Rehabber · Seattle, WA · Member since 2012 · 15 posts · 1 vote
Has anyone else noticed a dramatic increase in their scope of work and powers? I am having to bend over backwards to finish their "punch list" of issues on my property before we can close....this is after I have already jumped through the inspectors list from the buyer.
I am having to install handrails, carbon monoxide detectors, repair minor foundation cracks, and more.
Real Estate Agent · Henderson, NV · Member since 2011 · 1k+ posts · 550 votes
13y
FHA has minimum property standards that must be met before the loan can be done. They charge the appraiser with the task of checking to make sure the property meets these standards during the appraisal inspection. If the property doesn't meet the standards, the appraisal is completed subject-to the property meeting those requirements. Once the repairs have been completed, the appraiser goes back out to the house to verify. This has been the case for several years in all states. That said, part of the requirements is that the property must meet local/state building codes. I've been seeing clauses on appraisal orders referencing carbon monoxide detector requirements for properties located in California. Also, lenders can add more stringent requirements (overlays) on top of the FHA minimum standards.
Fannie Mae and Freddie Mac also have requirements, but these tend to be less stringent than FHA.
Landlord · Seattle, WA · Member since 2010 · 3k+ posts · 1k+ votes
13y
Yes, I've been seeing this recently as well. Seems to be a current trend. The little bit I have learned suggests this is about a stricter regulatory environment. I've been meaning to check into this more and have been to busy.
Rehabber · Seattle, WA · Member since 2012 · 15 posts · 1 vote
13y
That's my question too...it is basically coming from the lender. They say they wont fund until certain "requirements" have been met. This is often times within a week of our anticipated close. Worst part, after I do the repairs, the appraiser has to go back out to the property to verify....craziness.
Landlord · Seattle, WA · Member since 2010 · 3k+ posts · 1k+ votes
13y
In 20 years I've never had an appraiser give me a punch list. Just 1 month ago though I had an appraisal come back stating the appraisal was contingent on some work being done essentially a punch list. At first I thought it was a fluke, but since have heard of this on a number of other homes in the greater Seattle area after talking a little with my real estate agent.
Real Estate Agent · Henderson, NV · Member since 2011 · 1k+ posts · 550 votes
13y
FHA has minimum property standards that must be met before the loan can be done. They charge the appraiser with the task of checking to make sure the property meets these standards during the appraisal inspection. If the property doesn't meet the standards, the appraisal is completed subject-to the property meeting those requirements. Once the repairs have been completed, the appraiser goes back out to the house to verify. This has been the case for several years in all states. That said, part of the requirements is that the property must meet local/state building codes. I've been seeing clauses on appraisal orders referencing carbon monoxide detector requirements for properties located in California. Also, lenders can add more stringent requirements (overlays) on top of the FHA minimum standards.
Fannie Mae and Freddie Mac also have requirements, but these tend to be less stringent than FHA.
Real Estate Agent · Henderson, NV · Member since 2011 · 1k+ posts · 550 votes
13y
You can get proactive, so you won't have issues. Read up on the HUD website for their property requirements. Know you're local code, and stay informed of changes. This way, you can incorporate these items into your cost analysis and rehab. It's probably a good idea to at least know what the major lenders in your area require as well.
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
13y
None of what you listed looks like the appraisers are going over the top. The CO2 detector is required by state law in CA, I think, or the law is about to go into effect. The minor foundation cracks? I have a property with some cracks and a big gouge just inside the entry to the garage. I know it's not "foundational" as somebody obviously dropped something (like weights). You can be sure I'll be filling and painting the concrete in that area. Why let them ask? Handrails? The appraiser reported steps or porch of a certain height without handrails to the lender. Any surprise the lender wants a no liability property for their borrower? There are local codes here for handrail requirements.
I don't know if your buyer's lender is FHA, but reading the FHA guidelines is very informative since other lenders are following their lead. They've actually relaxed requirements having to do with paint and flooring and cleanliness in the last few years. There's no "FHA grade" carpet requirement anymore and you can sell a house to an FHA buyer that looks like crap. But there's a no-tolerance policy with health and safety concerns. (The appliance requirement is explained there as well, and it's not a requirement in most cases).
Then, like Phillip says, there's local and state laws that you really need to know. About fireplaces, about sewer lines, maybe even about hand rails. :)
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
13y
Agreed with Phillip and K. Marie...
FHA underwriters will do one of two things (and sometimes both) to ensure that the property meets basic FHA standards:
1. Review the inspection report and require certain repairs;
2. Have the appraiser do a minimum FHA inspection.
#1 has become a bit more rare (at least in my area). This is probably due to the fact that inspectors don't require any licensing in my state and most inspectors are horrible at their jobs. Also, because the inspector works for the buyer, there may be a conflict of interest.
#2 is getting more popular. In fact, underwriters are now requiring that appraisers return to the property to verify repairs after they are requested.
But, as K. Marie said, the requirements are pretty reasonable, and these are things you should be doing anyway (in most cases, not all).
Real Estate Investor · Pensacola, FL · Member since 2012 · 136 posts · 83 votes
13y
FHA is a nightmare. My mother recently tried to get a mortgage and they came back saying things needed to be done like.... installing tile in an unfinished attic/upstairs (this is a 1920s registered historic home). They wanted peeling paint that was very minor to be repainted, etc etc. The list was absurd. Some of the things they wanted done would either cost a fortune to do tastefully or take away the character of the house.
FHA requires very little money down so they want to be sure every toilet flushes and none of the doors stick it seems. I have a friend who is a mortgage broker that refuses to even waste time on FHA anymore because the system has become such a bureaucratic nightmare. He has had very little success getting the loans funded.
I also believe that banks are working even more closely with their appraisers. I tried to refinance a few months ago and for some shocking reason the appraisal came within $100 of the 75% LTV requirement, allowing me to pull no cash out.
Rehabber · Seattle, WA · Member since 2012 · 15 posts · 1 vote
13y
Thanks J-
It seems quite random which issues pop up at what time on which property...
I have some properties with glaring issues, that are not called out by appraiser, and some with miniscule issues that are forced to be dealt with.
I guess if this game was easy, everyone would be doing it again.
Have prosperous day,
Rob
Flipper/Rehabber · Denver, CO · Member since 2009 · 1k+ posts · 726 votes
13y
Regulations are so fun!
Client of mine had to get 3 appraisals on a townhome flip. Thankfully each one came in over value, but the first one had a HUGE punch list of items requiring to get fixed. The third was 9 days late, how is that even acceptable? After much yelling and fighting (you arent supposed to talk to anyone, thanks regulations!) the appraisal company still refused to reimburse any amount. I wish I could do my job really poorly, be 9 days late and still get paid the full amount....
Richmond, VA · Member since 2013 · 3 posts · 0 votes
13y
The amount of work required by an appraiser has more than doubled over the past three years including an average of 15 photos per property. For instance, the underwriter noticed a cracked step on the outside of the garage and asked me why I had not checked "Settlement" on the form. There were no settlement cracks in the house or even the garage floor. By the way, FannieMae and Freddie are requiring as much/more info as FHA.
Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
13y
Originally posted by Lore DeAstra:
The amount of work required by an appraiser has more than doubled over the past three years including an average of 15 photos per property. For instance, the underwriter noticed a cracked step on the outside of the garage and asked me why I had not checked "Settlement" on the form. There were no settlement cracks in the house or even the garage floor. By the way, FannieMae and Freddie are requiring as much/more info as FHA.
What a pain.
Welcome to BiggerPockets, Lore. Why don't you tell us more about yourself at New Member Introductions? We could always use an appraiser's perspective.
Richmond, VA · Member since 2013 · 3 posts · 0 votes
13y
Thanks Jon, for your kind words. I look forward to conversing with other real estate folks, with a different perspective. No doubt, we can all help each other.
Real Estate Agent · Henderson, NV · Member since 2011 · 1k+ posts · 550 votes
13y
Lore DeAstra Welcome to BP! I look forward to reading your posts.
Yes, lenders do keep piling on stuff for appraisers to report in the appraisal. Most consumers think this is the appraiser's choice, but don't realize that this is the lender's decision.
Take FHA loans and appraisals as an example. Although FHA doesn't require a stove to be in the kitchen, almost every lender I work with will require this as an "overlay".