Appraising for the FHA 203k

Home Inspector with, covering the USA S0289

Appraisers have a real challenge when appraising anything these days but it becomes more challenging when you have to appraise it "subject to" the repairs being completed.

In 1995 I received a call from HUD asking me to get to Alabama and give a talk to the appraisal institute group there as they were having some difficulties... I had to laugh a bit but ended up calling them. Once I explained  this was just an "after improved" value appraisal being "subject to" the work being complted they also laughed and said "why didn't someone just say that in the first place?"

In life it is all about the way the question is posed. I have a 203k project right now that the lender called the city of Berkeley and asked "do we need permits for siding repairs" of course the city saw "fees" and said "yes, of course you do". Now we are expected to get permits... I asked the lender to read the actual scope of work in the "siding" section... Replace the partially fallen cornice piece and secure it with a screw -  does that really require a permite - NO of course not. Your words have meanings so choose them well.

I used to have a RE appraisal fee shop and reviewed a bunch of appraisal reports. We have an appraised property that the seller decided to make some repairs prior to close... is a 203k loan, they would have been ahead to just lower the price and let the program do the repairs... in the meantime the appraisal became dated and an update had to be ordred only to find the original appraiser wasn't available so someone ordered a new appraisal... WRONG thing to do. This new appraiser saw the problem differently and is requireing a whole bunch of additional work on the out buildings. Too bad - now, after all this effort it may fall apart.

In any case be sure your appraiser is fully aware of what the assignment is, to appraise for a value based on these items being complete. That means if there is mold everywhere and we say it is being remediated they dont' see the mold any longer. If the kitchen is falling apart and the 203k work includes fully updating the kitchen with new flooring, cabinets, countertops, plumbing, appliances etc, then that is all the appraiser can comment on. 

It would be wrong to talk about the mold or the delapidated kitchen as these items are not existing on an "after improved value" appraisal. See you again soon, M







uptown 11-24-2020

Posted by

Mike Young, 203k Team Leader    Mike ready for your 203k order

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