You are in a difficult spot and I hope you are working with a licensed agent who can give you some good advice -- you really need a strong advocate here. Your lender or attorney may also be able to help. Without knowing all the details, it is hard to give you advice about getting a second appraisal, but you do have options. Your agent should be able to determine the market value of the house both before and after the 203k repairs are completed. If that value seems inconsistent with the appraisal, then the agent may be able to provide some additional comparables for the appraiser. The lender may be able to guide you here. Another question, if the market value isn't going to be as much as you are borrowing, do you still want to buy it? Or do you want to buy it at the price you negotiated? You probably aren't stuck and may be able to negotiate with the bank or withdraw. It's difficult to say without more information. Ask your agent, and if you don't have an agent think about getting one or talk to your attorney. If you need an agent, call our office Monday and I can connect you with one who does a lot of bank sales. Good luck -- I hope it works out for you.
Questions to ask:
Was the house appraised by an independent appraiser in 2012? Or was the $69,000 assessed value (which is not market value)
Did the agent perform a market value report for the home before an offer was made? This would have shown the true market value before and after improvements to the home.
Your situation is unique.