Appraisals Cosmetic Vs. Structural Issues

We recently had a purchase involving an older property and the buyers were concerned because the appraiser did not call out a broken window pane and some torn floor coverings.

I just blogged about condition issues in June – Condition Issues – What’s Lendable? Don’t Disclose In MLS If “As Is.”

But the point of today’s blog is to point out why appraisers don’t call out minor things like a broken window pane or a torn floor covering.

Appraisers do not call out minor items if the items are deemed to have a “de minimis” effect on the overall value.

Because the above-referenced property was worth almost $600,000, the broken window pane and torn floor coverings had only a very marginal effect on the value overall.

Further, if appraisers do call out such items underwriters sometimes require that they’re repaired prior to close of escrow even if the transaction is “as is.”

Underwriters make these calls because of “health and safety” concerns, and such repairs can delay transactions because:

  • Sellers are often reluctant to do repairs prior to close for an “as is” transaction;
  • Neither buyers nor sellers want to pay for repairs prior to close;
  • It often takes time to find a contractor to do the repairs; and
  • We often have to send an appraiser back out to certify the completion of the repairs.

Our appraisers are aware of this and are knowledgeable about FNMA guidelines, which indicate that these minor repairs are considered deferred maintenance items only. Hence, appraisers are not required to call out minor repairs for most conventionally financed transactions.

If issues are structural or clearly dangerous or if they significantly affect value, our appraisers always call them out and we want them to do so (to protect our clients and our appraisers’ licenses).

In addition, if a condition issue is referenced in a purchase contract, appraisers will almost always call it out.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167

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