Worried about appraisal - two FHA appraisals required

[Anonymous]

Hey everyone,

So I'm set to close next month and everything has gone perfectly so far - no hiccups with my approval, the grant I am applying for, or the inspection. I have everything ready to go, we're just waiting on the appraisal. 

The property I am buying is a flip, and because it's less than 180 days old FHA requires two separate appraisals. 

It's hard to compare the property to others that have sold in the area because there's not a lot of abandoned/foreclosed properties that are being flipped. Also, I am worried that the third bedroom in the attic won't be counted as a bedroom due to the window sizes. Other houses in the area have the same windows but I think they were grandfathered in. 

Also, the area is a little bit tricky because the zip code covers neighborhoods that are run-down and unsafe in some parts, but really safe and well-kept in others. I am just hoping the appraisers are familiar with the area because there is a huge difference in prices depending if your on one side of the main strip versus the other. 

I guess the upside is if it doesn't appraise, the seller has more wiggle room than others might because he is an investor who bought the property at 1/4 of the selling price. Also my real estate agent said that FHA appraisals "stick" with the property for some time, which might incentivize him to just lower the price to avoid having the same issue down the road.

I guess I don't really have any specific questions, just kind of wanted to vent out my worries a bit. Wish me luck!

[kjade1030]

Keep me posted.  Also, where do you live?  I have had a bunch of these lately in Baltimore, and they were also flips and so needed 2 appraisals.  So far, I have been lucky but I worry every time.  Baltimore is like you describe, some parts unsafe/vacant, other parts are really up and coming.  The point is so you don't get ripped off though, like someone buying a $50k house, putting carpet in, and charging you $100k for the house.  They want to make sure that high value is really there.  Also, since it's been six months, you should only need a 2nd appraisal if the new price is over 100% of the price the seller bought it for.  It's just a risky transaction that is why they are extra careful.  It's good for you too though, if you get two low appraisals, it is not just one appraiser being a jerk.  You would probably want your realtor to renegotiate price.

[me12345]

Your Realtor is correct in that when an FHA appraisal is done on a property, it stays with the property (Through the FHA Case number that is issued) for 180 days...So if they wanted to reject your offer and sell it to someone else, they would have to use that same appraised value if they were using an FHA loan.... My experience has been that 99% of the time they lower the sales price to the appraised value. (However, if they are giving seller concessions, they may take those away. (you may be able to recoup some of those with a "Lender Credit" with a slightly higher rate)

Thanks,

[Anonymous]

kjade - I'm im Baltimore too! It's funny you were able to tell from my description of the neighborhoods.

As for the house - it was a gut renovation, the investor bought for $50k and sold for $200k. I did my due diligence and made sure this house had all permits pulled as well as had things looked over by my inspector and a couple contractors. Plumbing, electrical, and insulation were 100% replaced along with the typical stuff like kitchen, floors, etc.

Anyway, both appraisals came back at or above asking! Both appraisers recognized the rather small boundaries of the neighborhood and didn't look at comps in other parts of the zip code. Also, they had no issues counting the third bedroom, it must be grandfathtered in because the vast majority of the 1.5 story homes (almost all built in 30s or 40s) have a bedroom in the attic.

[kjade1030]

That is great news!  I have another one tomorrow I am waiting to get the 2nd appraisal on.  Hopefully it goes well like yours did.  Congratulations!