What constitutes a finished floor - Does low loan/value ratio make any difference?

[mewre3]

This July we bought our house without a mortgage and now given the current rates we are looking to get a loan on the house -what they are calling a cash out refinancing. The loan will only be for 39% of the value of the house (We paid $428,000 and are borrowing 165,000). The house was appraised in Jan 2008 by the town and appraised for $439,000.

Over the last few months we spent over $5,000 on new paint, wallpaper removal, some new carpet and a brand new high tech home security system. Before the house was mostly pink with flowery wallpaper and the old carpet was beyond disgusting. Will this add to our new appraised value?

Also we pulled the old carpet upstairs but we are still prepping the hallway, bonus room and master bedroom for new hardwood floors so they have the exposed plywood/osb sub floor and in some places the the particleboard underlayment over the plywood (we have been slowly removing it to make way for the hardwood).

I have been reading conflicting things about what constitutes a finished floor and wanted to get some more opinions. Will this be a big issue for us being able to obtain a loan given the extremely low loan to value ratio? Will we have to do something before we close to finish the floor? If so could we paint the plywood or add a rug pad or something over it or will we have to put in the hardwood earlier than planed?
We are located in SW Durham NC if that changes anything.

Also we have taken off some base moldings in our effort to get the particleboard underlayment removed from the areas that will be receiving hardwood floors. Should we try to replace these before the appraisal or is that considered cosmetic?

Thank you in advance for any insight!

 

[G-man]

Hello & welcome.

When I'm appraising a home, the more complete it is the better. Most every appraiser here understands homes are lived in and undergo certain updates & repairs. Minor painting and wallpaper are, IMHO, totally cosmetic and wouldn't affect the overall value of the home. Missing floor coverings and trim, on the other hand, would have to be mentioned within the report & the client notified. It would be up to the client, the lender in this case, if the report would be "subject to completion" (ie the floor coverings & trim installed), or completed "As Is" with a cost estimate that includes installation of the carpet & trim by a professional.
If I were having my home appraised, in this current market, I would have my house in the best condition I could before an appraiser stepped foot one inside. Even in this business, first impressions mean a lot, as appraisers are human too and you want him or her to have a postive impression of you home.

 

[Thomas Fiehler]

If I were you, I would discuss this with the lender and see what their advice is. With that low a LTV, they may not care about those minor issues.

 

[Webbed Feet]

A few points.

This July we bought our house without a mortgage and now given the current rates we are looking to get a loan on the house -what they are calling a cash out refinancing. The loan will only be for 39% of the value of the house (We paid $428,000 and are borrowing 165,000). The house was appraised in Jan 2008 by the town and appraised for $439,000.

You mean the "town" did something called "Assessed" your property at $439,000.

Over the last few months we spent over $5,000 on new paint, wallpaper removal, some new carpet and a brand new high tech home security system. Before the house was mostly pink with flowery wallpaper and the old carpet was beyond disgusting. Will this add to our new appraised value?

A) "Cost" does not equal "Value" most of the time.

B) An "Assessed" for tax purposes value and an appraisal value for mortgage purposes are very unlikely to have anything at all to do with one another and should never be compared. The first uses "mass" appraisal methods and can be very inaccurate as many areas of the country it seems politics plays a role. I know of a recent case where a city had not physically so much as looked at a property in over 25 years. So you should not plan on comparing the results of a mortgage appraisal to your tax statement.

C) While improving the condition of your home may have resulted in an increase in value, it does not sound as if you hsve any reason to be comparing appraisal results to something in some attempt to determine an increase. In fact, if your market area has been depreciating (like much of the courntry) you could possible see results less than you paid regardless of the work you have had done.

Also we pulled the old carpet upstairs but we are still prepping the hallway, bonus room and master bedroom for new hardwood floors so they have the exposed plywood/osb sub floor and in some places the the particleboard underlayment over the plywood (we have been slowly removing it to make way for the hardwood).

I appreciate what you are doing to get ready for hard wood floors. Regardless, bare subflooring is not considered "market acceptable" and you could find yourself with a "Subject To" condition requiring you correct that. This could hold up your loan until you get market acceptable flooring back down.

I have been reading conflicting things about what constitutes a finished floor and wanted to get some more opinions. Will this be a big issue for us being able to obtain a loan given the extremely low loan to value ratio? Will we have to do something before we close to finish the floor? If so could we paint the plywood or add a rug pad or something over it or will we have to put in the hardwood earlier than planed?

We are located in SW Durham NC if that changes anything.

Also we have taken off some base moldings in our effort to get the particleboard underlayment removed from the areas that will be receiving hardwood floors. Should we try to replace these before the appraisal or is that considered cosmetic?

Thank you in advance for any insight!

The ratio will have little to do with it. Lenders are tough now. Unless an underwriter will do a hold back or exception or something, you'll have to get those hardwood floors in. No, painting the subflooring is not acceptable. Just a rug pad is not acceptable. If I were you, I'd get that hardwood in and restore the base molding both before the appraiser arrives. Or get it in writing out of the lender they will lend anyway even if an underwriter has to do a hold back. Any decent appraiser is going to have to disclose that stuff is missing.