Appraisers' Free Forum

I prepared an FHA appraisal on a single family residence with a 28' X 218' poultry barn in poor condition. The roof sheathing was rotted through in places and the corrogated metal roof was torn upward in one area like wind or an explosion up from within. The barn has exposed wiring, fuel tanks, and debris. I did not fully inspect it because the debris obscured some of the interior surfaces and the potential danger of collapse. The exterior of the barn was a amalgamation of vinyl siding raw wood and other materials some of which were falling off. I conditioned the appraisal on removal of the poultry barn. The value of the property was far above the pending sales price.

They came back with an engineer's report that said that one third of the barn was going to be removed and the remaining two thirds was structurally sound. They removed 36' x 28' of the barn. I then inspected the entire building. The fuel tanks were then visible. I re-inspected and included numerous pictures of the remaining portion of the barn that still had collapsed roof sheathing and other damage suggesting that it was unsound despite the engineer's report. I did not dispute the engineer's report but included photographs and commentary which would bring someone to the conclusion that the report was in error. The ground was littered with broken glass, roof shingles, nails, screws and wood. I further conditioned the appraisal on removal of the dangerous debris on the ground and fine grading. Additionally I required removal of exposed wiring, fuel tanks and all debris in barn.

I re-inspect again. I find a bulldozer with a freshly dug trench filled with broken glass, roof shingles, nails, screws and wood that formerly littered the surface ground. There is still lots of exposed wiring. The structural issues have been addressed by rebuilding the portion of the roof which was deteriorated. Part of the raw wood exterior has been painted. The area (concrete floor) inside the barn where the fuel tanks were is blackened by fuel oil spillage. There are no permits visible for the demolition.

1. Do I drop a dime on him to the construction code official?
2. What do I say about the exterior?
3. What do I say about the burying of debris?

I will require removal or correction of all exposed wiring. It looks like he may be removing it. If wiring remains there must be a electrician's cert indicating that it is safe.
I will require an environmental certification to ensure the residue is superficial and not indicative of a significant leak.

Settlement has been delayed. The seller has been making all the repairs and has a significant investment in the property at this time. The agent is really pissed off and mentioned to me that the parties are heated and talking law suits. I told her if anyone mentions lawsuits relative to my inspections I will notify the appropriate authorities. I will advise them that an attempt to intimidate and influence me is being made to affect the conduct and conclusions of my inspections relative to a federally related transaction. I reminded her that my tape recorder was on. She dummied up at that point.

Just appraise it. Any assumptions that the law has been followed or that there are no hazardous substances are no longer available as far as market value goes and if you appraise it with the usual assumptions you are into hypothetical condition zone.

If you blow the whistle on something like this you may be compromising you neutrality.

Edd If I were to discover a meth lab on a property during my inspection, I feel it would be imperative to notify the authorities. In following that line of thinking, if we don't notify when we see a crime underway we become accessories to that crime. Those laws were instituted to protect the public. One of the Appraisers primary directives in USPAP is to promote public confidence....

I see several issues that are potential problems. The burial of debris is an environmental issue. Demolition permits are needed to ensure proper disposal of recyclable debris as well as proper safety measures being taken during the demolition. Renovations need to be done according to code....for the protection of the occupants as well as future owners.

I don't think this becomes a violation of neutrality.......but a matter of social responsibility.

If the situation is reported, it becomes a matter of the law fulfilling its purpose.

Goodpasture wrote:I don't think this becomes a violation of neutrality.......but a matter of social responsibility.

You are right when that is your priority and if the violations here require reporting. However, if you are reporting the violations as a matter of principle then I think you are in a position of weighing appraisal considerations of privacy, confidentiality and bias. I'm not sure how you walk the line between them. I don't think I could do it well.

Frederick's appraisal is promising to be scrutinized and while there is no indication that he has compromised his analysis or opinions, he will be accused of doing so especially if he makes efforts to straighten things out by turning in the seller. His focus may have changed from being a neutral observer to what Mako might call a crusades.

At a minimum his appraisal credibility may be compromised.

It is a tension between appraiser independence (when appraising) and doing the right thing as far as the violations go. If he can persuade everybody his independence was not effected by the legal violations he may be aware of, more power to him.

If he is required to turn the seller in due to principle or law, he may not be able to appraise it.

I am thinking that rather than contacting the code official I should simply add the condition that evidence that demolition satisfies all municipal inspections and requirements must be provided. This should force the buyer and seller to do the right thing.

It seems to me that conditioning on an environmental certification and satisfying all municipal inspections and requirements will ensure compliance with HUD MPR and insulate me, the real estate agent, HUD and the lender from future liability and provide a safe residence for the occupants. This should also address the burying of debris, petro-chemical contamination and give additional opinions on the safety of the site.

More important to me than the legal or HUD requirements is that this is a single family residence and although the buyer is a childless, single contractor I have to believe in my heart that this is a safe environment for children as well as the adults.

As you all well know, a year or two from now this guy may move a pole dancer in with her two insufficiently supervised little kids.

I would do it Subject To inspections and let the lender figure out what they want to do about the barn.

Frederick wrote:I am thinking that rather than contacting the code official I should simply add the condition that evidence that demolition satisfies all municipal inspections and requirements must be provided. This should force the buyer and seller to do the right thing.

It seems to me that conditioning on an environmental certification and satisfying all municipal inspections and requirements will ensure compliance with HUD MPR and insulate me, the real estate agent, HUD and the lender from future liability and provide a safe residence for the occupants. This should also address the burying of debris, petro-chemical contamination and give additional opinions on the safety of the site.

More important to me than the legal or HUD requirements is that this is a single family residence and although the buyer is a childless, single contractor I have to believe in my heart that this is a safe environment for children as well as the adults.

As you all well know, a year or two from now this guy may move a pole dancer in with her two insufficiently supervised little kids.

...conditioning on an environmental certification and satisfying all municipal inspections and requirements will ensure compliance with HUD MPR ...

There you go! That is the job you said you'd do and what USPAP requires of you. And that tack strengthens the image of the profession. The rest of it doesn't have anything to do with appraising, but shows you are person of strong convictions. Don't worry about insulating anybody from liability, just tell it like it is.

You will still be attacked, but that is SOP for all of us who tell it like it is.

The three FHA inspection watchwords are "Safety", "Soundness", and "Livability."

1) Is it safe? Well, not with an open garbage trench. But I don't see any "exposed wiring" in the photos. I see electrical insulation which may be wrapped around wires; I see wire nuts attached to what one may presume to be conductors; but I don't see anything made of copper which is ordinarily used to conduct electricity. I would provide photos, remark on the electrical setup, and state that it appears safe for the use to which it is put. The petroleum stains on concrete may be a safety concern. When they're wet, they're a slip/fall hazard. Barefoot kids might absorb toxic chemicals through their skin. Not safe for SFR use.

2) Is it sound? Engineer's report says it is. You have doubts, and have expressed them. That item's done.

3) Is it livable? Not with the environmental concerns, safety items, and the open trench of debris.

Property still does not meet MPR for the above reasons. Cite the Appendix D excerpts that apply, send in the inspection report with invoice, and wait.

I would not define which inspections to get from whom.

Frederick is aware of problems on the property that he believes negatively impact SS&L. Do they not also heavily impact value, if no other reason than they may obstruct FHA financing?

If he makes the appraisal "SUBJECT TO" rather than "AS IS", is he not appraising with extraordinary assumptions that, whatever the called for inspections reveal will prove him wrong?

It seems to me, based on Frederick's observations and comments, that if he is appraising "SUBJECT TO" he should be asking for specific changes rather than additional inspections to prove him right or wrong.

I think he should just tell it like it is together with his concerns and express its market value it accordingly as well as his opinion of SS&L.

Edd Gillespie]His focus may have changed from being a neutral observer to what Mako might call a crusades.[/quote]

Nope! Note even close.

I consider this an appraiser trying to do his job & CYAing.

I absolutely love this comment;

]quote="Frederick wrote:The agent is really pissed off and mentioned to me that the parties are heated and talking law suits. I told her if anyone mentions lawsuits relative to my inspections I will notify the appropriate authorities. I will advise them that an attempt to intimidate and influence me is being made to affect the conduct and conclusions of my inspections relative to a federally related transaction. I reminded her that my tape recorder was on. She dummied up at that point.

You Sir...are my hero!