I had a call last week from a woman who wondered where she could find out if certain homes for sale were approved for FHA financing. As I talked to her about the fact that, for the most part, it takes an appraiser to determine whether or not a home qualifies, I tried to explain what she would need to look for so she could avoid paying for appraisals on property that may not qualify. It occurred to me that there was a good blog post in that explanation so here it goes!
FHA appraisers do a different type of appraisal than appraisers for conventional loans. They are more concerned with the health and safety of the borrowers. They look at the standard things that all appraisers look at, and they take it a little further. FHA is not only concerned with the property value but is also concerned with things like handrails on steps, broken windows, lack of screens, evidence of rodent infestation and other issues that don’t affect a normal appraisal to the same degree. If the house was built before 1978 and may have the potential for lead based paint, the FHA appraiser looks for peeling paint. The FHA appraiser needs to see that the bedrooms have egress in case of a fire, the windows have to work and if there are burglar bars they need to have the code approved methods of opening them from the inside in case of a fire. They want to see smoke detectors. The FHA appraiser needs to see window screens if there isn’t central air conditioning. They look at the remaining life of the roof and the furnace and hot water heaters and want to see a stove in the kitchen. The utilities have to be on during the appraisal and they check that the various components are working. The appraiser looks for evidence of environmental contaminants like asbestos and mold. The FHA appraiser looks for earth to wood contact and other evidence of termites.
So for the most part, the home has to be livable. If the carpet can be cleaned or the house needs paint to make it clean and fresh, this will not generally be enough to cause the appraiser to require that the work be done before closing (or after). If you want to read the actual FHA appraisal guidelines you can see an article from HUD here. The basic HUD website can be found here and the FHA Appraisal page has an overview of the entire process.
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{ 135 comments… read them below or add one }
I had an FHA appraisal on my house.The apraiser missed 850 sq ft on the origanal measurement. After fighting with the lender ,they remeasured ,found thier mistakes, but used the same comps. One of which was almost half the size of mine. I also have an In-Law suite in the “basement”. These rooms are 2 feet below finished grade at thier lowest point ,and are well within FHA guidelines for habital space. But I am being told that company policy is anthing below grade. Am I missing something? Any input would be appreciated. thanks
Kevin,
One of the biggest frustrations in this business is appraisers who get inflexible. It is doubly hard if the FHA appraisal was recorded, it is almost impossible to get past that. Appraisers are fearing for their jobs and have gotten much more careful.
I took an appraisal course quite a while ago and I have to say that I am not an appraiser, but I understand a little about the process. In the course they considered finished basements, but not by adding the square footage to the rest of the house, but, let’s say a 1600 square foot house with 800 square feet finished in the basement my be worth $10-20 more per square foot, than the 1600 suare foot house without a finished basement. They wouldn’t call it a 2400 square foot house. The comps would be other similar 1600 square foot houses with finished basements, and the added value may be more in line with the cost of finishing the space. The $10-20 dollar per square foot figure I mentioned is not meant to be an exact number but a guesstimate.
Your best bet is to try honey rather than vinegar when talking to them. FHA guidelines are strict, and the appraisers job and license to do FHA loans are on the line with every appraisal.
Kevin-you are in a tough situation as the homeowner. Before the real estate meltdown, appraisers were able to use their personal judgement more, instead of relying on strict guidelines. Now, in the current “gotcha” climate, where everyone is looking to blame their bad decisions on someone else, appraisers seem to be the only ones held liable for any mistakes in the real estate valuation process. As such, those of us who want to stay in business and out of jail are very careful. The general rule for basements is that if its below grade, even partially, its a basement. You may have a finished basement, and you may even have permits for the finished basement. OK great. What do the public records say your legal square footage is? If public records indicate a total square footage which does not include the basement area, then most appraisers are not going to count your basement as living area, even if you have permits. We are not going to put ourselves out on a limb by obviously disagreeing with what public records say your legal square footage is.
If you have a 1600 SF house and an 850 SF finished basement, and public records indicate your total living space (GLA) is 1600 SF, then you have a 1600 SF house with an 850 SF basement. If you disagree with this, you need to get in touch with your city building and permit department and find out why. If you believe your basement should be counted as legal living space, its up to YOU to do the leg work with your city, get them to come out and inspect and reclassify if necessary, pay their fees, and take it from there. Thats not the appraisers job. Once you have official documentation, such as a change to public records, a new permit which indicates the space is legal GLA and what the new GLA numner is, or some other such document, the appraiser is then covered, and most reasonable appraisers would then count the additional space as legal GLA.
If you bought the house thinking it was legally 2450 SF when it really was only 1600 SF, then someone didnt do their due diligence.
John, I appreciate your comment and sorry, I missed it when you first posted it and didn’t get it online right away.
I think that your reasoning isn’t correct regarding the finished basement issue. As I understand it, it’s not an issue of whether or not permits were pulled when the basement was finished. Even with permits, finished heated and cooled space below grade is not counted as square footage when an appraiser is figuring value.
When he compares value he would look for comps with finished basements and see what they sold for. Generally you will find that 1600 square foot with finished basements, sell for more than 1600 square foot homes with unfinished basements. And 1600 sq’ homes with unfinished basements sell for more than 1600 sq’ homes with no basements.
It might work out that no basement homes sell for $150 per sq’, unfinished basement homes sell for $160 per sq’ and homes with finished basements sell for $180 per sq’.
Dan Connolly’s last blog post..Disclosure: What the seller DOESN’T have to tell you in Georgia
I had an appraisal done for an FHA mortgage. Some of the things included on the items to be fixed include.
-replacing moldings throughout the entire house.
-repairing or removing a shed
(this is a small childrens playhouse in the back yard that is in poor condition)
-fixing drywall and repainting
(small hammer hole in the drywall)
These items don’t seem like they have anything to do with the structural integrity or safety of the home so should items liek this be seen in an appraisal report, or should I discuss this with the lender?
Thanks,
Tom
Well although they may not seem like significant issues, apparently the appraiser thinks they are. I imagine the playhouse might be a safety issue because kids would want to play in it no matter what the condition. I don’t really understand the condition of the moldings that would require replacement, but the bottom line is if the appraiser requires it you will probably need to get the things done. Holes in sheetrock have always been an issue in my experience. I have not had much success appealing FHA appraisals.
It’s not only health and safety, resale ability is a factor. Could they sell it if you never made a payment and they got it back quickly?
I’m in the process of buying a home w/ FHA mortgage. We have to do all this work before the closing. It’s so unexpected and we only have 2 weeks to do it. I just wish this was explained to us.
I want to bid on a property that is listed “As Is” so any repairs would not be done by seller. Would that mean I would have to make the repairs myself before closing or not get the loan?
Joanne,
You could get an FHA 203-K loan which would incorporate the repair costs into the loan. Most corporate sellers (foreclosure etc) won’t let you do repairs before closing. If they do, allow it, you need to be careful because if something went wrong in the loan process you most likely wouldn’t get paid back for the work you did before closing. Also if you put in something like an air conditioner compressor, and it was stolen before closing, that would be an uninsured loss.
Dan i have a question i was trying to buy a house that is missign the outside part of the Air Conditioner will it be turn down by the appraiser. The mortgage company have been waiting for a answer from fha since 2 weeks ago but i really dotn trust them because she has made so many excuses for other houses i have seen can you please help me thanks
I am not sure whether the missing ac will cause it to be turned down by an appraiser. If it is, then you might be able to close with an FHA 203-K loan, which would let you borrow the money for the repairs. See if your lender has that product, the FHA 203K loan. It takes longer than a regular FHA loan and whether or not you can get the extension from the seller is another big question.
I have a situation with a house that has an improved basement area with Kitchen, living room, ect. Then the above grade level has the bedrooms and bath (no kitchen). On appraisal how would I handle this?
Sorry Kelly, but I really don’t know the answer to that. Was there a kitchen on the area above grade that was removed? There will be some value established for this. It falls into the category of functional obsolescence. It is a floor plan that is not normal. They will probably adjust the value for that, but I don’t have any idea how much!
We are in the inspection period of trying to sell our 1926 home. The buyers requested everything, but are most interested in us replacing the roof. We have a roofer who said that $1000 worth of repairs would certify it for another 5 years. The buyers are doing an FHA loan. Will they be able to get the FHA loan if we do the repairs? Or will we have to do an entire new roof before closing?
Well there is no easy answer to that. The guidelines for FHA appraisal are changing by the minute. It would be a question for the FHA appraiser. The appraiser has to determine if there is enough life left in the roof. He might take the certification from your roofer and might not!
Also, are you currently listed for sale with a real estate broker? If so you should talk to that person about the negotiations, there are rules which prohibit us from advising people who have signed an exclusive right to sell contract with another agent.
im buying a house that has all the 3 major issues wrong with it, asbestos, mold and abandoned oild tank. the seller refuses to fix all thesee problems but wants to give me credit towards my purchase price. what should i do? i dont know if i should accept the offer or back out of the contract. thanks
There is virtually nothing you can do with asbestos that will not cost a fortune. My house has it. I made the mistake of looking into that after I bought the house.
Hard to answer that, with so little information. Asbestos, mold and abandoned oil tanks all have the potential for being really big problems. I would get professional advice from experts in those three areas.
If the seller gives you a credit and lowers the price, do you have the money to get it in healthy shape? Is the property worth what you will have to pay to buy it and then get it into good condition? Are you willing to take on the task?
Will your lender make a loan in its present condition?
Sorry, no answers here, only more questions!
Is is possible to buy a house with room additions that doesn’t have city permitts and still qualify for a fha loan? Why?
Does a pool have to have city permitts to qualify for a fha loan?
Tammy, I am not an FHA appraiser so I can’t answer specific questions about the process. The point of my article was that if a home isn’t in pretty good condition, your appraisal money may be at risk.
Dan—
The roof has to have 3-5 years of remaining life. A certification from a licensed roofer should be enough for the appraiser. (Check with the individual appraiser)
Tammy—
Any room additions should have permits or not be included in the value of the home. The appraiser could require permits or just turn it down for FHA financing.
Araceli—
Shouldn’t make a difference I would just value it as not having A/C.
Kelly—
Dan is correct it would be a functional obsolescence issue unless having a kitchen in the basement is typical for your market area. There would have to be comps with the the same ammenities (Kitchen in basement).
Hope this helps.
Scott
Certified FHA Appraiserin Oregon
Hey Scott! Thanks a lot! That helps quite a bit. I started to feel like I was getting on thin ice with very specific questions about FHA appraisals, I know the guidelines are changing quickly as the market meltdown continues, so I appreciate the clarification.
Dan:
Just to get back to the original post:
Measurement standards are not left to an appraiser’s discretion, so I doubt the appraiser was being ‘inflexible’. The standard for measuring and determining Gross Living Area (GLA) is defined in the ANSI Z765 standard. I suggest people Google it if interested.
Rooms below grade, even if they are only 2 feet below grade, are not counted in the GLA. Homeowners get upset with appraisers for not counting their basement bathrooms and bedrooms in GLA or above grade counts, but the standard does not allow for it.
Hope this was helpful.
Steve
Certified FHA Appraiser in Illinois
My client is buying a home (FHA loan) that has an empty pool. Will there be problems not passing FHA? If answer is yes, what condition does the pool need to be in?
Dan,
We had a market appraisal done in March order to get information to appropriately price our home, and got an offer for what we were asking. Our tax assessment was redone around the same time and it was within $2000 of the appraisal in hand. We felt pretty confident that we had a good picture of what the home was worth.
Then the FHA appraisal came in a whopping 20% lower just two months later in May of this year. We supplied our appraisal and contested the comps (it appears they used at least one foreclosure or short sale, which I didn’t think they were supposed to do)- but were unsuccessful in our appeal. We were told this appraisal was now going to be the official FHA value for the property for the next 6 months, no second opinions. We couldn’t just take our home off the market and refusing FHA financing would have cut out about 75% of the buyers in our area. (It was interesting that they didn’t require any repairs or anything- the home is in great shape, we took excellent care of it- FHA just trashed the value and we lost a ton of equity.) We swallowed hard and took the deal, because it made us feel like if the government was saying this about about our neighborhood, it would only get worse.
I understand and that appraisers are working for the lender and all that, but my question is this: Why wouldn’t they let us see a copy of the appraisal? Why couldn’t we order another look? It was our property after all, and here is a government agent dictating our deal without letting us even see what we were up against. That just doesn’t seem right- it seems as if we should be entitled to see this document. I looked all over the FHA website for some guidance about this but there’s nothing about appealing this decision. Can you fill me in?
Janice in Memphis TN
Janice,
We see this over and over. It is not fair at all, in my opinion. I think that there should be a review process but I don’t think that there is one. The appraisers have their license to do FHA appraisals on the line with each appraisal that they do and they are being extremely careful. I think that the fundamental is that the recent mortgage meltdown was caused to a great extent by appraisers who weren’t doing their job correctly and who were “in bed” so to speak with the lenders and borrowers; so now they have over compensated to try to correct this.
When you say that you have comps, it is important to understand that the comps have to be very recent. If there are comps with similar property near the subject and within the last 6 months or even 3 months that support the price the appraiser found, then you can’t go further away, or into different subdivisions, or further back in time to find comps to change the value.
The other thing that I wonder about is the market appraisal that you got. If that was done by an appraiser or a Realtor. Because Realtors are not held to the same standards as licensed appraisers sometimes the market analysis that they provide falls more into the category of wishful thinking.
Why they won’t let you see the appraisal is because it is paid for by the purchaser, so they technically own it. Sometimes the buyers will get a copy at closing and will let you look at it, but they don’t have to.
I am purchasing a home with mild mold damage. I just got a mold inspection report. I am financing a FHA loan. Will this have to be repaired before closing or can I sign a waiver stating I am aware there is mold and I will be fixing the problem and buying the home as is?
Thank you.
My husband and I have a closing set for July 31st. Before this closing, we moved 2000 miles away, closing fell through, and so we moved back (long story). We’re being extra cautious when it comes to moving/renting a plce this time. The Buyer is using an FHA/VA loan. The inspection went really well. The Buyer is buying the house “As Is”, with the exception of 3 required FHA repairs, which we are willing to fix.
Next, we have an FHA appraisor come out. What happens next? Are we required to fix what they find or is the Buyer? Is there a report that we are offered (like a counter offer), suggesting items to fix? We just don’t want to get stuck fixing items that we absolutely can not afford. We have like $100 to our name due to our huge move back from Arizona. Our realtor never gets back to us, probably because he doesn’t know the answer.
Thanks,
Tiffany/Knoxville TN
Michelle,
I don’t know the answer to that one. I think (just my guess) that they will want the mold removed prior to closing. Maybe one of the licensed FHA appraisers who have been commenting will chime in?
Tiffany,
Your contract will determine what you are required to do and what you are not. In Georgia we have a FHA exhibit which addresses those issues. I have heard that these are not national forms but forms specific to GA. In our exhibit there is a line about who would pay how much towards FHA required repairs. Read the contract an if it doesn’t address the question at all, I would take it to a lawyer specializing in Real Estate law in your state.
My question is how do you know that the three FHA required repairs are really required if the appraiser did not come out yet? Normally that is where you hear whether or not the FHA will require repairs? Did the inspector tell you what the FHA requires?
Dan,
I am buying a bank owned(forclosure) and am getting FHA finansing.
The house is missing one sink , toilet, range. And oddly the SMUD electricity meter outfront.Carpet is a mess , and a few holes in the dry wall. Fireplace is missing parts. And some interior doors are also missing .
My offer was accepted , however the bank said they will not make any repairs.
And they want close of escrow in 45 days and a 3500.00 deposit.
Would I have to replace or repair all of this to close fha??
Many Thanks
Alex
Alex,
Again, I am an agent, not an FHA appraiser. The way it works generally is that the utilities have to be on for the appraisal and anything the appraiser asks for has to be done before closing. You would have to check to see if your offer is contingent on appraisal and if there is anything in your offer that addresses the issue of FHA required repairs. Your contract will control the way the repairs are handled. If the bank sent back an addendum for you to sign, that normally that will supersede anything in the original offer that conflicts with the addendum. Most banks won’t do repairs or allow you to do them prior to closing, but again that is a issue that should be addressed in the contract and addendum.
My husband and I are in the process of buying a home with an FHA loan, and had gone through all the stages, paid for our appraisal, which came back exactly what our bid was. However, the bank decided they wanted to do their own appraisal, which came back 40k less than what our bid was, and now won’t loan us more money than what they believe the house is worth. I remember hearing that once an FHA appraisal was made by a bank, the house cannot be reappraised for 12 months, is this correct? Also is it only for FHA buyer or for those with conventional loans as well. I am hoping they cannot change the appraisal for all loan so we have more leverage, but who knows, we may just lose our dream home.
I have heard it is fixed for 6 months for FHA but that it doesn’t transfer to conventional.
Can anyone explain this one? We are selling our condo and the buyer is going through FHA. The appraisal came back $2000 ABOVE our sales price.
However, according to our realtor, “Yesterday FHA determined that your condo association was in a declining market. They countered the appraisal at $X with you still paying closing costs. ”
Does this make any sense to anyone? Has anyone heard of this happening?
Thanks.
It is a new one for me. The lending industry is changing on a regular basis. It’s difficult to know what they are going to do. I had a house that we had a contract on that appraised for 45,000 more than the sales price (sales price 135K appraised at 180K) and they turned us down. That was a conventional loan and the underwriter said it proved a declining market. (FHA made the loan on that one). Appraisers and lenders are running scared. We hear stories of bizarre treatment on a daily basis.
Hi Dan,
I’m guessing this thread has been kept alive due to the current market!
I have a somewhat similar issue to Rose, above, in that our appraisal is being questioned by the underwriter, weeks after the appraisal came in. The kicker is that this was an FHA appraisal arranged by the bank loan officer himself (we weren’t given an option as to who we’d use) and it came in for the same amount as what we offered. Now, at the 11th hour, the underwriter is saying comps in the area warrant a lower price (apparently considering the FHA appraisal about $30-50K too high, and not considering the state of the other houses and the value of the well-taken-care-of house we want to buy). The sellers are not willing to come down in the price, which we thought was fair in the first place. Do we have any recourse? Any suggestions?
Thanks,
Kristi in Southern California
I don’t think you have recourse. Unfortunately the Sellers are often upside down or under water with their loans and would have to write a check in order to sell for less than they are asking. Their only other option would be to try to convince their lender to do a short sale, and that might be a way to handle it, if you have the time to go through the process. Unfortunately if the Seller is paying their mortgage(s) on time it is difficult to go that route.
The only other option might be to try to go with a conventional loan and a new appraisal.
DAN
On an fha appraisal- the date of the settled sales used can be back as far as 60 or 90 days ?
thank you
Sorry, they keep changing the rules so I am not 100% sure but I think its 90 days.
closed on dec 30 2009 with fha loan inspector said heat pump was not working realtor said it was fixed upon moving in moved in on dec 31 as to come was an air condition service company was at my house to fix but only said house had closed so they were unable to repair realtor paid the 50 dollars for my home warranty to fix i was still out of heat for days till it got fixed i thought a house is not allowed to close with fha unless heat air is in compliance with fha laws.
I guess you mean that you closed in Dec 2008?
The heat and air have to be working when the FHA appraiser looks at the house but they could break down on the next day. (Murphy’s law).
There is generally no warranty on anything from the Sellers and you probably don’t have any recourse, but that could best be determined by an attorney familiar with real estate law in your state.
thanks for the info did close in 2008 I’m going to try a lawyers info dont think i shouldve been without heat upon moving in as a repair man came three days later to fix and said house had closed it was not there responspility to fix it.in the 1st place it was two realeators in the sa\me deal mine thought it had been fixed no response she said from original realetor but he sent his help out to have it repaipered three days later to fix doesnt that say it was never repaired
Hi Dan,
There are a lot of interesting comments concerning FHA Appraisals. When appraising the value of properties, I understand that MANY, and I mean MANY comps in several areas are foreclosures, which in my opinion is not the TRUE VALUE of what the home is worth because many of these homes are purchased by investors, not primary home owners. When it comes to appraising the value of a home, do FHA appraisers take into account repairs and updates such as a new HVAC system, new windows, new carpet, new paint, and several other items that add value to the property not to mention the size and condition of the yard as well? I agree with ROSE and KRISTI above about how bad the government has gone overboard because they had their homes appaised by a professional who came back with a fair and close appraiser based on the agreed contract price but FHA comes back with a $40,000 less amount, which makes no sense and is a major drop. People are going to continue to let their homes go into foreclosure if they try to sell and the govt. tells them that their homes are worth $50,000 less that what they owe. Washington needs to wake up and become practical, balanced, and realistic to keep the economy from damaging even more. Here is another question; Suppose that a home is 1,400 sq. ft. and is listed for $100,000. How do appraisers of FHA go about coming up with the true value if 1. most of the homes sold in the area in the last 12 months are 900 – 1200 sq. ft, which averages around $58,000 – $95,000, 2. you have 2 homes that sold for $69,000 that had over 1400 sq ft but also had 3 properties that sold for $95,000 to $115,000 with about 1,300 sq ft with 1/2 to 1 bath less? I asked these questions because it appears that FHA is not allowing TRUE and REASONABLE standards by allowing foreclosed properies count, which is not the true value of the property. Just because a bank wants to clean up its balance sheet and sell a home for $45,000 below tax value does not in any way justify appraisers coming in and saying, ‘hey, your home is only worth $73,000 due to other comps in the area,’ when in fact most of the people in the area paid a solid and fair price for their homes though appraisers are trying to protect their jobs. I thought appraised properties were based on “WHAT HOMES IN THE AREA SOLD FOR BY HOME OWNERS, NOT INVESTORS OR DUMPED BY BANKS TO CLEAN UP THEIR BALANCE SHEETS. The last question is this; how many comps do FHA Appraisers have to submit and if they do not have enough comps in the area to match the selling property over the past 6 months or so, esp. when it comes to total sq. ft, are they allowed to use other similar homes in the area that have about 200 sq. ft less but sold for only $10,000 less or in some cases 300 sq ft less and sold for $15,000 more? What I am getting at is where is the silver lining for looking at comps that are 200 – 400 feet less, which sold for $15,000 less to $10,000 more of your asking price vs. 2 comparable properties that sold for $40,000 less than what you are asking for due to foreclosures, plus these foreclosed properties were in pretty bad shape when sold? Do the appraisers look more at the total sq. ft, condition and safefy, updates and repairs such as (NEW HVAC, NEW WINDOWS, and other major updates), age of home, or some other variable to come down to the final and true value? I know a lot was said and asked. Thanks for your input and I hope that FHA will come back to the right or the middle like the credit crisis had to in order to be balanced and just. Hope many people like Kristi, Rose, and others know that I am on your side and we are practical, realistic, and fundamental. The system needs fixing again or we will never come out!
Thanks,
Chris
I agree that the system is broken and doesn’t make sense. Remember that I am a Realtor, not an appraiser, so I can’t answer the technical questions with 100% accuracy.
As I understand it, the foreclosures being dumped by banks are not comps for well maintained homes being sold by regular people who pay their mortgages as agreed.
Condition plays a part, but appraisers don’t necessarily give credit for every improvement, even in a normal market. You understand that they don’t get to see the inside of the comparable properties so it is somewhat of a guessing game as to the condition of the comparable homes. They categorize properties as: poor, average, good, very good and excellent, but don’t break it down to the details of the improvements.
What is really happening is that the banks are over-compensating for the mess that they are in by threatening the underwriters and appraisers if they make a mistake. So we are getting a rash of appraisals that are just plain wrong. The victims are the homeowners and borrowers, and the only solution is to try to get your elected officials to repeal or rework the Home Valuation Code of Conduct, which is the new law (Jan 2009) that has gotten us into this prediciment.
Hello, i have a FHA buyer that aquired a beautiful forclosed home. The pool is not filled, pump is also missing. We also over bid on the home. My buyer is willing to make the FHA required repairs, contingent on him getting the home at the appraised value. Do we have a good chance.
Probably have to get a 203K loan with the funds borrowed for bringing the pool back to good condition.
does anybody have info on this thanks
DAN PLEASE COME BACK !!!!!!!
Chi,
Sorry, I have been swamped with business, vacations and my own long case of the flu (not swine). Plus my blog stopped sending me emails notifying me of new comments. I have fixed that so hopefully I will be back on track answering questions.
Just starting the mortgage process. A bank told me yesterday that if I did go with an FHA loan and the home we are trying to buy appraises for lower, with an FHA loan it might be harder to renegotiate. Is this true?? I think this home might be worth a bit lower which would help us out if we could pay a little less. I just need to know if an FHA loan really plays into this vs. a conventional loan. I want to feel good that the loan we choose will help us, not hurt us.
Tenille,
I don’t really understand what your bank was trying to tell you. With either an FHA or Conventional loan, if the property does not appraise, the choices are for the Seller to take the amount that it appraises for, or to try to appeal the appraisal. Generally both conventional and FHA appraisals are hard to appeal. In my experience, FHA appraisers rarely will change an appraisal. I have heard that it stays on their books for 6 months so anyone trying to get an FHA loan will have to use that value. Conventional appraisers are a little more flexible and occasionally they will rework the value, but not very often.
At that point renegotiating doesn’t have much to do with the type of loan you are looking for, but the amount that the Seller owes and if they can afford to drop the price. A lot of people have first and second mortgages to pay off, and can’t take less than they are asking. It varies from person to person and really doesn’t have anything to do with what type of loan you are trying to get.
The only other option is for the buyer to pay the difference between the appraisal and the sales price in cash. The house only has to appraise for what you are trying to borrow, so if you want to pay cash for the amount over the appraisal you can (but not many people do).
Dan,
My wife and I are first time home buyers applying for a FHA loan. Our offer was already acccepted and home inspection complteted. The house needs some repairs… it needs new windows (none broken just have wood rot), and evidence of water in basement with minor mold on drywall..The seller is giving us a credit towards the windows and basement water sealing.
Our main question is whether we should go with the traditional FHA loan or the 203k FHA loan? If we go with the traditional FHA loan we are cconcerned that the appraiser will require us to do all of repairs before settlement whicch will not be possible for the larger priced items, but we do not know how many items would need to be fixed beforehand. Also, oncce you choose the FHA traditional can you still have the chance to get the 203k if needed?
Steve,
Look for a lender that has both the regular FHA and the FHA 203K loans. Then, if the appraiser asks for repairs with the regular FHA loan, you should be able to switch to a 203K using the same appraiser. Discuss that possibility with the lender before you decide on a lender
I would work on getting bids from a lender approved contractor in the meantime so if you have to switch you won’t lose too much time. The 203K process takes longer, so you have to make sure you have enough time to get the loan (in the terms of your contract). You may need to ask for an extension if you end up having to go that route.
Hi Dan, (and FHA Cert. appraisers??)
I am buying (or trying to buy) a short sell home that has become a nightmare. I offered 25K less than the asking price, which is more than 35K less than the liens. It seems like a very fair deal. It has a new roof, water heater, yada yada yada – great shape. I am going FHA as a 1st time home buyer and didn’t realize the hoops that I’d be put through for doing so.
This homeowner, not being mine, let a friend use the back property to operate a construction business, park his equipments, bring in fill, etc. Store rented and inspected diesel tanks. The FHA appraiser came and paniced! SHe rejected on several accounts. I got an environmental engineer who had a great head on his shoulders and came out and did an inspection. He deemed it to be fine, as the tanks were gone by this point and they were the oil company’s to maintain so they were. Thank goodness there!
Anyhow, I need to paint the deck and unscrew the crawlspace door, as it was unaccessible. I want get on my soapbox about wood not being there if paint used was from 30 years ago or the one about common sense items being a screwdriver. I just wonder about the crawlspace. The realtor responded when I told her of the approval and coming back to finish appraisal that I had to make sure the entire area was covered with plastic for a vapor barrier. Since I’ve done most the leg work on this myself, the info. that I’m finding says only if water pools; otherwise, a barrier is not necessary. THe house sits on a hill with great drainage and there is no water anywhere that I’ve seen. Could you tell me if this is really necessary since I seem to be playing realtor also here?
Thank you,
BJ
Brandi,
Every inspection I have ever been to (close to 700) the inspectors all say that there has to be a vapor barrier regardless of the elevation of the property. It keeps moisture which is in the soil from getting into the crawl space and growing mold.
Hi Dan,
Thanks for the real person info and getting back so fast. I was afraid that the web data may not have the whole story. I am writing now to ask if you know anything about the deck paint request. I have it scraped, pressure washed and clean -ready for the stain/sealer. It has been raining here, forecast to be raining the rest of the week and the deck is wet. The selling bank said that we have until the end of Oct. to close. I am afraid of waiting on the deck to dry for paint and not making the deadline. I also know that it won’t stick painting/staining it wet. Will the bank/appraier accept the bare clean deck for the inspection with term of paint by closing? Is there anything that I can do in this situation?
Thank you again,
Brandi
In my experience if the appraiser asks for something then it has to be done before closing. I have had them come out to check the morning of closing. I think you will probably have a couple of dry days before the end of October, don’t you think?
hi im i in the wrong to wonder why after i closed to have a repair man at my house to fix what was said to be wrong the heat pump,to find out it was not working upon move it was not working from inspector but second releator i think wanted to close before end of year could they make me think its working as they did to have me close on date even though there was a work order out to have the heat pump fixed is this a fha home matter i dont know any ifo let me know thanks
can you help me on this matter or info from you or others has my time ran out to file a claim i dont want to file a claim i just want to know what is right from wrong thanks.
Normally when there are repairs that were supposed to be done before closing you would either go and reinspect before closing to make sure that the work had been done or there would be a receipt from a HVAC repair company stating that the work was completed. I wouldn’t count on the fact that the appraiser had checked. The appraisers are independent and are not working for FHA, by the way. They don’t have any gauges or equipment to test whether the systems are working correctly, and again, it may have come on when the appraiser was there and not worked when you closed. That last minute check is the responsibility of the Buyer.
So when they came back three days later did they fix it? I suppose they charged you since they said that it wasn’t the seller’s responsibility any more. In most cases when you are buying a foreclosure you sign documents that state that it is as-is and that you do not have any recourse after the closing. That is why you need to have an attorney look at your paperwork. It may turn out that you have signed a document that states that you agree that you are accepting the property as-is.
sorry to be a pain no they ddnt fix because house had closed my realator paid my warranty the 50 to fix she thought it had already been fixed from main realtor if my heat pump goes out for winter the warranty only covers 1 main part heat pump it would not be covered again kind of make sense. we were home when the airconditioner mechanic came to fix only to call his boss which he was working for the main realator to say house had closed and was unable to fix offered me a price still thought if paying for a fha loan thought heat pump was suppose to be in working condition upon move in any response again helps wont bother you again on this matter thanks for your help
While you may have had that agreement before the closing, the closing normally has documents that state clearly that the seller is not responsible for anything after the closing. That is what you should look for, see if you signed that type of document. I really don’t think you have any recourse with the Seller. You should show your documents to an attorney if you want to really know the truth of the matter,
It sounds like your Realtor did the right thing with the warranty. I would think as long as you renew the warranty on the anniversary date you should be protected even if the heat pump breaks again.
I am purchasing a home with and FHA loan and have already gone throught the first inspection, to which we recieved a list of things needing repaired. We have finished all the repairs, but when the appraiser came back out for the final inspection he came up with another list of items to be repaired! Is this allowed? If he missed it the first time how can he come back with it the second. We were told the second inspection was just to check that the work needing done was completed not to find more problems. What can we do here?
Unfortunately there is not much you can do about that. I am sure that their position is that if the items need to be done, they need to be done and the fact that the appraiser missed them on round one won’t matter. Can you get the seller to do or at least pay for the second round of repairs?
My husband and I are trying to get an FHA loan on a small, 5-acre farm. It has a house and a pole barn. Our bank took our $400 for the appraisal and told us they were not allowed to communicate with the appraisal company or even select them. The appraisal was done and came in below the selling price. The seller agreed to take the appraisal price. We were waiting for a closing date when our bank called us and told us the FHA underwriter suspended our loan because she did not agree with the appraisal. We were told by the bank that the FHA has a new rule and does not loan on pole barns. So, the underwriter subtracted the appraised value of the barn ($20,000) from the appraisal price. We were told by the bank that the FHA has now entered that new price in the system and we cannot go anywhere else and get a new price. The seller does not want to accept the new appraised price because it is now $20,000 less than the agreed selling price. No one will give us any clear answers on why the FHA underwriter did this or how they can determine a new appraisal value sight unseen. Needless to say, my husband and I are very upset over this. We basically paid $400 for someone to screw up our dream of owning our own little piece of America.
Is there some reason why you couldn’t get a conventional loan on that property? The FHA appraised value won’t necessarily prevent a conventional lender from making a loan on the property.
I am thoroughly disgusted with the way the FHA underwriters and appraisers are able, in many cases, to make arbitrary decisions that cannot be appealed. Well they can be appealed but it won’t go anywhere. I think that there is a code of silence amongst the underwriters and none will challenge the other because they know if they were found to be in error they would be fired.
The problem is the same inmates that got us into this mess, are in control of the asylum. The idiots that started this meltdown by making loans to unqualified people, are still running the show. Their solution is to threaten every underwriter, appraiser and loan originator with their job over every decision. So they are all running scared and making what turns out in many cases to be unreasonable decisions.
We were told that even if we went conventional, the price would still be 20,000 less because of what the FHA underwriter did to the appraisal. Basically, since the FHA underwriter put their own value on the property and entered it in the “system,” it is now that price no matter where we go.
Again, I am not an appraiser, but I don’t think that appraisers for conventional loans look at the FHA appraisal record when they are appraising the house. Who told you that? Your FHA lender? Again is there some way you can go for a conventional loan?
I have one better for all you. I had an FHA inspection supposedly done several times over only because I pointed out obvious issues such as:
-roof
-water in basement
-gas smell
Guess what?
-piece of roof was off the day we moved in
-basement flood pretty bad when it rains ruined all of my extra carpet I had down there and i am allergic to mold
-I have severely damaged walls
-I am running on 60 amps and should have had a fire long ago I was told my electrician
-my gas furnace got red tagged
-no air and no screens (didn’t even know that was an issue)
-hot water tank broke within 3 months
-floors are ready to fall through
-room from floor to celiing in basement full of trash including but not limited to pipes and fiberglass and bats
-plenty of broken steps on porch and broken sidewalk (didn’t know that was an issue
-broken window in basement
-the list goes on
Think I have a lawsuit? lol I am sitting here with no hot water or heat.
Did you buy that house with an FHA loan?
hi, i know that you are guys are a little annoyed with all the questions but i need some insight if you have any to offer.see me and my husband are trying to buy our first home and to make a long story short the listing agent is saying that the home wont pass fha.i dont get it because the home is in prestine condition. he says its due to the finished basement , as it has rooms down there with the hopper,push out windows…that if something like a fire occured no one would be able to get out.but there is a door to the bulkhead so im lost and wondering if there are any suggestions on what i should do or who can help.i dont want to lose my dream home after going through so much to find it.thanks alot for any help! FRUSTRATED SARAH
what do you mean a door to the bulkhead?