Before I pay for a Second appraisial , Advice please .....

4 Replies

I had a question regarding getting a FHA 203K rehab loan

the property I am wanting to purchase was built around 1945 ( there is no Lead Paint ) as far as I can tell

This is a distressed property , and needs around $20,000 - $25,000 in repairs done ( new roof, new A/C unit, painted inside and out, all new flooring, Bathroom remodeled some and the same with the kitchen, some electrical work )

The property is in a Trust , and my Mother is the Trustee of the property ( is was my grandmother's property )

The likely sell price will be about $55,000 - $60,000 ( this includes the pay off of the property, the repair costs, closing and the pre-paids )
The pay off for the property is $29,000

The ARV ( from the research I have done, should put the property in the $85,000 - $90,000 range ) after it's fixed up

I already have a licensed and bonded Contractor, lined up to do the work ( they have worked on and know all of the guidelines for FHA 203K loaned properties )

There is one thing I am a bit concerned about, and that is.... The property has 2 bedrooms and 1 bath in the " Main " part of the house and then it has a 2nd-unit ( which use to be a workshop , before someone turned it into a liveable type unit, with a kitchen, 1 bedroom and 1 bathroom )
This is connected to the Main house via the roofline ONLY..... there is about 20 ft. walking distance between the two ..... the Main house and the workshop ( 2nd-unit )
I called the Local Tax Assessor , to confirm that is it still considered on record and via court house documents as a single family residence , with a workshop / liveable space , and they confirmed that it is

Back in 2006 we had the property appraised, and this is exactly how the appraiser appraised it ..... as a single family residence with an attached workshop / liveable space

Well, I had an appraiser come out 4 weeks ago, and they said it was a 2-unit property and that they could NOT do an appraisal on it, because there are no other comparable properties in the area to compare it to ( other 2 unit properties )

I am in need of a Lender who can make sure and get an appraiser who will view/ look at and appraise the property as they did back in 2006 ..... as a single family with an attached workshop/liveable space

I have heard that with an FHA loan, that there are the following forms , for a property such as the one I am trying to purchase.... Single Family 1004 form
and the Multi-Family 1025 form
that can be used, no matter the property and or if there are no properties like it to run comparables against

I just don't want to pay for another appraisal , and not know beforehand ( 100% ) sure that it can for sure be appraised, and have a value put on it

Sorry for the long message, just wanted to let you know all of the facts
Thanks so much for your time and help,
I really appreciate it

Even if there aren't nearby comps, it is still possible to put together an appraisal, although the appraiser might have to put in some disclaimers or something. I had an appraiser appraise a house in the middle of nowhere and used comps from several miles away (which isn't really kosher, but what choice did she have). Ask the bank to call around to different appraisers who will either 1) appraise it as a house or 2) find a way to appraise it as a duplex. Or call another bank, or another appraiser who can at least tell you if it's possible, which it should be (the bank has to order the appraisal). 

Also, from the sounds of the title, you had to pay for the first appraisal. If the appraiser didn't put together an appraisal for you,  you should absolutely not have to pay for a report regardless of his excuse. I would demand your money back and take him to small claims if he refuses.

I agree with the above. However, the appraiser may have done you a favor. If he appraises the property and says that the extra living unit is a non-conforming use via the city zoning, you will have much more problems.

I've run into issues like this before with appraisers who see things "differently" from anyone else. The problem is, Federal regulations prevent backs from picking any one particular appraiser. They have to put each appraisal out to a pool of licensed appraisers and select the best bid on it. So when you say you want a lender who can ensure you get an appraiser who will see it the same way as your 2006 appraiser....unfortunately, the lender can't do that.

Okay, here is my take. I am an appraiser and before I go any farther: each State's appraisal board (assuming your State has one) view issues such as this very differently and State boards are the police of our industry; I am not certified in your State and will not profess to have all of the answers; I am making lots of assumptions because I do not know your property and am operating on limited data. Disclaimer over.

The two forms noted in your post, the 1004 and the 1025, are FNMA forms (Freddie also uses them under different nomenclatures). Typically, what you are calling a "workshop / liveable space" is known as an accessory unit. The 1004 is set up to accommodate accessory units. It can be done; this is not the problem and there is no need to use the 1025 form, which is a 2-4 unit residential form. The problem is that the appraiser is charged with estimating the contributory value of the accessory unit in that case. The value contribution can be estimated in many ways, but the appraiser has to bare the burden of proof, which--at times--makes it hard for anomalies like this. The contribution of this accessory unit can be estimated by income capitalization, paired data analysis, or depreciated cost to name a few. What I am reading in your post is that he/she felt the need to have a sale that has the same physical feature to make a reasonable comparison and that is not necessarily true; the contribution of this--and virtually any--item can be extracted from the market from the above-noted methods as well as others.

Do not confuse what I am about to say, I'm not taking sides, but the problem may be with the appraiser's knowledge of his client (the bank) and its underwriting standards. With all of the changes to this and affiliated industries of late, ie...Dodd-Frank Bill and Interagency Guidelines, underwriting standards have become ridiculous and the appraiser may be trying to bow out graciously. Then again, he/she may not be competent to appraise your property; again I am operating on a limited amount of information. It saddens me to say it, but not all appraisers know what they are doing, it is the same in all professions. We can only hope that they get better as they go.

In reference to the fee, did the appraiser complete the appraisal assignment? If not, he/she will likely just get a trip fee (usually $100 or so, but I cannot quote their fee for them). I am assuming that this is and will be the case because it does sound like he/she is bowing out by the "could NOT do an appraisal" comment.

Second appraisal: you can contest the appraisal with the bank, though it sounds like one was not completed, and they can have another appraiser complete the assignment. My two cents to put into this is to have the bank use a Certified General appraiser! A Certified General appraiser is one who can appraise any property type that they are competent to appraise, not merely a Certified Residential who is only permitted to appraise 1-4 unit residential property. What this will do is likely assure you that you have someone who can think outside the box (or the form, as it were). I have some additional thoughts on further assurances in regard to appraisers that belong to specific professional organizations, but I do not want to plug specific professional organizations and get booted from the post. Nevertheless, to keep this uptown, I will say that not all professional organizations are created equally in the appraisal profession and some have--generally--more knowledgeable candidates and designates. Get a better quality appraiser and you will get a better product, though it may be slightly higher in fee.

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