How to navigate appraisal required repairs

Updated: Jun 4, 2020

If you sell your home, an appraisal is required for the buyer to purchase the property. What are appraisal required repairs, and why do they matter? Chad Lummus gives us his tips and tricks for staying ahead of the curve!




Audio transcription


In today's episode, Josh Kalinowski interviews Chad Lummus. Chad Lummus is one of our great agents here in our office, and today they're talking about appraisal requirements. The appraiser's job, depending on the scope of the appraisal that he was given from the bank, is to justify the value for the bank. Also, depending on the type of loan that the borrower/buyer is getting, the appraiser makes sure that the property meets certain standards and it's in good enough condition, so that the buyer isn't forced to pay a bunch of repairs outside of the normal maintenance issues that may arise.


Josh Kalinowski:

Hey, everybody. Welcome back to another episode here. Hey, I've got my main man Chad Lummus. Most of you guys remember him when we used to do ... We don't even do the weekly market update anymore. I don't even know what to say, bro. We got to get back to that.


Chad Lummus:

We do. Absolutely.


Josh Kalinowski:

We got to get back to that, dude. Hey, man. Chad, I am so happy to have you ... Everybody, Chad Lummus, agent with Coldwell Banker. I'm happy to have you on this because I know this is ... You've got a great past in construction, so that has been one of the great tools that I know that you've used to help represent your buyers and sellers and one of the things that has helped you become so stinking successful in this industry, dude, like a massive agent in our community. Love to see your success.


Josh Kalinowski:

One of the things I really want you on this show for is to talk about appraisal-required repairs because that is just so confusing. It seems like it's changing all the time and from appraiser to appraiser, and you gotta be careful. I've been doing this for many years. You've been doing this for a number of years as well, too. It's so important for an agent to understand that because buyers and sellers don't really live in this world, so it's very confusing. So what are required appraisal repairs?


Chad Lummus:

What type of loan you get is going to determine what the appraisal requirements are. So conventional loans, depending on how much you put down, they're going to have different requirements, but they're not as strict as a government-backed loans like FHA, VA.


Josh Kalinowski:

Those are what I'm kind of focusing on right now because they are very strict. There's a laundry list of things that they look at when they go look at the home other than the price. So when the appraiser goes out to evaluate the home for the lender, they're going to look at certain things, and whatever they find on the home, when they're asked to be repaired, they have to be repaired. There's really no negotiation. It just doesn't go to closing.


Chad Lummus:

Thus, they're required, right?


Josh Kalinowski:

Exactly.


Josh Kalinowski:

I got a question for you. When you are representing a seller, is this something that you talk to them about, especially during a price range? Because one of the things about conventional FHA, WCDA, VA loans is that some of them have price limits. You know you're going to experience different categories.


Chad Lummus:

Exactly.


Josh Kalinowski:

Is that a conversation you have with your sellers?


Chad Lummus:

Absolutely. I'll look at the home and determine, "Okay, what price range are we in, and who's this going to attract? What type of buyer? Is it a first-time home buyer? Is this a higher-end home where it's most likely going to be a cash or conventional loan?" Based off that evaluation, we'll talk about those required repairs and what may come up after I do a walk-through of the home. And the seller may not be ready to do those repairs yet, but at least they know what could come up.


Josh Kalinowski:

When you got in this industry, you really cut your teeth as a buyer's agent, like buyer representation, right?


Chad Lummus:

Absolutely.


Josh Kalinowski:

When you are working with a buyer, whether it's a first-time home owner, whether it's somebody moving up to another level of house, how do you walk them through the house? Or what is it that you feel is so important when it comes to identifying these things?


Chad Lummus:

Yeah, absolutely. I always look past the cosmetic and look at the meat and bones on the home. Cosmetic, to me, it's just not important. So I'm looking at the home. I'm looking at the roof. How old's the furnace? How old's the water heater? Can I see any major cracks in the foundation doing an exterior walk? Is the basement finished? Can I see any cracks through there? Are they horizontal or are they vertical? How big are they? Because, I mean, all foundations are going to have cracks. The size is really what determines it, and that's what the appraiser's going to look at, too. They're not going to call every little crack. They're going to look at what could potentially be a structural issue. Then we're looking at negative drainage, stuff like that. So I'm really actually looking at the same thing that the appraiser's going to look at based off the type of loan.


Josh Kalinowski:

Well, I love that you say that because it's so good to be proactive, right? I mean, nobody wants to be blindsided in these transactions because, I mean, if you think about it, the seller really wants to sell, and the buyer really wants to buy. When you have these required repairs, it really puts both people, buyers and sellers, on this tension of going, "Well, in order for me to buy the property, these got to be done." And then the seller's like, "Well, in order for me to sell the property, these got to be done."


Chad Lummus:

Right.


Josh Kalinowski:

Let's talk about the emotions of that a little bit because it's very stressful.


Chad Lummus:

By the time we get to the appraisal and those appraisal-required repairs, the buyer has already submitted probably a repair addendum, and then the seller's getting hit again.


Josh Kalinowski:

Yeah.

Chad Lummus:

So as a buyer's agent, when we're going through those repairs, I'm actually trying to look at things that the appraiser's going to ask for, so the seller's not getting dinged twice.


Josh Kalinowski:

Right.


Chad Lummus:

I tell the buyer that, too. I say, "We don't want to beat this guy up, or lady, and so let's just be proactive and ask for those things." And maybe there's a few other things that they want, but at least let's get those things that are going to come up possibly again. Then as a seller's agent, when we get those buyer inspection repair requests, I say, "Okay. The downspout extensions. Let's take care of that because that's probably come up from the appraiser. This is going to come up. Let's just take care of those. These other little things, do you want to take care of those, or do you not? Because those are negotiable.”


Josh Kalinowski:

I think that, actually, you just hit on a really good point because some of these required repairs are really minor things, very easily fixed before you even get a buyer on the property or you even put the property on the market. Give us some ones that you're just like, "I can't believe these are required repairs," but, yes, they actually call for these out. Because I guarantee you, sellers, you have no idea how some of these things are so simple but they're so frustrating, and they really could be a nuisance as you're showing the property.


Chad Lummus:

Yeah. So the seller's going to see this list of things. I break it down like, "Okay. Downspout extensions. I'll do that for you." I actually have three of them in my car I carry around all the time because it is so common, and it's just amazing how many people don't have it. But it's important to have. It directs the water.


Josh Kalinowski:

Well, the wind blows a little bit here, bro, if you ever notice. Usually the wind is taking the downspout extensions off.

Chad Lummus:

That's true. Anyway. So downspout extensions. Another big one that people don't realize is when you have branches overlaying your house. If those are touching the roof, the appraiser's going to call on it. The reason why is because the wind blows those branches back and forth, and it rubs on the shingles, which then need replaced. So you just gotta cut them back.


Josh Kalinowski:

Yeah.


Chad Lummus:

You can have overhanging branches. They just can't touch your house.


Josh Kalinowski:

Yeah. Yeah. How about the plates over the electrical outlets, like having those plates? You're like, "Really? I bought it that way," right?


Chad Lummus:

Exactly. Yeah. Yeah. Especially government-backed loans, they look at those. They're really serious about those. But a plate, like a missing plate, is like 25 cents.


Chad Lummus:

Another one that comes up on the electrical is reverse polarity.

Josh Kalinowski:

Oh, yes. Yes.


Chad Lummus:

At first, you might think “Oh, my gosh. The house is going ... It needs all new electrical.” It's really the negative and positive, are swapped, and that's it.

Josh Kalinowski:

Yes.


Chad Lummus:

Buyers don't understand what it is, so that's another thing to explain to them is, "This is not a huge deal."


Josh Kalinowski:

Let's talk about some big ones, though, because there are some ones where you're like ... When you're getting ready to list the property or you're walking through the property, and you're like, "That's a big deal and regardless if you want that fixed or not." Because there are some buyers that are like, "I don't really care." And you're like, "I know, but you're doing an FHA loan, and they do. They care. And the seller's not willing to pay for that, so we got to figure out how we're going to fix this."


Chad Lummus:

Right.


Josh Kalinowski:

Give us some examples of some big ones that can cost some money.


Chad Lummus:

Well, obviously, the roof, so a T-lock roof is a big deal here in Casper. The first thing I ask is, "Have you talked to your insurance company? Can we get that replaced?" Nine times out of 10 it's a yes. Regardless of what a roof inspector says, a lot of the times the insurance companies will just go, "We'll go ahead and replace it for you."


Chad Lummus:

So that's a big one because, I mean, even though you're paying a $1,000 deductible it's still anywhere from five to $10,000 monetary value that could pass on to the buyer, and nobody wants that.


Josh Kalinowski:

Yeah.


Chad Lummus:

Second one is cracks in the foundation, like I'd mentioned before. It could be as small as sealing it and plating it. You're looking five to 700 bucks, but it'd be a huge deal if you got cracks all around the foundation and you've got water issues. Then you're looking at 20 to 30,000, potentially.


Josh Kalinowski:

Yeah. Hey, dude, I love what you just said right there. But also, hey, another one I was thinking about is negative drainage. How many times has that come up on appraisal requirements?


Chad Lummus:

Yeah. I would say probably six out of 10 times there's negative drainage. I've seen it where the dog has dug a little hole next to the foundation, and it gets called on.


Josh Kalinowski:

Right.


Chad Lummus:

But it is a big deal because we don't have great soil here in Casper. It's expansive, so water gets into the soil next to the house, drains down, soil expands, and it puts a tremendous amount of pressure on the foundation. It can cause a lot of troubles down the road.


Josh Kalinowski:

I mean, these are real people with real emotions buying real property, right? I love that you are trying to over-communicate with them because you really care and are concerned about them buying and selling.


Chad Lummus:

Absolutely. Yep. And getting into a good home and then selling a good home, too.


Josh Kalinowski:

Yeah.


Chad Lummus:

Only because, as a seller and a seller's agent, you want to give that buyer a good home.


Josh Kalinowski:

Yes.


Chad Lummus:

I mean, it's hard to sell a terrible home that has issues and stuff. It's not a good feeling.


Josh Kalinowski:

Right. Oh, I couldn't agree with you more, man. I mean, once again, this is ... We're doing this episode here because of the industry. We care about the industry. We care what people think about realtors, right? And the fact that you happen to be an exceptional one, the fact that you know how to handle buyers and sellers, I mean, you're on here because you represent the industry at such a high level. But if you're a buyer or a seller, I hope you take stock into how it's so important that you talk to an agent that is helping you walk through these things. If they're just opening the door and being a glorified door opener, they are not giving you the service you deserve. They are doing a complete disservice to the industry and to you.


Chad Lummus:

Absolutely.


Josh Kalinowski:

Got it?


Chad Lummus:

Got it.


Josh Kalinowski:

Anything else you want to add to that, brother?


Chad Lummus:

No, man. I appreciate you bringing me on here and allowing me to show my value to my clients or potential clients.


Josh Kalinowski:

Yeah, dude. I tell you what, man, you are a rock star. And doing this, it reminds me how much I miss our videos, bro, so we gotta get back on the weekly market updates, man.


Chad Lummus:

It's been on my mind every day.


Josh Kalinowski:

Yes. Well, I still get the reminders in my calendar like, "Oh, weekly update." I'm like, "We're not doing that, obviously," so we'll get back into that.


Josh Kalinowski:

All right, everybody, I hope that you guys enjoyed this episode, as always. I mean, Chad brought some great, great knowledge to you guys, and once again, I hope that if you got an agent and you're working with them and they're not bringing this stuff up, man, you got to call them out on that. If you're searching for an agent, obviously, Chad Lummus, Coldwell Banker. Give him a call. He will definitely take care of you, and he will make sure that you're communicated with throughout the entire process.





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