Advance Property Research is Vital
‘Subject to’ obtaining a correct legal description…
Appraisers, an unusual situation occurred with an appraiser buddy, who asked for advice. After reviewing the details and providing input, I decided that this would be a good ‘teaching moment’ for others.
See PDF for images below.
Appraiser was asked to do a ‘refi’ assignment for a home that was purchased about 6 months prior by the borrower. The report was completed and turned in. Not long afterward, the appraiser received a ROV request because the borrower felt the value was too low. In the course of this process, the prior appraisal done for the purchase – by a different appraiser – was provided to the current appraiser.
The primary issue in both appraisals was the site size. The borrower claimed the actual site size is about TWICE the size both these reports indicate. And the borrower may be correct. Except, the property legal description and site size relied on by BOTH appraisers does not include Lot 14 – as shown in red on the PDF. They both relied on county assessor info which is apparently incorrect.
This is a very strange and oddball situation. Normally, county assessors are pretty reliable in their property descriptions. Somewhere in past history, Lot 14 was either dropped out of the county’s legal description, or perhaps was never included.
The point of this article is to encourage appraisers to do careful and advance research on the subject property before trekking to the location. Use the available plat map from county records, and compare that with aerial image(s) to see if their might be an anomaly with any details, or obvious conditions. Read the legal description, and compare that to the plat map. Don’t take anything for granted.
Look at the aerial image on the PDF, and compare that to the Plat Map. Read the Legal Description. Note that there is a parking area just off the street on the left side of Lot 14. Then there is a walkway (or perhaps driveway) from that up to the front of the house. The house was built in the 1930’s, so this configuration probably existed then. The house appears to straddle the property line between Lot 14 and Lot 1.
Had this situation been noted by BOTH appraisers, each should have requested (or actually demanded!) a copy of a full Title Report before any report was written. Hopefully that would reveal the actual property ownership and transfers over time of the affected lots, and would have a more complete written legal description than the assessor has.
But, let’s say that the Title Report is silent about Lot 14. Then what? Can the property be appraised? Yes it can.
The appraiser would include in the report a detailed explanation of why this situation is a Hypothetical Condition. It is a physical and legal characteristic that is presumed and known to exist, but is contrary to what is presently revealed by the existing legal description. In other words, Lot 14 should be included, and the site size adjusted up from what the county shows.
The appraiser probably should include a mention of Lot 14 on the form in the Legal Description comment field, with a note directing readers to additional commentary elsewhere in the report.
The third thing the appraiser would want to do is write the report ‘Subject to’ obtaining a correct legal description showing all lots encumbered by the mortgage loan. That puts the onus on the LENDER to get that done.
Whenever screwball situations are discovered before or during the property visit, I always encourage appraisers to contact the client BEFORE finishing and delivering the report. Clients always appreciate knowing in advance what you’ve found out. The client may have underwriting processes or requirements we know nothing about until the call is made. In the case study above, the appraiser could advise the client that the report can be written as noted, if they wish. But get their instruction (in writing via email) first whenever you discover anything weird.
“Let’s be careful out there!”