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Tell the client what the HO said?

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CANative

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Retired Appraiser
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California
I'm interviewing a property owner while making the appointment to see the property and she's telling me she calls it the "old, yucky place." She doesn't live there full time. She says it's an old farmhouse she thought would be a good investment (surrounding by high end vineyards and wineries) and states that the house is "going to come down next year" and she might rebuild as income property (maybe, zoning is AG so probably not without a variance although you can build a SFR with an accessory unit).

What is the REL and what, if anything, should I tell the conventional lender client of this conversation?
 

hastalavista

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May 16, 2005
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Certified General Appraiser
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California
Greg-

A good question.

While I don't see any issue with reporting the conversation you had with the borrower (it is part of your data collection process and is a primary verification source) in the real world, it may create more problems than solve (like, "did you have to put this in the report!" :rof: ).

I think from an appraisal view, the question is HBU and remaining economic life of the improvement. You might agree with the borrower that the best thing to do is bulldoze the property. If so, then the borrower's statements add weight to your independent analysis.
 

TJSum

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Certified Residential Appraiser
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Maryland
Yes, good question Greg. Our "favorite" conversations with the HO is what they plan on doing to the house in the future. :) Last week, I did a refi and the HO told me they wanted to get this refi done on their property ASAP, because then they can start looking for a bigger house to move into and turn the current subject into a rental. So what is our obligation here, as of the effect date it is owner occupied. ???
 

stefan olafson

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Apr 2, 2003
Professional Status
Certified General Appraiser
State
North Dakota
Agree with Denis on this one. What a place is called has little to do with value. Just read about a place on the historic register that's up for sale in nearby town. Historically it's called the 'pest house' because that's where they put people in the early 1900's with infectious diseases! It's last use was as a early childhood education center.

Just do your job, take a little bit more of a look at HBU and tell it like it is.
 

CANative

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Retired Appraiser
State
California
Out of curiosity, does a property owner need to inform or get permission from the note-holder to raze the improvements and rebuild on a mortgaged property?
 
Joined
Jul 15, 2003
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State
Connecticut
Q 1) I have to agree with Denis, but I would be very very careful with what you say unless you have it in writing and signed by the HO. You are appraising the property per SOW, as in, today's effective date. What happens tomarrow or next year or last year has no affect on the report today.

Q 2) It does not have anything to do with you, the farther you saty away from it the better your are. But good question, I do not know.
 
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North Carolina
I am NOT a lawyer.

But Ive always been told Yes. They must have the lenders blessing. Their collateral is diminished....

todd
 
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Jun 3, 2005
Professional Status
Certified Residential Appraiser
State
Colorado
Out of curiosity, does a property owner need to inform or get permission from the note-holder to raze the improvements and rebuild on a mortgaged property?

Yes and no -- the note and deed of trust require the homeowner to maintain the property in good (habitable) condition, but that doesn't stop homeowners from remodeling (partial demolition) or totally demolishing a property.

The lender can call the note if the homeowner doesn't comply, but if the homeowner doesn't tell the lender and makes the payments on time, usually the lender will never know. If the lender finds out their security has been hauled off to the landfill, the property owner could be in a world of hurt.

As to the original question -- the homeowners intent has nothing to do with the current report. The improvements might be demolished, or they might be there 100 years from now. Although there might be some issues regarding primary residence or second home, it is an owner occupied property at the time of your report. (Unless it's vacant -- which becomes a question for the underwriter.)
 
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Annelle

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Jan 26, 2004
Professional Status
Certified General Appraiser
State
Arizona
I agree with Denis too. The future is speculative.
 

Edward OConor

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Apr 27, 2006
Professional Status
Certified Residential Appraiser
State
New York
Yes, good question Greg. Our "favorite" conversations with the HO is what they plan on doing to the house in the future. :) Last week, I did a refi and the HO told me they wanted to get this refi done on their property ASAP, because then they can start looking for a bigger house to move into and turn the current subject into a rental. So what is our obligation here, as of the effect date it is owner occupied. ???


What business is it of ours what the borrower does with the money? Are we the money spending police?

What's ok? College, vacation, bills, 6 kilos of cocaine, bookie or Las Vegas?

I stop that conversation quickly with "What you do with the money is your business not mine. My job is to appraiser the house for "zzz" lender not to spend your money."
 
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