Home Buying in Bolingbrook>Question Details

Yelirny, Home Buyer in Bolingbrook, IL

Who is responsible for the cost of a reappraisal of a FHA short sale?

Asked by Yelirny, Bolingbrook, IL Thu Mar 24, 2011

The whole issue was that smoke detectors were not installed when the first appraisal was done, something that is a no no when it comes to FHA. In both the signed contract and online listing of the home, smoke detectors and CO detectors were listed as being included with the home. So I had to pay out of pocket ($250) on top of the original $440) for a reappraisal of the property because the seller and their agent screwed up and ordered an appraisal when they did not have the smoke detectors up and installed. I am trying to understand why I need to pay for their mistake. They are claiming they are not responsible (especially since its a short sale they claim AS-IS), that reappraisals are ALWAYS needed for FHA homes and that the cost for reappraisals are supposed to be included in the original appraisal cost. Everyone else I talk to disagrees with these points, but they are not budging.

Any thoughts or has anyone dealt with something similar? Do I have any legal ground here?

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It sounds like this is a FHA re-inspection cost, not a re-appraisal per say. FHA inspection is to make sure the house is safe and habitable, not missing anything. For example, sometimes a water heater and copper lines not removed from property by owner. Perhaps the last occupant took the stove, the mortgage holder doesn't want the new buyer to live in there without a stove or risk default due to missing mechanicals. FHA inspection tough on GFI outlets, railings on decks. Normally, you have time to fix deficiencies after possession and the city occupancy permit overlaps too.

The FHA bank appraisal stays with the property for 6 months after appraisal date for subsequent buyer. I had a FHA appraiser that became registered to property so every other appraiser could see what the appraiser value was.

Here is the rub I see. You should have to pay for bank appraisal, however the house doesn't have to be in compliance before closing and you take possession. Subsequent inspections are for the benefit of the seller. If the FHA inspector says, GFI in kitchen and bathrooms, railing on back yard porch and water heater bleeder is 18 inches above the floor, the seller, bank in this case has until closing to fix and this should not be a condition of underwriting on the loan.
1 vote Thank Flag Link Thu Mar 24, 2011
I would say if you have to send the appraiser out again, yes, you will be on the hook for an additional fee. Not really any breach because you're buying as-is, and your only recourse in a short sale is to cancel the contract. It sounds like you already got approval from the bank, so you're kind of stuck with the price and other terms.

One thing you can do is before the next appraisal, go there with your agent and see if they have been installed. If they haven't I see your choices as follows: 1) cancel the contract (talk to your attorney to make sure you can), 2) ask them again to install them and ask your lender to hold off on the appraisal until you have verified their installation, 3) ask the seller for permission and replace the smoke detectors yourself (you may want to get written permission but definitely talk to your attorney). Sometimes the last option is just what you have to do to get things done. But keep in mind that if the sale doesn't go through for whatever reason, the smoke detectors are basically a gift to the seller, and you likely have no recourse to get reimbursed (check with your attorney).
0 votes Thank Flag Link Thu Mar 24, 2011
Thanks for the responses.

Yes I am working with a realtor and have a real estate attorney. And I am going through with the sale regardless (closing next week).

Too me it just seemed unfair. I know the house is AS-IS but what if the seller reinstalled the smoke detectors, I paid to have the appraiser come back out only to find that the detectors were not installed correctly and the appraiser needed to come back out another time. Would I have been on the hook for yet another $250?

My real estate attorney is saying that there really is nothing we can do since it is AS-IS, but I was thinking there could be some sort of breach of contract since they claimed the house came with smoke detectors then when the appraisal took place they were not present.

I know theres probably not much I can do nor would it be worth it in the end to fight this. I am not concerned about the $250, just seems unfair and want to make sure I am not getting screwed over.

(And by the way, I do take some responsibility for this, as I saw the house and noticed the smoke detectors missing, but did not complain about it as I did not think it was a big deal... that was my mistake, however I feel the sellers realtor bears the most responsibility, versus me, a first time home buyer that did not know much better at the time)
0 votes Thank Flag Link Thu Mar 24, 2011
Unless your agent/attorney is able to negotiate something different, you are the one who must bear the cost. Buyers are responsible for all necessary appraisals unless otherwise note in your purchase contract.
0 votes Thank Flag Link Thu Mar 24, 2011
If you were not represented by an attorney, you really need to ask an attorney if there is legal ground. But I would agree with other advice, if you are getting a good deal on a distressed property, there are some costs you as a buyer have to eat and you still are probably way ahead of the game. Just a note, your independent inspection of the property should have revealed the smoke detector problem.
0 votes Thank Flag Link Thu Mar 24, 2011
I must ask you first if you were working with a Realtor?
0 votes Thank Flag Link Thu Mar 24, 2011
I assume this is for your loan. Your mortgage lender is the one who orders the appraisal. I'm not too sure that the reappraisal is supposed to be included, but seller's side is right that it's really not their problem, especially since the property is being sold As-Is. Ask yourself this question: Does the $250 additional cost make the home not worth buying?
0 votes Thank Flag Link Thu Mar 24, 2011
you may want to talk with an attorney, but that would likely cost more than the $250. Could talk with the listing agent's broker to see what they can or will do. what is your agent saying about all this? Did you see the house? Check it out for yourself before writing the offer?
0 votes Thank Flag Link Thu Mar 24, 2011
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