FHA Low Appraisal

[mkdelight]

We were pre-approved for a FHA mortgage but the appraisal came in $25,000 less than the contact price. Any suggestions or options.

Thanks

[deviousdevelopment]

Have you gone back to the seller with the appraisal?  Thats what I would do, try to negotiate a better price. 

You can do that or pay the difference but unless you live in an area thats full of investors waiting for the next boom (and buying up properties like crazy) the seller should work with you to make it work seeing as how every appraisal is going to come back low for anybody trying to by the place if he doesnt.

[mkdelight]

That is our first step. We should hear from the owner in the next couple of day.

Thanks

[deviousdevelopment]

Good Luck!!!  I really hope it works out in your favor and they drop the price...a win-win for everyone. 

[musikklvr]

Hopefully, the seller comes down. Just be ready to walk away if they do not and you do not have the difference. I went through it twice and both sellers wouldn't come down.

[Lel]

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mkdelight wrote:

We were pre-approved for a FHA mortgage but the appraisal came in $25,000 less than the contact price. Any suggestions or options.

Thanks

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There is a possibility that the appraisal was affected by the new Home Valuation Code of Conduct regulations.  News reports are coming out that reveal that the appraisals done under the HVCC rules are coming in low, thereby quashing the deals.

In some cases, persons who are not familiar with a particular market are sent to appraise homes.  Since they don't have any experience in the market, they make appraisals that seem out of line with reality.  For example, in our area, appraisers have been sent from Oakland to San Jose, even though they've never appraised a single home in the entire city or county.

In addition to seeing if the sellers are willing to come down on the price (though $25,000 could be a steep drop, depending on your market), you should also try to find out information about the person who did the appraisal.  If the appraiser isn't qualified (in that they are unfamiliar with your market), you might be able to request another appraisal from someone with real knowledge of your area. 

[musikklvr]

This is what happened to me. I had appraisals from an appraiser in a different city and I had to use whomever the VA chose.

[Anonymous]

I'm pretty sure that FHA loans do not have to comply with HVCC (although given some time, they likely will have to.) My LO chose the appraisal company and was able to speak to them directly.

But that aside, definitely find out who did the appraisal and make sure it was done correctly.

[Lel]

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Adelaide wrote:

I'm pretty sure that FHA loans do not have to comply with HVCC (although given some time, they likely will have to.) My LO chose the appraisal company and was able to speak to them directly.

But that aside, definitely find out who did the appraisal and make sure it was done correctly.

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I did some additional checking, and you're right, FHA loans are not subject to HVCC.

[homewardbound]

I agree, walk away if seller does not come down.  I didn't buy my first house, FHA appraisal came in $7,000 under offer price and the seller agreed to lower the price but wouldn't pay closing costs then came back and tried to get two more thousand dollars out of me.  I walked immediately and found an AMAZING house under market value and bought it very quickly.  If I had settled for the first place, I never would have known how much more house (with a pool, on a lake with more square footage) I could get.  Good luck to you and don't be afraid to walk away.