Safety Concerns

[Howard Bouchard]

I Have Always Made My Appraisals Conventional Or Otherwise Subject To Repairs/remedy For Health And Safety Issues. Things Like Sliders Or Doors Over 30 Inches High And Oftentimes Much Higher Opening To No Landings Or Stairs. Missing Deck Rails Etc. Recently I Was Told By An AMC That The Lender's Guidelines Required I Submit My Appraisal "as Is", Even For These Types Of Safety Issues. I Refused To Do So And Haven't Received Any More Orders. I Think This Kind Of Thing That Needs To Be Addressed If AMCs Are Going To Be In Charge Of Appraisal Ordering And Management On A Larger Scale. What's Your Take?

 

[Darrel Clark]

I don’t believe there is anything in USPAP or any appraisal guidelines, other than FHA, that says an appraiser must require repairs for any reason. Of course, it is the appraiser’s responsibility to describe the property, including any negative aspects such as safety or health problems, and to address their impact on market value.

In addition, if an appraisal is prepared for a federally related transaction, FDIC guidelines require that an “as-is” value be given—even if there is also a value shown that is based on hypothetical conditions (such as required repairs or proposed improvements). The specific FDIC guideline states, “For federally related transactions, an appraisal is to include the current market value of the property in its actual physical condition and subject to the zoning in effect as of the date of the appraisal.” FDIC Statements of Policy 8-31-98 p.5466.

 

[Pat Butler]

I agree with the above poster. Your client is simply telling you what they want you to consider in your scope of work. If they aren't concerned with safety issues then get that in writing from them in your engagement agreement and include that info in your SOW.

 

[Caterina Platt]

A step further.sometimes 'As Is' can't happen

Howard, I see both sides of the coin here. I share your concerns for the health and safety issues and in such cases might make a notation in the report that such condition existed, recommend repair and renounce liability. Typically, my market would treat these minor repair items as a cost to cure issue. These minor repair items are generally either remedied by the seller per the purchase contract or home inspection punch list, or the buyer is credited with an amount sufficient to complete the repair. Thus, your market reaction.

On the other hand, this 'As Is' demand can sometimes be impossible. I may be off an AMC's list (haven't heard boo in several weeks) for just such an occassion. Really long story, but it amounted to the AMC demanding I take risks I couldn't afford to take. The borrower couldn't provide me with a foundation report, and there were some serious concerns. I had to CB4 it. It was sent back to me for corrections. "Must be 'As Is', to which I had to reply that I would be happy to make it as is if someone would supply me with a structural either clearing the foundation or providing a bid for it's remediation.

I had warned them the minute I got back in from the inspection about the condition. No one wanted to handle it properly.

I didn't hear back, nor have I recieved any other orders. In another week, I'm considering their payment past due and I'll find out for sure what's up when I make that call.

I'm with you. There needs to be some education of these people.

 

[c w d]

Unless there are specific guidelines and or regulations (USPAP) telling you to do something a certain way the lender can pretty much dictate how they want they appraisal done. Doing the appraisal of a house falling down on itself can be completed "As-Is" so long as you account for market reaction to such circumstances and reflect it in your opinion of value.

 

[Wayne Tomlinson]

As Is

Just because you were told in a class somehere that everything must be repaired before you can appraise is no reason that that is the rule.

Please quote the source of that requirement.

When I first went on the FHA panel, there were many things which could/should be "required as an FHA requrement". Now unfortunately, since FHA VA and the GSEs are all in competitionn for loan volume, they have removed the safety requirements in order to increase market share. To hell with the borrowers who were to be protected by the government requirement that the home they were buiying at least had an appraiser look it over an point out certain deficiencies and "require" them to be repaired or painted to qualify as security for a loan.

That is almost totally absent in the present environment.

It is possible to appraise "AS IS". That is what is asked for in almost every appraisal. It is also important for the appraiser to include all the deficiencies noted.

It is the client who must decide what to do about the condition.

List the deficiencies, point out the hazards, and ship off the appraisal.

Sometimes the assignment is to tell just what the property you looked at is worth at the time you examined it. Not what it would be worth if it is "fixed up"

Wayne Tomlinson

 

[Mike Garrett RAA]

Repeat after me...I am an appraiser, not a home inspector!

 

[Caterina Platt]

Alright then. The long story. Now tell me what you'd do to make this 'As Is' under the circumstances.

Pull up to the house, finally. The borrower has cancelled and re-scheduled 3 times. You're already in dutch with the AMC as everyone is in a hurry, regardless that it's the borrower's delays. You are greeted by a flat roof dwelling with parapet walls that keep you from actually seeing the roof surface, but you can see the blue tarps. There are also a series of tarps around the north and east foundation walls. The foundation has been exposed down to about a foot around this area.

The borrower tells you there are active roof leaks, and that they've had the foundation inspected. Bids exist for the roof, but nothing was ever put in writing on the foundation. There are large chunks of stucco missing on these north and east walls. Apparently there have been wicking problems with this area. According to the borrower, the foundation is OK, but there needs to be a moisture barrier installed at the soil level. About 1/3 of the dwelling is a 150 year old adobe construction, and the remainder of this 3000 SF adobe home dates about 30 years back. 10 years ago, you know it sold as a Fannie repo for super cheap. The borrower also tells you it was a specialist in old adobe dwellings that inspected the foundation. He drove 90 miles one way, inspected and never wrote a report or charged them. Can't seem to get his name out of them.

Do you know foundations and construction well enough to look for yourself and call it good? I don't. Do you know many 'experts' who'll go out of their way to look at a home and not charge for the opinion, let alone put a report together? Perhaps.

Do you know that many older adobe dwellings in this area never had a foundation under their support walls? Some were built on a layer of river rock, some not even that much. To be standing after 150 years, it's probably a good bet there's something substantial under there, sure. Do you know for a fact that the plaster stop the borrowers state will cure the wicking? Are you willing to call it 'As Is' without a professional opinion?

I found the information to support the 'As Is' value for both levels of repair, whatever may be needed, but which one do you choose? Roof and stucco with a plaster stop, or foundation remediation? The roof project was bad enough that the bid was actually $30,000. I nearly fell of my chair when I heard that. Would have never put such a high number on that based on past experience with even high end, membrane installations. Apparently there was a significant amount of resufacing and drainage issues to address. The roof had not been touched since the borrower's purchase, and who knows how long prior. What else, pray tell, is also wrong?

Wouldn't the proper type of loan have been a rehab type program or a construction loan? Sure. I tried to warn them it's a square peg in a round hole situation, but the AMC simply wanted the report so they could charge for their job.

That is why it got CB4'd.

BTW Wayne and cwd. I've done plenty of REO work. The repair and market reaction issue is not new to me. In the REO world, the market would likely assume the worst due to appearances and the chance of significant repairs and respond accordingly in pricing. That is not necessarily the proper way to handle the owner/occupant refinance deal. A wrong call will significantly affect the value either way.

 

[Mike Boyd]

I had a similar situation several years ago. Client demanded an "as is" report on a house where the kitchen and bath had been removed. I wanted to make it subject to completion of those repairs. I appealed to the client but they insisted on an as is value as they needed the refi money to complete those repairs. If I had made it subject to, they could not close the loan until the work was done and they didn't have the money for that. So, I made a massive condition adjustment and also deducted a similar amount under functional utility as it did not have a kitchen or bath. Everyone ended up happy and the loan closed.

 

[Mr Rex]

Repeat after me...I am an appraiser, not a home inspector!

Home Inspectors can't demand or require anything to be repaired either. Just remember the mantra: "I am simply a reporter" and report it in the precribed format of your SOW (mindful that FHA has certain automatic repair requirements, Conventional lenders do not and often demand an As-Is value). To require all potential problems be repaired as part of an apprasial is to suggest that a typical buyer would not consider buying until the repairs are made. Report deficiencies per SOW, and stop playing code cop.