property that is nearing the C5 category. And it's not due to me not being able to make a decision, but because, once again, the lending community has decided that they don't want to see appraisals with a C5. A safer and sounder lending practice would be to look at photos, read descriptions, etc, and make your own decision.

This BS where they come back and ask "what do we have to do to make it a C4?" is nonsense. The UW should ask - "what do I want to see repaired for my firm to lend money on this property?" And then send an appraiser out with the list of what you wanted repaired and I'll go check.

Life would be simple for you if you just did C4 based on a completed bathroom.

 

[glenn walker]

C-4 Subject to bathroom being completed !

 

[MNRural]

I did not do it subject to repairs, because the lender originally wanted it as is. Now of course they need the condition level to be c4 or better to do the loan.

I guess I'm just confirming with others that an ongoing remodeling project in the bath, given no other compensating factors, would put it in the C5 category.

I wish fannie had included more details in the definitions or had AOs like USPAP. The definitions are vague enough so everyone has a different interpretation.

 

[J Grant]

I did not do it subject to repairs, because the lender originally wanted it as is. Now of course they need the condition level to be c4 or better to do the loan.

I guess I'm just confirming with others that an ongoing remodeling project in the bath, given no other compensating factors, would put it in the C5 category.

I wish fannie had included more details in the definitions or had AOs like USPAP. The definitions are vague enough so everyone has a different interpretation.

I don't think the ratings themselves are vague, as much as there is some latitude about what words within a rating can encompass For example, what constitutes "significant repair"? What differentiates a minor repair that would make it C4 vs a significant repair that makes it c 5? Imo, C 5 level significant repair means on day of inspection , the deficient or broken competent or area poses a present, or imminent risk (if not repaired ) to the safety and structure of the house/ and or the health and safety of occupants

example, if a roof is older and nearing economic life but still functional, that could be C4. But if the same age roof has a leak and water damage in ceiling, even if just in one part of a room, then the rating is C5.

As far as lenders pressuring an appraiser to "fudge" or change a condition rating to get a loan through, just say NO !!! if it is C 5 and needs the item fixed to be C 4 for them to greenlight the loan,t tell the lender appraisal can be made subject to repair for C 4 condition. If owner does not want to repair it boo hoo that is their problem. Getting a loan is not guaranteed in our constitution...

 

[Overimprovement]

This comes directly from Fannie selling guide, and have used it to justify ratings in the past when I get push back for either higher or lower. The key word is holistic. I have used it as my golden passport to have some autonomy over the vague definitions. My bolds.

"As previously noted, the Condition rating selected for the property must reflect a holistic view of the condition of the property improvements. It would be inappropriate to select either a lower or higher overall rating on the basis of one or two minor inferior or superior areas of the property improvements."

 

[EddieB]

Sounds like a C4 with condition adjustments if comparables are superior. But you were inside, not the underwriter.

 

[J Grant]

This comes directly from Fannie selling guide, and have used it to justify ratings in the past when I get push back for either higher or lower. The key word is holistic. I have used it as my golden passport to have some autonomy over the vague definitions. My bolds.

"As previously noted, the Condition rating selected for the property must reflect a holistic view of the condition of the property improvements. It would be inappropriate to select either a lower or higher overall rating on the basis of one or two minor inferior or superior areas of the property improvements."

The holistic aspect is good, but be careful...they mention inferior or superior areas of property improvements, which is not the same thing as repairs .

If a house is otherwise in good condition and upgrades but the roof has a hole and a leak, per UAD it is C 6. (or made subject to repair to C4 or C 3 ) I personally think that is crazy, but that is the UAD edict on repair as I understand it. .

 

[Overimprovement]

The holistic aspect is good, but be careful...they mention inferior or superior areas of property improvements, which is not the same thing as repairs .

If a house is otherwise in good condition and upgrades but the roof has a hole and a leak, per UAD it is C 6. (or made subject to repair to C4 or C 3 ) I personally think that is crazy, but that is the UAD edict on repair as I understand it. .

True--anything that represents an imminent threat to safety or soundness does get different treatment. But I don't think trim or grout fall into either bucket.

I just like having as many tools in my toolbox as possible when fighting U/Ws.