Appraiser saying house can not go FHA 203K .....

[Michael Dunn]

So I just " re-talked " with the appraiser that came out a week and a half ago,  to do the appraisal on the property I am trying to purchase.

When he came out, he said that there were certain issues with the house , and because of these issues.... he could not do an appraisal

The issues are....

1. That one of the rooms did not have a closet in it, and also that it did not have a window that was operable

2. It is a " 2-unit " property , and that there are no 2-unit / multi-family properties in the area to compare the property to...I.E. give an appraisal value on the property

Welllll , over the weekend , I put in a closet, as well as got one of the two windows in the room operable

So I called him back today to tell him that I have done these two things, and he told me that the house ( all of the sudden ) will not go FHA 203K .

What I don't understand, is that a week and a half ago, he made no mention that it wouldn't go FHA 20K , only that it needed a closet and operable window in the one bedroom ( to make it a legit window )

He's saying .... That since it is a 2-unit property ( although, the county tax records have always and still do.... show it as a single family property with a de-tached workshop )

The 2nd " unit " was originally a workshop when the house was built ( back in 1945 ), but some 20 years ago, someone put a bathroom, kitchen, bedroom and washer and dryer hookups in it

I don't understand why he is saying that it won't go FHA 203K, when I have seen houses in worse/ more distressed shape than the property I am trying to buy.

The house does need about $25,000 in repairs ( New AC unit, roof, painted inside and out, all new flooring, appliances 0

It is a cabin type house, so the wires are stapled to the wall ..... to get by this and get it up to code, can't you just wrap it in conduit ?

And lastly , even if he's deeming it a " 2-unit " property .... and is saying that he can't find any comparables to compare it to ..... couldn't he just find recently sold 3 bed 2 bath , 3 bed 1 bath, 2 bed 2 bath  houses and then subtract ( $15,000 ) for a bedroom  and ( $10,000 ) for a bathroom ?

It looks like I may have to pay for another appraisal, but even at that ..... I'm getting no guarantee that it will go FHA 203K

Sorry for the long post... just need some help and recommendations please

Thanks so much, I really appreciate it - michael

[Jeff Onofrio]

@Michael Dunn

Mike- I wanted to get you a professional response from an actual appraiser so I asked my appraisal department head of my company to write you up something to your issue.  Here was his response and good luck! 

Hello Michael,

I am a real estate appraiser and I direct the Collateral Valuation department for a lender. I may be able to shed some light on the property and appraisal issues that you are facing.

The 203k renovation loan gives you great flexibility for financing the property. The scope of your repairs can clear up any potential issues.

If the property is truly a two unit property, the appraiser will be required to use the multi-family (1025) appraisal form and include sales of multi-unit properties as comparables. HUD and the lender will require 3 closed sales of multi-family properties in the past 12 months. If the area is rural, this may result in using comparables from many miles away. In very extremely rare instances, there may be no such sales to use in comparable areas and the property valuation would not meet HUD standards.

The beauty of the 203k is that you can make that home what you want it to be as long as it is economically feasible. It sounds as if you may be able to include in the scope of work renovations to have the property conform to a single family use or a single family with accessory unit use. A single family with accessory unit appraisal is reported on the single family (1004) appraisal form. An accessory unit defined by FHA/HUD is a separate additional living unit, including separate kitchen, sleeping, and bathroom facilities, attached or detached from the primary residential unit, on a single family lot. The accessory unit must be subordinate in size and appearance to the primary unit and must be connected to the utilities (except phone and cable) of the primary unit. I don't know the particulars of your property but you may just need to have the scope of work include removing the additional electrical meter.

HUD requirements include working windows on bedrooms but do not have any requirements for closets unless the municipal code requires closets.

As stated by some posters, prior to having your 203k appraisal done, you must establish a detailed scope of work. The lender can pick the appraiser, and a good lender will pick the 203k appraiser because outsourcing this function to an appraiser without renovation appraisal experience may be setting the process up for failure. After all, the lender is soley responsible for selecting an appraiser with the necessary competency for the assignment.

I purchased my current home using a 203k loan and am very happy that I did. Do not let your frustrations to date stop you from pursuing this opportunity.

Wes Costello
Collateral Valuation Director
NMLS# 1014781
700 East Gate Drive, Suite 400
Mount Laurel, NJ 08054
www.annie-mac.com