Will the seller need to put flooring in for the appraisal?

Question

Hey all,

I know for VA and FHA, that flooring should be within a SFH for the appraisal to come back good to go. However, I showed my agent a property that needs some work and that I wish to rehab myself. It does not have flooring installed but I am buying with a conventional loan. She says this is a new strict thing the appraisers have. Does this sound right? Typically, conventional loans are not as strict? TYIA

Nate Sanow · Answer

I have never heard of a flooring requirement.  I’ve sold a lot of property that was bought on conventional loans with bad flooring, like old carpet with stains etc, with no problems.  The agent might just be speaking into the appraisal coming in low, etc.  That could be her concern as if the appraisal value comes in low it could kill the deal if the seller doesn’t want to accept the lower price.

Brian Miller · Answer

@Kaitlyn Beard it may depend on the condition of the rest of the property. Appraisers have a rating system that they use to determine the condition of the property. It goes from best condition, C1, to worst condition, C6. The lender has the final say, so you may want to check with them on what condition they will lend on. I've seen lenders accept C5 condition for conventional as long as the property is insurable, and is not riddled with safety or structural issues.  A lack of flooring does should not be an issue. Below is what they typically look for, and if it does not pass, you can have it re-appraised after the deficiencies have been corrected. I have had buyers do work on an as is sale to satisfy the loan if the seller is not willing to.

Deficiencies Cannot Affect the Following:

• Safety
• Soundness
• Structural integrity of the property

Properties that are based on an “as is” condition and do not have these deficiencies are eligible for financing. When a property is “subject to,” usually there are deficiencies that make the property ineligible for financing. “Subject to” requires completion of the items, a re-inspection, and the appraiser to clear the deficiencies on the appraisal.

Dave Skow · Answer

@Kaitlyn Beard  1) if using a conv  loan / lender -  ask your loan person to  run the  file with address  thru AUS  to see if they get an appraisal waiver ( PIW)  ...if they do - then  you can  avoid the  appraisal .... 2) if an  appraisal  waiver isnt  possible  - the appraiser  will make a note  on the  report and  make the appraisal  " as is "  to  " to be completed"  ....if the entire property flooring isnt  done  -  it will likely be called for by appraiser

Account Closed · Answer

I've been known to paint concrete floors with a brown paint to emulate wood color and get that passed as sufficient by the appraiser. Keep in mind they appraisaer will take pictures of the rooms for their appraisal report and the closer it looks to complete the fewer conditions the lender will require.

I meet the appraiser at the site and answer any questions like "will the floors be completed" and tell them "yes" if asked. If he doesn't ask, I ask if he has any questions and it usually goes to other things like "how old is the roof".

Jay Hurst · Answer

The c1-c6 statues does NOT effect whether a property is marked subject to or as is.

Kaitlyn Beard · Answer

Thank you! I was not aware of the C1-C6 structure, but that helps round the idea.

Kim Tucker · Answer

Typically if you are getting a loan for an owner occupant, meaning you are going to live in it, everything that is supposed to be in a house needs to be in working order.  So if the floor is supposed to have carpet, but you are looking at plywood, yes, the seller would need to install carpet and no its not a new thing.  It's been a thing since I started investing 22 years ago.

Now if you are getting an investor loan, that is not a rehab loan, meaning it is not fronting renovation money, you probably have the same situation, everything needs to be functional.If you are getting a rehab or a "construction" loan, then no, you carpet is not needed.Some Local Regulations - there are a few local cities, counties that have created inspection laws that require an inspection and certain things to be fixed and in working order before the home can exchange hands.  Not an appraiser or lender thing, but rather a city / county code thing.

Jay Hurst · Answer

@Kaitlyn Beard   Are you asking if "sold in as-is" condition should you offer less?  if that s what you are asking, then very possibly but depends on the market and where it is already priced. Might already be priced at a discount. (but that is up to you and your agent to know) But, yes, houses like this that cannot get conventional financing usually do trade at a discount because financing options generally more expensive or require cash.  and the average home buyer does not always have the resources to pull it off etc.

Kaitlyn Beard · Answer

So "As is" you shouldn't offer less?

Jay Hurst · Answer

@Kaitlyn Beard   The appraiser is going to mark the appraisal as "subject to". That means the value will be subject to the property being fully put together in this case the flooring.  Conventional loans require that the appraisal be marked "as is" to close. As is means the value is as the property is right now. You can ask the lender if they will allow a escrow holdback that would have to be funded by either you or the seller to fix the issue. Most lenders do not like escrow holdbacks but you can ask.

Alternatively, we will do a bridge loan in this situation allowing you to close. Then refinance the bridge as soon as the issue is corrected.

Will the seller need to put flooring in for the appraisal?

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