Should appraiser know of issues?

9 Replies

I am in escrow for an investment SFR and the home inspection revealed issues with the electric wiring. I got two estimates for repair including fixing a fire hazard condition in the wiring coming from the street through attic and unpermitted work on electric panel redo. Are these issues part of what the appraiser looks at and considers to value the property? Will appraiser even know that there are issues and will unpermitted work affect appraisal? I'm in a dilemma about how to handle this.. Thanks for your input!
(661) 877-1430

The appraiser will only notice it if it is obvious, he won't be doing any testing.  Not sure what you mean by "how to handle it", either the appraisers discounts for it, or he doesn't.

Hi Kiki,

I'm an appraiser in NC and typically only a visual inspection is done during the time an appraiser is at the house. Unless something is obviously wrong, the appraiser will have no idea about the electrical problems. You would think that it would be readily apparent if the electricity doesn't run to an outside meter box and it runs through the attic. But the appraiser may not look up or have limited building experience. If it is for a FHA or VA mortgage a little more in depth inspection is done, including at least a head and shoulders visual inspection of the attic. New FHA rules require the appraiser to walk the attic if it is floored. But still it would have to be pretty obvious.

Now if you provide the appraiser with the home inspection, then I know I would make it subject to those repairs, since it is a safety hazard. Each appraiser is different but having that disclosed should make a difference.

Hope that helps!

Thanks! I think it does. 

(661) 877-1430

@Kiki Helland I'm not sure why you would want the appraiser to know about that...In both worlds I live in, buy and hold and fix and flip, I want the property to appraise for the MAX value that I can get it to and do not want the appraiser hitting me for things like that...It will cost you more money if you are doing this in a loan senario as most banks will lend 75% of the asset.

If I were in your shoes, I'd be going back to the seller to ask for a discount on the faulty wiring and not passing anything along to the appraiser...just my .02

Originally posted by @Thurman Stoddard :

...Unless something is obviously wrong, the appraiser will have no idea about the electrical problems. You would think that it would be readily apparent if the electricity doesn't run to an outside meter box and it runs through the attic. But the appraiser may not look up or have limited building experience....

You hear of instances where a disgruntled buyer (mostly cash buyers) goes after an appraiser if their appraisal was materially different from a report subsequently ordered by the lender and that caused a deal to stall. Missing an issue of this sort might skew the appraisal significantly. Can the buyer go after you then for negligence if you were to miss an issue like this and a subsequent appraiser didn't?

I think they would have a good case. The appraiser isn't a home inspector but they are supposed to be competent and knowledgeable about the time if property they are appraising. Something obvious like the original post or misidentifying a house as site built when really it is a modular home or a manufactured home with an addition, etc are all possible areas the appraiser can be held liable. Once again it comes down to being competant both geographically and in detailing the physical characteristics since they are the supposed professional that the public is relying upon to determine the value. Omitting a gross obvious safety hazard, whether through intent or ignorance is not in the publics interest. 

In other words, no, and if you read the appraisal it will generally state that the assumption is that the subject property meets code requirements unless otherwise stated. An appraiser is not expected to be an engineer, or to have any other expertise other than appraising the estimated value of property at a point in time. Unless some deficiency about a property is obvious, the appraiser has no duty to investigate further. With electrical, if it turns off and on it works. 

You also have a duty to disclose known deficiencies of a property to an appraiser as well as to any lender, significant deficiencies can affect the collateral value and any loan decision, omission of facts known can be fraud.

In all cases a seller who fails to disclose hidden or latent defects is liable for the value of such defects and is grounds for the termination of any offer or contract to purchase or lease.  

Due diligence is placed at the feet of a buyer, the proper inspection of a property is a buyer's responsibility.  

Disclosure of any defect lays with the party who has knowledge of that defect.  :)

  

"Due diligence is placed at the feet of a buyer" is both poetic and accurate. Good luck.

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