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Back story: I am in the process of purchasing my first home and it has appraised $40K over the contracted sell price. The appraiser noted vague, cosmetic issues (paint the exterior and laminate floors need to be replaced) and gave (IMHO) inflated estimates to repair or replaces these issues ($7k). He then took a considerable amount of time to respond with explanations to the vague issues. Now, I'm a week from closing, I've had a contractor out to verify these issues are indeed cosmetic, but the underwriters are still calling for the repairs in order to finance my loan.
I've invested a lot of my savings in numerous inspections and the necessary costs involved up to this point. The seller has agreed to add the repairs on to my purchase price. But I have to pay for carpet that I don't want, nor will need, as the original wood floors are in perfect condition under the laminate, and there is no place on this house that needs paint, but I would have to pay for paint that I would be painting over (and paying for again) once I closed on the house.
My questions: is this ethical behavior from an appraiser? What course is recommended to actually be able to close and not loose this house altogether?
It depends on what type of loan you are getting and who is the lender. These sound like lender requirements. Also, the appraiser is estimating the cost to hire a licensed professional to complete the job, not how much it will cost you to do it with a brush and a bucket of paint.
If you want to close, complete the repairs that the lender is requiring.
Chances are in addition to the painting, there's also scraping, and perhaps, repair of wood rot. Peeling paint is considered a structure fault, leaving the surfaces at the element's mercy and must be corrected or the collateral's value could be at risk.
The only way an appraiser would require replacement of laminate flooring is if it were a safety issue......ie, tripping hazard. Appraisers don't randomly pick flooring to be replaced without reason.
Safety, structural and code issues cannot be done post-closing. You seller is offering carpeting as a quick end to the requirement. They don't have time to pull up the laminate and deal with the wood below - takes too much time. It sounds like you are getting a decent deal at 40K over sales price, but there's no way to have the appraiser back off from these requirements. Your choices are limited and comes down to accept the seller's remedy or go find another home.
Inspected and not lead paint, also there is no peeling.
I cannot vouch at to why the previous owners/tenants did a lot of their "renovations." The laminate was definitely not a safety issue, but the plastic coating was peeling and cosmetically looks bad.
Hm. Usually that kind of thing happens more on Gov't loans. Might be an underwriter overstepping - - or enforcing a conservative Lender guideline overlay to protect them from having to buy a loan back.
I haven't seen "paint the entire exterior and replace an entire laminate floor" get this deep in the process, usually it's "fix that railing or windowsill or exposed wires" or something.
If the value is $40k over the sales price, have the seller repair the items on his dime and reset the price by the amount of the cost, and you're still getting what seems to be a good deal. Is that possible?
I have not seen cosmetic repair requirements on a conventional appraisal in decades, so it's real hard to imagine what could be going on here.
Short of reviewing the report, it sounds like the OP should apply with another lender.
I am with you. Even on an FHA/VA/USDA loan the peeling of the top layer of laminate flooring wouldn't be a required repair. I feel like there is some part of this story that is missing. Is there some sort of city or county assistance or revitalization grant that is being received which maybe requires these cosmetic repairs? Even then I don't know how that would tie in to the appraiser?...... I am stumped.
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