Why would FHA Appraisal be so different from comps and independant appraisal?

Asked by John, Olney, Philadelphia, PA Fri Mar 12, 2010

We have a 3 bedroom 1 bath house (1800 sq ft), Single detached house with detached two car garage for sale on a triple lot approx 9000 sq ft) .
Realtors told us we could “easily” get $150,000
Two houses on the street behind our house are comparable sold last summer for $150,000 (1500 sq ft & 4400 sq ft lot) and $146,000 (1365 sq ft & 3600 sq ft lot). Another house sold in the fall for $135,000 for a smaller house (1500 sq ft) and on a single lot (3300 sq ft). Our house has more square foot and our property is 1 to 2 times larger. All homes are in about the same condition.
We had an independent appraiser come in with $152,000 on the property in late Dec 2009.
Buyer had an FHA appraisal (1/5/2010) for $132,000 - $20,000 below the independent appraisal.
Do conventional Mortgage lenders use the FHA Appraisal?
Can we sell the house for $150,000 – get the buyer to get a $132000 first FHA loan and give the buyer a 2nd? We have 2 interested parties.

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6
Keith Sorem, Agent, Glendale, CA
Sat Mar 13, 2010
What does your Realtor say?

Due to changes in appraisal procedures it is possible that the appraiser made an error, which can be appealed IF your Realtor has proof that the comparable sales used were incorrect.

Also, appraisers are required to project future values. According to the link below the values have increased during the past year. The trend of increasing values and a poor selection of comparable sales might make a difference.

A thorough investigation by your Realtor should give you the information that you need. Good luck.
0 votes
Edward G. Ma…, , Philadelphia, PA
Sat Mar 13, 2010
I mistyped the number 5 in my answer for 6 on the 3rd line of my answer.
0 votes
Erica Ramus,…, Agent, Pottsville, PA
Sat Mar 13, 2010
An appraisal is still just an OPINION of value. It is not set in stone. 2 appraisers may indeed give 2 different values, based on their OPINIONS.
0 votes
Edward G. Ma…, , Philadelphia, PA
Sat Mar 13, 2010
A few factors involved:
1) the property that sold near you in the summer may be too old to use. Properties can only be used in an evaluation that have settled within 5 months. That could eliminate that property. So your independent appraisor may have been able to use it (it may have been less than 6 months and the buyer's appraisor might not have been able to use it because by then, too old to use)
2)it also depends on the reason for the independent appraisor. If he was appraising for instance to get you refinancing, the pressure is on the appraisor to make the numbers work out.
3)if the appraisor knew the kind of value that you wanted to place the property on the market, then the pressure would have been on the appraisor to give the value that you wanted.
4)the term "fha appraisor" is confusing. It is not an fha appraisor, but rather just a normal appraisor that does an "fha appraisal" Unfortunately, that fha appraisal will hold for 6 months. So if you sell your house to a buyer with fha financing you will be stuck with that appraisal
5)you can have your agent appeal the appraisal, he would have to take that up with the lender. The lender's hands are tied by a law that states they cannot contact the appraisor directly. They could order another appraisal if the lender sees that it is warranted. The problem is some buyers will not agree to having this appeal done, because that buyer may think that the property is priced correctly by the fha appraisor and may think they are paying too much.
6)Hopefully, your agent met the appraisor originally with properties to suggest to use. That doesn't alwasy work but it is essential to get you the best possible outcome.
7)Lastly, with an fha loan your buyer could put a downpayment of $15000 and that should do the trick.
0 votes
Dianne Hicks, Agent, Rancho Bernardo, CA
Sat Mar 13, 2010
John
You can try to challenge the appraisal but keep in mind the appraiser only looks back 3 months when looking at comparable sold properties to comp your property. So it will not matter what sold last summer to any of the appraisers.

As stated before, FHA will not allow a secondary loan. Yes, you can sell VA, Conventional or cash because they do not use the same appraisal.

Good Luck!!!
Web Reference:  http://www.di4homes.com
0 votes
Andrew Himes, Agent, Collegeville, PA
Sat Mar 13, 2010
FHA will NOT allow any secondary financing. Unfortunately with FHA appraisals you are stuck with them for 6 months. You will not be able to sell the property to a buyer using an FHA loan for any more than 132,000 for 6 months. You can however sell to a conventional buyer and they can have a new appraisal done on the property. I have had this happen to my sellers numerous time over the last 12-18 months. The appraisal process has gone from one end of the spectrum (3-5 years ago appraisers were just giving whatever value buyers were willing to pay) to the other end where we are currently at (lenders checking and triple checking to verify the appraisers work). It is a tough situation but if both buyers you have lined up are FHA buyers you are in a tough spot right now, usless they are able to come up with the additional down payment to use a conventional mortgage product.


Andrew Himes, CRS, ABR, e-PRO
Prudential Fox & Roach Realtors
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