I had an interesting experience last week with a listing that is scheduled to close today. I got a call from the buyer's agent indicating that our FHA appraisal had been sent to appraisal review. Its been well over 2 years since I have had an underwriter at the lender's office question the validity of an appraisers work.
The property was listed for $97,900 originally. We received an offer where the seller asked for significant seller paid closing costs. To compensate we increased the purchase price to $99,000. The home was in superior condition and when the appraiser came to evaluate the home his opinion was that the home was worth $99,000.
The underwriter at the lender's office had concerns about this valuation and sent the file to appraisal review. The review concluded, after throwing out some comparables, that the home was only worth $98,000.
This posed a problem for a couple reasons:
1. My clients were expecting a sale of $99,000 and by all reasonable conclusions deserved to sell the home for that agreed upon price.
2. Regardless of getting a second opinion from another appraiser, the FHA appraisal review process "tags" the property for 6 months so if we chose to toss this buyer and start over with a new FHA loan the property would still show as only being worth $98,000 in the FHA system.
3. Since FHA buyers are, by nature, light on financial resources, the buyer could not cough up another $1000 to close the deal at $99,000.
So how did we resolve this problem? FHA forced our hand and we were compelled to reduce our sales price to $98,000.
In another story, I was recently made aware of an appraisal on a home contracted at $100,000 that appraised for $76,000. The appraiser used HUD homes and distressed property as comparables!
When it comes to the marketplace, you never know when you are going step on an appraisal landmine. Hopefully, the damage isn't so severe that it kills your transaction.
Happy Transacting!
3 comments:
Wow, our deal is in blog land as an example - lol. I feel famous...or maybe INFAMOUS.
...and the names have been changed to protect the innocent. :)
Regarding the "infamous" underwriter; Some people grow with power, others just swell.
Post a Comment