Appraiser saying house can not go FHA 203K .....

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Appraiser saying house can not go FHA 203K .....

Michael Dunn
Olive Branch, MS · Member since 2013 · 452 posts · 10 votes

So I just " re-talked " with the appraiser that came out a week and a half ago,  to do the appraisal on the property I am trying to purchase.

When he came out, he said that there were certain issues with the house , and because of these issues.... he could not do an appraisal

The issues are....

1. That one of the rooms did not have a closet in it, and also that it did not have a window that was operable

2. It is a " 2-unit " property , and that there are no 2-unit / multi-family properties in the area to compare the property to...I.E. give an appraisal value on the property

Welllll , over the weekend , I put in a closet, as well as got one of the two windows in the room operable

So I called him back today to tell him that I have done these two things, and he told me that the house ( all of the sudden ) will not go FHA 203K .

What I don't understand, is that a week and a half ago, he made no mention that it wouldn't go FHA 20K , only that it needed a closet and operable window in the one bedroom ( to make it a legit window )

He's saying .... That since it is a 2-unit property ( although, the county tax records have always and still do.... show it as a single family property with a de-tached workshop )

The 2nd " unit " was originally a workshop when the house was built ( back in 1945 ), but some 20 years ago, someone put a bathroom, kitchen, bedroom and washer and dryer hookups in it

I don't understand why he is saying that it won't go FHA 203K, when I have seen houses in worse/ more distressed shape than the property I am trying to buy.

The house does need about $25,000 in repairs ( New AC unit, roof, painted inside and out, all new flooring, appliances 0

It is a cabin type house, so the wires are stapled to the wall ..... to get by this and get it up to code, can't you just wrap it in conduit ?

And lastly , even if he's deeming it a " 2-unit " property .... and is saying that he can't find any comparables to compare it to ..... couldn't he just find recently sold 3 bed 2 bath , 3 bed 1 bath, 2 bed 2 bath  houses and then subtract ( $15,000 ) for a bedroom  and ( $10,000 ) for a bathroom ?

It looks like I may have to pay for another appraisal, but even at that ..... I'm getting no guarantee that it will go FHA 203K

Sorry for the long post... just need some help and recommendations please

Thanks so much, I really appreciate it - michael

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Jeff Onofrio
Specialist · Marlton, NJ · Member since 2014 · 92 posts · 55 votes
11y

@Michael Dunn

Mike- I wanted to get you a professional response from an actual appraiser so I asked my appraisal department head of my company to write you up something to your issue.  Here was his response and good luck! 

Hello Michael,

I am a real estate appraiser and I direct the Collateral Valuation department for a lender. I may be able to shed some light on the property and appraisal issues that you are facing.

The 203k renovation loan gives you great flexibility for financing the property. The scope of your repairs can clear up any potential issues.

If the property is truly a two unit property, the appraiser will be required to use the multi-family (1025) appraisal form and include sales of multi-unit properties as comparables. HUD and the lender will require 3 closed sales of multi-family properties in the past 12 months. If the area is rural, this may result in using comparables from many miles away. In very extremely rare instances, there may be no such sales to use in comparable areas and the property valuation would not meet HUD standards.

The beauty of the 203k is that you can make that home what you want it to be as long as it is economically feasible. It sounds as if you may be able to include in the scope of work renovations to have the property conform to a single family use or a single family with accessory unit use. A single family with accessory unit appraisal is reported on the single family (1004) appraisal form. An accessory unit defined by FHA/HUD is a separate additional living unit, including separate kitchen, sleeping, and bathroom facilities, attached or detached from the primary residential unit, on a single family lot. The accessory unit must be subordinate in size and appearance to the primary unit and must be connected to the utilities (except phone and cable) of the primary unit. I don't know the particulars of your property but you may just need to have the scope of work include removing the additional electrical meter.

HUD requirements include working windows on bedrooms but do not have any requirements for closets unless the municipal code requires closets.

As stated by some posters, prior to having your 203k appraisal done, you must establish a detailed scope of work. The lender can pick the appraiser, and a good lender will pick the 203k appraiser because outsourcing this function to an appraiser without renovation appraisal experience may be setting the process up for failure. After all, the lender is soley responsible for selecting an appraiser with the necessary competency for the assignment.

I purchased my current home using a 203k loan and am very happy that I did. Do not let your frustrations to date stop you from pursuing this opportunity.

Wes Costello
Collateral Valuation Director
NMLS# 1014781
700 East Gate Drive, Suite 400
Mount Laurel, NJ 08054
www.annie-mac.com 

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  • Franklin Romine
    Visalia-Fresno, CA · Member since 2009 · 1k+ posts · 863 votes
    11y

    @Michael Dunn

    Request another appraiser.  If you want the property it might be worth it.  Its a dice roll everytime with a appraiser.

    Frank

    0Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    11y

    The issue is likely that it's not a legal 2 unit, so can't be used/financed as one.  Also with a 203k, you need the list of work being financed, a contractor proposal, in order to come up with an "after repaired appraised value".

    0Reply
  • Michael Dunn
    OP
    Olive Branch, MS · Member since 2013 · 452 posts · 10 votes
    11y

    Hi Frank,

    Thank you for your reply

    I have always wondered ..... why is it a dice roll ?

    Don't all appraisers have to be un-biased and asses and value the same house as another appraiser would , via follow certain guidelines ?

    It was appraised back in 2006 with no issues ( although the house was in good shape back then )

    I was wondering..... could I request who to have appraise the property , I.E. the same company that did it back in 2006 ?

    Or do I have to go with who ever my Lender " picks "

    Thanks again, much appreciated

    0Reply
  • Jeremy Tillotson
    Investor · Fort Wayne, IN · Member since 2014 · 1k+ posts · 515 votes
    11y

    The house does need about $25,000 in repairs ( New AC unit, roof, painted inside and out, all new flooring, appliances 0

    It is a cabin type house, so the wires are stapled to the wall ..... to get by this and get it up to code, can't you just wrap it in conduit ?

    You would have to remove the wires run conduit and install new wires in conduit. 

    I am a GC and flipper, you have much more than 25k in rehab, people always seem to under estimate what it takes to fix a house. Best of luck none the less. 

    1Reply
  • Michael Dunn
    OP
    Olive Branch, MS · Member since 2013 · 452 posts · 10 votes
    11y

    Hi Wayne,

    Thank you too for your reply

    The issue is likely that it's not a legal 2 unit, so can't be used/financed as one.

    How would I get around this, as far as getting it approved for the FHA 203K ?

    The 2nd unit is attached to the property , so in a sense it is a 1 unit single family property ..... it is attached by the roof line , with about 20ft. of walking distance from door to door between the two of them

    The second unit does have it's own meter.... not sure how much that matters though

      Also with a 203k, you need the list of work being financed, a contractor proposal, in order to come up with an "after repaired appraised value

    I have a contractor who has done quite a few of these rehab loan / HUD properties , but I was thinking to wait until I got it appraised, before I had him come out there and do a write up for all the work to be done

    I have been doing contractor work ( samet hing with my Dad ), both of us for more that 15 years, but we are no longer licensed or bonded . We were hoping that we could do certain repairs.... is this a possibility? (  stuff such as the Painting, flooring, countertops )?

    Lastly please, I was wondering if all else fails with getting approved for the 203K rehab loan ..... would the bank who the house is under ( Chase ) , do some type of in house loan, since they have a vested interest in the property ?

    And what % down payment would they likely require ..... 5% , 10%, 20% ?

    Thanks again for all of the help

    0Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    11y

    No doing your own work.  No "in house" loan from the seller.  You can't pick the appraiser, the lender can't even pick them, they come from a "pool".  You're doing this backwards.....the appraisal is based on the repaired condition, which is impossible for the appraiser to  establish without a detailed scope of work.

    0Reply
  • Jeff Onofrio
    Specialist · Marlton, NJ · Member since 2014 · 92 posts · 55 votes
    11y

    @Michael Dunn

    Mike- I wanted to get you a professional response from an actual appraiser so I asked my appraisal department head of my company to write you up something to your issue.  Here was his response and good luck! 

    Hello Michael,

    I am a real estate appraiser and I direct the Collateral Valuation department for a lender. I may be able to shed some light on the property and appraisal issues that you are facing.

    The 203k renovation loan gives you great flexibility for financing the property. The scope of your repairs can clear up any potential issues.

    If the property is truly a two unit property, the appraiser will be required to use the multi-family (1025) appraisal form and include sales of multi-unit properties as comparables. HUD and the lender will require 3 closed sales of multi-family properties in the past 12 months. If the area is rural, this may result in using comparables from many miles away. In very extremely rare instances, there may be no such sales to use in comparable areas and the property valuation would not meet HUD standards.

    The beauty of the 203k is that you can make that home what you want it to be as long as it is economically feasible. It sounds as if you may be able to include in the scope of work renovations to have the property conform to a single family use or a single family with accessory unit use. A single family with accessory unit appraisal is reported on the single family (1004) appraisal form. An accessory unit defined by FHA/HUD is a separate additional living unit, including separate kitchen, sleeping, and bathroom facilities, attached or detached from the primary residential unit, on a single family lot. The accessory unit must be subordinate in size and appearance to the primary unit and must be connected to the utilities (except phone and cable) of the primary unit. I don't know the particulars of your property but you may just need to have the scope of work include removing the additional electrical meter.

    HUD requirements include working windows on bedrooms but do not have any requirements for closets unless the municipal code requires closets.

    As stated by some posters, prior to having your 203k appraisal done, you must establish a detailed scope of work. The lender can pick the appraiser, and a good lender will pick the 203k appraiser because outsourcing this function to an appraiser without renovation appraisal experience may be setting the process up for failure. After all, the lender is soley responsible for selecting an appraiser with the necessary competency for the assignment.

    I purchased my current home using a 203k loan and am very happy that I did. Do not let your frustrations to date stop you from pursuing this opportunity.

    Wes Costello
    Collateral Valuation Director
    NMLS# 1014781
    700 East Gate Drive, Suite 400
    Mount Laurel, NJ 08054
    www.annie-mac.com 

    3Reply
  • Michael Dunn
    OP
    Olive Branch, MS · Member since 2013 · 452 posts · 10 votes
    11y

    Jeff,

    Thank you so much, I really appreciate it

    Can't thank you enough

    0Reply
  • Michael Dunn
    OP
    Olive Branch, MS · Member since 2013 · 452 posts · 10 votes
    11y

    Hi Jeff,

    I wanted to ask you please, if you could send the following response / reply to Wes ?

    Thanks again

    My Reply:

    Hello Michael,

    I am a real estate appraiser and I direct the Collateral Valuation department for a lender. I may be able to shed some light on the property and appraisal issues that you are facing.

    Thank you so much, I appreciate you taking the time out to reply and help me with the current situation I am facing

    The 203k renovation loan gives you great flexibility for financing the property. The scope of your repairs can clear up any potential issues.

    If the property is truly a two unit property, the appraiser will be required to use the multi-family (1025) appraisal form and include sales of multi-unit properties as comparables. HUD and the lender will require 3 closed sales of multi-family properties in the past 12 months. If the area is rural, this may result in using comparables from many miles away. In very extremely rare instances, there may be no such sales to use in comparable areas and the property valuation would not meet HUD standards.

    The thing with this property, is that there are no detached properties anywhere close in " Mississippi ", BUT .... there are plenty of de-ttached and attached properties, as well as Duplexes and Multi-Family properties about 30 minutes away in Memphis,TN

    My question is , could the appraiser not use recently sold properties in Tennessee ( Memphis ) for comparables , since there are plenty in Memphis .... even though the property I am trying to buy is in Mississippi ( which is just 30 min. away ) ?

    The beauty of the 203k is that you can make that home what you want it to be as long as it is economically feasible. It sounds as if you may be able to include in the scope of work renovations to have the property conform to a single family use or a single family with accessory unit use. A single family with accessory unit appraisal is reported on the single family (1004) appraisal form. An accessory unit defined by FHA/HUD is a separate additional living unit, including separate kitchen, sleeping, and bathroom facilities, attached or detached from the primary residential unit, on a single family lot.

    This sounds like what the property is , and what they ( the appraiser and Lender ) are going to define and deem it as

     The accessory unit must be subordinate in size and appearance to the primary unit and must be connected to the utilities (except phone and cable) of the primary unit. I don’t know the particulars of your property but you may just need to have the scope of work include removing the additional electrical meter. I will definitely check tomorrow and make sure that it is just the meter , that tis second unit has

    HUD requirements include working windows on bedrooms but do not have any requirements for closets unless the municipal code requires closets.

    Just to be safe and make sure there wouldn't be an issue again, I installed a closet and got one of the 2 windows in the room in operable working condition this past weekend

    As stated by some posters, prior to having your 203k appraisal done, you must establish a detailed scope of work.

    I have a Contractor already lined up. So before we get another appraiser out there, do I need to have him come out and do a write up of all the needed repairs and the associated costs for the Labor and Materials ?

     The lender can pick the appraiser, and a good lender will pick the 203k appraiser because outsourcing this function to an appraiser without renovation appraisal experience may be setting the process up for failure. After all, the lender is soley responsible for selecting an appraiser with the necessary competency for the assignment. I was told by my Lender that they have no say so in who they choose to appraise the property.... does this sound correct?

    I would much prefer my Lender pick someone who is very familiar with the 203K, as well as an appraiser who is willing to go across state lines to Memphis,TN to find comparables ( if this is allowed )

    I purchased my current home using a 203k loan and am very happy that I did. Do not let your frustrations to date stop you from pursuing this opportunity.

    Wes, Thank you so much for taking the time out to help me get things moving along, and hopefully being able to get this property appraised finally, with 3 comparables and get the property purchased and closed on  :)

    With the 203K......

    1. Can the work begin after you close? And if so, how long do you have to complete the repairs ?

    2. Is there anyway to do some of the work myself ... mainly all of the  painting and installing the flooring ? I am a sub-contractor, and have experience in this type of work, but I am currently not licensed or bonded

    Thank you again, Really appreciate it - Michael

    Wes Costello
    Collateral Valuation Director
    NMLS# 1014781
    700 East Gate Drive, Suite 400
    Mount Laurel, NJ 08054 www.annie-mac.com

    0Reply
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