Appraisal Condition Requirements

4 Replies

BP,

I need some information regarding what the actual requirements are for the condition of a home so that an appraiser can complete an appraisal.  I purchased a house for cash in OKC last month that needed a little rehab.  Our intention was to immediately start the cash out refi process once we closed on the cash purchase.  There was a shower that the previous owner had DIY'd that we thought we could salvage.  Eventually after talking with a couple contractors we realized that we were better off removing the shower and starting from scratch.  The contractor started the work and progressed fairly quickly.  The appraiser ($675) happened to stop by the house in the middle of tile going up on the walls.  He contacted me afterwards and said he would need to go back once the shower was complete, and the visit would cost another $175.  I said ok, and told my contractor to let me know when he would be finished so that I could reschedule the visit.  Long story short, the appraiser showed up again on the day my contractor was finishing installing the fixtures and had a small piece of grout to complete.  Yes, I know the contractor shouldn't have told me he was going to be finished but that's a separate issue.  The appraiser once again said he would need to come back to ensure the grout was complete, and the fixtures were installed essentially another $175 visit.  I asked him to appraise it as is, and he insisted he could not.  He would not accept photos of the completed work either.  My lender said I had no recourse other than to pay the fees.

My question is, was he in the right that he could not complete the appraisal in that condition?  Or was he just looking for another reason to charge me a trip fee?

Secondly, we just bought another house that is in need of flooring, paint, and some other minor repairs. Should I not even schedule an appraisal until the work is complete? I am not concerned about the value coming in low, because the house was bought wholesale and will come in at the LTV we are looking for.

Thanks in advance.

Josh

Originally posted by @Josh Darley:

BP,

I need some information regarding what the actual requirements are for the condition of a home so that an appraiser can complete an appraisal.  I purchased a house for cash in OKC last month that needed a little rehab.  Our intention was to immediately start the cash out refi process once we closed on the cash purchase.  There was a shower that the previous owner had DIY'd that we thought we could salvage.  Eventually after talking with a couple contractors we realized that we were better off removing the shower and starting from scratch.  The contractor started the work and progressed fairly quickly.  The appraiser ($675) happened to stop by the house in the middle of tile going up on the walls.  He contacted me afterwards and said he would need to go back once the shower was complete, and the visit would cost another $175.  I said ok, and told my contractor to let me know when he would be finished so that I could reschedule the visit.  Long story short, the appraiser showed up again on the day my contractor was finishing installing the fixtures and had a small piece of grout to complete.  Yes, I know the contractor shouldn't have told me he was going to be finished but that's a separate issue.  The appraiser once again said he would need to come back to ensure the grout was complete, and the fixtures were installed essentially another $175 visit.  I asked him to appraise it as is, and he insisted he could not.  He would not accept photos of the completed work either.  My lender said I had no recourse other than to pay the fees.

My question is, was he in the right that he could not complete the appraisal in that condition?  Or was he just looking for another reason to charge me a trip fee?

Secondly, we just bought another house that is in need of flooring, paint, and some other minor repairs. Should I not even schedule an appraisal until the work is complete? I am not concerned about the value coming in low, because the house was bought wholesale and will come in at the LTV we are looking for.

Thanks in advance.

Josh

 There is no reason the appraiser couldn't accept a photo, especially if the contractor was there finishing the work. This seems like a blatant money grab. The problem is fighting the appraiser could result in retaliation and low appraisal value. I would be nice until the appraisal is complete. Then contact the appraiser and ask for $175 back. Ask them what organization they hold accreditation or licensing through and get their license number. Tell them if they are unwilling to be reasonable, you will go through the process of filing a complaint. 

There is also the risk that you get this appraiser in the future, but if you have an active complaint filed against them, I would tell the lender it is a conflict of interest. 

Hey @Josh Darley

This is really going to depend on the type of loan that you are getting and the lender. Many commercial lenders are able to accept pics or scope of work to appraise "as completed." However, most conventional lenders will not allow this. If the fixtures you are referring to are plumbing or light fixtures then the appraiser legitimately would not be able to say that he was able to verify it had functioning plumbing and electrical systems. It is most likely less about the grout and more likely about whatever fixtures were not installed preventing him from being able to call it completed. Having fully functional plumbing and electrical systems are an absolute requirement for most lenders to do a cash out refi. 

Some lenders can be pretty strict with their cash out refi process because of people trying to scam the system. We've run into some underwriters that specifically require a final in personal appraisal to verify that ALL work was completed and the home meets their refi standards. 

I would just call this a lesson and pay the fee. OKC is small enough that there's a good chance you may have the same appraiser on a future deal. There's a pretty small pool of appraisers that do the majority of the cash out refi appraisals. 

In the future, I wouldn't personally allow an appraiser to schedule anything until the house is TOTALLY move in ready (cleaned, landscaped, etc). Contractors have a tendency to over estimate what they can accomplish in a day or two. Until you do a final walkthrough, never assume things are done. 

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You shouldnt have told the appraiser to go back out if the job was not done.  The appraisers job is to insure the safety of the bank in lending you money. It is perfectly acceptable to require this work completed before him giving the OK to his client, the lender, that it is ok to give you hundreds of thousands of dollars.

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