FHA 203K appraisal causing issues.

Asked by Daniel Carr, Durham, NC Sat Apr 6, 2013


We bit on a forclosed home and won, we then had to find a new loan company as the loan needed to be modified to a FHA 203k.

The house was previously assessed in 2012 at 69. We bid around ~20 grand lower and won. Now we are at the point where the appraiser came up with the estimate and gave it to the underwriter. The appraiser put the house lower than expected, and since the home needs 10k in repairs we are stuck with around 8k difference that we will have to come up with.

We did find a few issues with the appraisal, would it possibly be enough to request a second appraisal or would we be working against ourselves with asking for a new one (if a second appraiser came in at a lower value for whatever reason).

Also since we put in a bid and won, would we be able to go back to the bank and negotiate?

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Jenn LaGraffe’s answer
Jenn LaGraffe, Agent, Fayetteville, NY
Sun Apr 7, 2013
Hi Daniel,
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.
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Lauren Comer…, Agent, De Witt, NY
Sun Apr 7, 2013
When a home doesn't appraise as high as the purchase price, you have the right as the buyer to pay the difference or ask the seller (in this case the bank) to come down on the purchase price. The purchase offer you submitted should stipulate these details. You shouldn't be bound to purchase a home that doesn't appraise. I'd say you're in the driver's seat here, your first move should be to ask the bank to come down on the price. Secondly, appraisers can revisit their numbers and change their appraisals. Another appraisal would be at the descretion of your lender and you should know ahead of time if a lower appraisal will supercede the first, be careful there. If this low appraisal is accurate, the bank (seller) will run into this problem with any offers, unless the buyer is not taking out a mortgage and paying cash. Good luck!
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Bob McTague, Agent, Manlius, NY
Sat Apr 6, 2013
Is a licensed real estate agent representing you? If so, this is a question for your agent.

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.
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