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#2044403 - 10/15/15 03:42 PM Should we have provided Earlies?
peony Offline
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peony
Joined: Mar 2013
Posts: 250
We are reviewing a loan and the purpose was to purchase a residential property. It does have a house on the property but it is dilapidated and will be torn down after closing.

Upon reviewing the appraisal, it states “small dilapidated dwelling on property given no value.” It then states that the “appraisal is completed ‘as-is.’ Cost to cure removal of dwelling on property is estimated at approx $5,000 & does not significantly negatively effect subject value or marketability.”

I'm torn between yes to providing Earlies because the appraisal does not state anything about it being inhabitable and no to providing Earlies because it is going to be torn down.

Thoughts?

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#2044409 - 10/15/15 03:54 PM Re: Should we have provided Earlies? peony
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
If it's not to be dwelled in, I don't think it's a dwelling. It's a building. I always look at what will be the use AFTER the loan proceeds are applied. For instance, I might be buying a house, but turning it into an office. It's not a house. It's an office building for regulatory purposes. On the other hand, I might be buying a barn and turning it into a dwelling. It's not a barn. It's a dwelling for regulatory purposes.
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David Dickinson
http://www.bankerscompliance.com

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#2044414 - 10/15/15 04:03 PM Re: Should we have provided Earlies? peony
peony Offline
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peony
Joined: Mar 2013
Posts: 250
I put in a request to get more information from the loan officer to find out what the customer's intent to use the property for after tearing down the house. Thanks!

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#2044716 - 10/16/15 05:44 PM Re: Should we have provided Earlies? peony
Always In Training Offline
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Joined: Jul 2006
Posts: 1,115
Where the Green Grass Grows
we had a loan like this. Borrower -- "It's not liveable. I intend to demolish & burn it. I'm not going to live there." Appraiser -- "Building is not inhabitable."

Guess what, borrower moved into the run down house. I don't remember the circumstances exactly why. I just remember it being a thorn in our side.

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