Financing in Brooklyn Park>Question Details

Starsatnight, Home Buyer in Texas

FHA appraiser used 3 foreclosure comps to do our appraisal so it looks like the house we want to buy is worth much less. Is this common?

Asked by Starsatnight, Texas Wed Sep 21, 2011

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If the property you're buying is a bank owned property it would be common. If it's not a bank owned property, then there should be extensive commentary in the appraisal as to why the comparable properties chosen were the best choices at the exclusion of non-distressed, person to person transactions. If that narrative is absent, that's an issue.
1 vote Thank Flag Link Wed Sep 21, 2011
Ugh! This is so common in the market. Unfortunately, bank owned and short sales are a part of our market and help contribute to the lower the values. It's a tough on all parties of the transaction. Most buyers won't and shouldn't pay more then the what the home appraised for. I hope the next home you find works out!
0 votes Thank Flag Link Thu Sep 22, 2011
Thank you everyone for your answers! I appreciate the support.
Unfortunately, the house is located in a new development; the homes are only 5 years old, and there have been several foreclosures in recent history. The seller doesn't have a lot of equity in the home and was barely going to break even on the sale. It is a beautiful home and only minor things came up on the inspection, so hopefully she can find a buyer that is willing to put down a larger down payment in order for the financing to go through.

I have learned an expensive lesson from house I fall in love with, I will pull the comps before I make an offer!
0 votes Thank Flag Link Thu Sep 22, 2011

Why not ask the seller if they would be willing to sell the property for the appraised value. It may not be fun for them but in the end it may be better than losing the sale and having to find someone else to buy the house.

Cameron Piper
Coldwell Banker Burnet
licensed MN Broker
Web Reference:
0 votes Thank Flag Link Thu Sep 22, 2011
This is from the 4150.2 FHA Appraisal Handbook:

"Typically, the Sales Comparison Approach is the most applicable approach to estimate the market value of a REO property. Appraisers may utilize sales comparables from other REO transactions only when such sales are deemed to be the best available for the market area and they meet all of the following criteria:

• located in the subject neighborhood or reasonable proximity
• comparable property subject to reasonable adjustment
• sold with a willing buyer and seller
• exposed to the market for a reasonable period

Appraisers are reminded that an explanation, as well as support, must be provided for any adjustments to the sales price of comparable sales that exceed the guidelines set forth in Revised Appendix D: Appraisal Protocol, pages D-31, D-68, D-98 and D-127, attachment to Mortgagee Letter 2005-48.

Inclusion of vacancy rates, rates of foreclosure and a discussion of foreclosure sales in the subject’s market area may be used as additional support for reliance on sales of other REO transactions.

Do not use distressed sales such as Sheriff Sales. These sales do not involve a willing seller nor are they exposed to the market under normal conditions. The resulting value indication derived from the use of such sales is not consistent with the definition of market value."

FHA's Mortgagee Letter 05-48 is in the web reference. These should be the exact guidelines you're looking for.
0 votes Thank Flag Link Wed Sep 21, 2011
First of all, Distressed properties encompass about 70% of sales in some areas.
The Appraiser is more constricted by the DISTANCE from the house, than he is by the details of the Comps.
There are places in the Appraisal for the Appraiser to allow for the CONDITIONS/CONSIDERATIONS OF SALE>
Besides, the Appraiser may have just saved your bacon.

Good luck and may God bless
0 votes Thank Flag Link Wed Sep 21, 2011
Some Appraisal Management Companies have rebuttal processes. Feel free to email me a copy of the appraisal and I'll look for technical errors and cause for rebuttal. There may not be any but it's worth a shot. I used to be a FHA underwriter and had to do this kind of thing.
0 votes Thank Flag Link Wed Sep 21, 2011
Thank, it is not a foreclosure property! The owner/occupant is retired and no longer wants to do all the upkeep on a home of its size. I made an offer for the full selling price, which is $1,200 less than what the county appraisal district has it assessed for. The FHA appraisal value came in at $10,000 less than what I offered, and without doing a larger down payment than I'd planned, I cannot get an FHA loan on the property. Just a little frustrating after paying out $800.00 for the home inspection and FHA appraisal!
0 votes Thank Flag Link Wed Sep 21, 2011
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