The Mini House been under contract for a while, but because of the FHA 90-Day Rule, we weren’t able to move forward with the financing and underwriting until about two weeks ago. Unfortunately, in that time, we’ve gotten some bad news…
The first appraisal on the property came back at about $30K below the purchase price!
While I knew the appraisal would be rough on this one — the only comps in the subdivision are foreclosures and there isn’t too much retail sold in that area in general — I didn’t expect it to be this bad. Part of the problem was that we didn’t get a chance to meet the appraiser, build a relationship and state our case why we thought that the appraisal should come back closer to the purchase price.
My wife and I were in the hospital the day of the appraisal, and my partner on this project didn’t get over to the house in time to meet the appraiser. This was clearly our fault (I always preach about controlling your own deals!), and I’m angry that we screwed up. Lesson definitely learned…
As for next steps, we’re trying to get the buyers to move to another lender, at which point we’d get another shot at the appraisal. If they don’t agree, the property will go back on the market and we’ll look for another buyer. I’m not confident we’ll ever get this house to appraise at full asking price, but then again, I never thought we would have gotten a full-price offer on this one — we purposefully listed it high just to see what would happen.
Hopefully I’ll have some more news on the status of this deal in the next few days…
Bad news is FHA appraisals are tied to the property for 6 months. At least that’s how it works in California.
I was at a seminar and they mentioned that if the appraisal is unjust you can report them to the Appraisal Institute for discipline. You can also have an appraiser you know challenge it. But if the comps are non-existent I don’t know what your options are? Lease-option?
Steve –
It’s interesting that you say that. I thought that too, until the first time this happened (a couple months ago on another property). That deal fell through, but the new buyers were able to come along and get another FHA appraisal (different broker/lender) and the first one never showed up in the system.
I’ll have to investigate a bit more to figure out what the difference may have been.
Thanks for the info!
Keep me updated on what happens. It is fun how these “rules” are interpreted and acted on differently everywhere.
I’ve also always been told the appraisals attached to the house for 6 months with a FHA. Thankfully, I’ve never had to put it to the test. The policy (true or not) has never made any sense to me. $30K is a formidable gap. I had a bad appraisal about 9 months ago and talked and data’ed with the appraiser until I was blue in the face. (I had more than ample comps which supported my price and she poo-pooed each one) This lady wasn’t going to change the appraisal. In the time crunch to close, I let it go and ate $3000. Sometimes you’re the bug, sometimes you’re windshield. Good luck with the outcome.
Most of all, congratulations on the new addition to your family!
Jingle
I had an FHA buyer get a low appraisal last year. They told me I had a right to request a second appraisal, so I did — and the next guy they sent out hit it right on the nose.
– Hakrjak