Financing in Des Moines>Question Details

Snowed In!, Home Seller in Des Moines, IA

FHA Question about how long a bad appraisal with an attempted purchase stays on record with the house..

Asked by Snowed In!, Des Moines, IA Mon Feb 15, 2010

Our home was for sale and the buyers were gettingan FHA loan. The FHA appraisal came back 10K too low. We did not want to come down because we hadabout 6-7 comps from another appraiser confirming our asking price. Wells Fargo would not let us pay for another appraisal or consider these comps for a rebuttal. That deal fell through. Now we have another buyer using a local lender. It has been 3 1/2 months since the bad appraisal. We are concerned that the inaccurate appraisal will come back to haunt us as the new buyer is also getting an FHA loan. What can we do? Will the past appraisal affect this new loan because it is with a ne lender?

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An assumable mortgage allows a buyer to assume the rate, repayment period, current principal balance and other terms of the seller's existing mortgage rather than obtain a brand-new mortgage.

In theory, any type of home loan could be assumable. However, only two types of typical loans have this feature: FHA loans, insured by the Federal Housing Administration, and VA loans, guaranteed by the U.S. Department of Veterans Affairs. Conventional loans typically are not assumable.

Assuming an existing mortgage can be simpler, easier and less costly for the buyer than applying for a new mortgage.

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1 vote Thank Flag Link Wed Jul 22, 2015
The issue here is the "approved list" used by lenders. This was most likely an issue on the original purchase causing you to pay too much initially. . In the market, lenders do not want an honest appraisal. What they desire is an appraiser who "hits the number". If he/she does not, they will be removed from the approved list and thus the whole specter of inflated values comes into focus. I.e. quality appraisal work is not desired in this industry and that leads to problems for anyone wishing to sell at later date, especially within 2 years.
0 votes Thank Flag Link Tue Nov 3, 2015
Coming in a little late on this question, but Rudy below is correct. When an FHA buyer starts the home buying process and FHA case number is assigned to the property and appraisal and follows both for 120 days so by now you should be past that. I have had a couple deals in Colorado where the sellers had to lower their purchase price as well because of an existing FHA/Case# and appraisal.
0 votes Thank Flag Link Wed Mar 10, 2010
Snowed In

That FHA appraisal has a shelf life of 4 months before a new once can be ordered. Sound likes you have another 15 days to go.
0 votes Thank Flag Link Mon Feb 15, 2010
Under FHA the appraisal is registered and assigned to the property via the case number. There could be some issues with a new borrower and appraisal. Although appraisal are not recorded as stated below in a standard loan process FHA follows a different process and assigns a case number for each transaction and appraised value is part of the file. Under FHA the case number may be transferred to a different lender including the appraisal.
0 votes Thank Flag Link Mon Feb 15, 2010
The past appraisal should have no impact on your current sale. Appraisals are not recorded in public record. The original lender, the appraiser, and the original buyer would be the ones who would have copies. The comparables that were used in this appraisal could still be valid but may be looked at differently or weighted out of the appraisal all together based on better, newer comparables.

Appraisers are very careful now as they are being blamed for a lot of our mortgage crisis when prices were considered inflated to make it work. There are some terrific appraisers out there and unfortunately, they are left to clean up the mess, which makes them more conservative. Some of the basic things appraisers look for in determining a property's value are square footage, age of the home, school district, condition (i.e. newer siding, windows, re-modeled items, carpet, paint, etc.), date of the sale (lenders prefer them to be within six months) and location. Each of these has a weighted value to the appraiser (i.e. new siding on a 30 year old home is considered more of a maintenance item than an upgrade) and some items will contribute to the overall value - but not necessarily add value on their own (i.e. a kitchen remodel adds some value but won't automatically adjust your price by the amount you spent on it).

Underwriting guidelines with lenders are also much stricter. Wells Fargo may not have even been allowed to consider another appraisal due to new government guidelines.

Bottom line - don't sweat the old appraisal. There is no written record of these that another appraiser can look up - unless you happen to pull the same appraiser! Appraisers are now assigned by random drawing through a third party system to eliminate fraud and misuse. If you do happen to get the same appraiser, you will know when the appraiser calls to set up a showing. You can refuse to let that appraiser have access and they lender would have no choice but to re-assign the appraisal. That would be a last resort, but you do have the right to restrict access on your own home. The only other way someone would know about the first appraisal is if the appraiser had mentioned it to another appraiser and they talked, or your original buyer had mentioned it to someone. The original lender, Wells Fargo, would not be able to release it to anyone else without the permission of the original buyer as the original buyer would have been responsible for the cost of that appraisal.

Sound complicated enough yet??!? Don't worry - you should be fine - good luck with your sale!
0 votes Thank Flag Link Mon Feb 15, 2010
You shouldn't have a problem with that appraisal. Most likely, the loan officer pulled the file from the underwriter. If the borrower had gone through a broker, the broker would have tried a different lender and the appraisal would have been irrelevant. Unfortunately as of 2/15/10, the FHA loan appraisals must now be ordered through 3rd party companies, so lenders no longer have access to the appraiser to request a better value. It's out of our hands now. I would recommend that for $300 you get an appraisal of your own to find out the value. Keep in mind that appraisals are subjective and can vary. You may also ask a Realtor (if you don't have one) to do an assessment of the value. The Realtor can also help you with the purchase of your next home and make sure you're not paying more for a house than it's worth (saving you an appraisal check too).
0 votes Thank Flag Link Mon Feb 15, 2010
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