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Subject To Home Inspection Items

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Overimprovement

Senior Member
Joined
May 31, 2017
Professional Status
Certified Residential Appraiser
State
Kentucky
If this has been discussed, please post link, I looked but didnt see anything too relevant.

Have a lender who wants me to change my report to 'subject to repair of ' a couple items found in a SUBSEQUENT home inspection report. This a conventional, portfolio loan, local lender. These are NOT items I would have been expected to uncover--one was a 'mold-like' substance under the house on the underside of the sub-flooring.

Thoughts? USPAP issues?
 

Overimprovement

Senior Member
Joined
May 31, 2017
Professional Status
Certified Residential Appraiser
State
Kentucky
BTW, they did furnish the home inspection, and while I dont necessarily agree they are big issues--its a C4 home to begin with--I do see them. Sounds like a buyer/seller disagreement over who will pay more than anything. I dont want to be a pawn...
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
I see no problem with it...write that due to subsequent home inspection uncovering X conditions which were not known at time of eff date, the client is making the appraisal subject to repair, therefore appraiser is changing from "as is" to "subject to repair".
 

glenn walker

Elite Member
Joined
Oct 11, 2006
Professional Status
Certified Residential Appraiser
State
California
Normally no "BUT" now you know there is mold I think I would .
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
It changes the scope but can be done within the original assignment engagement (IMO).

Based on what you describe, I'd be willing to do it; what I would charge (if anything, depending on the client) is a business decision.

Are you concerned that you might be increasing your liability by doing so? I don't see that; in fact, I see this as actually lowering liability.

The fact that these things were not discoverable during the inspection process shouldn't concern you (easy for me to say, I know). The only decision is, given what has been disclosed now (after the fact), do you want to amend your report and specifically call these things out? From a liability perspective, I would think that narrows your liability rather than expanding it.

Your call... good luck!

(I see no USPAP issues. This kind of request can be handled within the USPAP requirements)
 

Overimprovement

Senior Member
Joined
May 31, 2017
Professional Status
Certified Residential Appraiser
State
Kentucky
Appreciate the thoughts so far, especially the reduced liability angle. My concern I guess was making MY report subject to something that I didn't uncover, and may not agree is even an issue--there are mold like substances in EVERY home. Home inspectors think any discoloration on wood is mold. That's just not so.

My other concern--for me to clear the report, I either have to again rely on home inspector that issue is resolved, OR crawl under a home with a 16" clearance (I weigh 230, not a petite fella), and verify it myself. I am not qualified anyway to state that a potential mold issue has been resolved. Or would I require a mold professional to clear it?

Why doesn't the lender just make the loan contingent on the repairs directly? Why drag the appraiser into it at all?
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
Jeez you are not going to be asked to crawl under the home, subject to repair will rely on inspection by an inspector checking yes after they inspect following a professional contractor performing any needed mold remediation.
 

Flakey

Senior Member
Gold Supporting Member
Joined
Oct 11, 2006
Professional Status
Certified Residential Appraiser
State
South Carolina
I would include the inspection report (or at least the relevant part), state that it was provided by the client along with their revision request verbatum and make the extraordinary assumption that the information, analysis and conclusions presented in the inspection report are true and correct.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
Appreciate the thoughts so far, especially the reduced liability angle. My concern I guess was making MY report subject to something that I didn't uncover, and may not agree is even an issue--there are mold like substances in EVERY home. Home inspectors think any discoloration on wood is mold. That's just not so.

My other concern--for me to clear the report, I either have to again rely on home inspector that issue is resolved, OR crawl under a home with a 16" clearance (I weigh 230, not a petite fella), and verify it myself. I am not qualified anyway to state that a potential mold issue has been resolved. Or would I require a mold professional to clear it?

Why doesn't the lender just make the loan contingent on the repairs directly? Why drag the appraiser into it at all?

That's a very good question.
The answer is likely since they now know there are issues that can affect the collateral value (somewhat) and the eligibility (a bigger problem) of the property for the loan, they'd like that to be included in the collateral-component of the loan. The appraisal is the collateral value component in the mortgage-lending process so it makes some internal sense to have those issues dealt with in the appraisal.
From a lender's perspective, if I find out there is an issue with the property that could affect the collateral eligibility and/or value, and the appraiser I engaged wasn't able to discover it, I'd like to bring the appraiser in and have them bake-that-into their appraisal.

Just because that's the lender's perspective doesn't mean the appraiser has to or should do anything. And, yes, the issue could be handled in underwriting but it can also be handled in the appraisal component.

Many times we get information that results in a "subject-to" condition on the appraisal. Sometimes, the fixes to those conditions cannot be directly verified by the appraiser. This is a perfect case in point: The appraiser (you) had no way of discovering some or maybe all issues, and you'll have no way of directly certifying they are fixed by direct observation. IMO, the way to handle this is in the "subject to" rationale, it is stated that the appraisal is relying on a 3rd party report. In the 1004D completion process, the same rationale applies...

Due to the nature of issue X, I cannot directly verify if it is complete or not. I am relying on the contractors' final report/invoice/project notes to confirm the work has been done. I advise my client to review my confirmation-process to ensure it meets their requirements.

Depending on my relationship with the client, I wouldn't charge for the change and collect the re-inspection fee if it is required. Or, the UW can handle that and sign-off on the completion his/herself. In fact, in a situation like yours, I advise the client that they can sign-off on the completion without my input because I'm not going to be able to directly confirm anything anyway.

But, as I said, this is your call. :cool:
 
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