FHA still requiring 2 appraisals?

Question

So I get a call from my agent on Monday and he mentions that FHA is requiring a second appraisal on a house that I rehabbed over the winter and am supposed to close on this coming Monday.  I thought the removal of the 90 seasoning was going to stop this but apparantly not.  I am way over 90 days ~130 days.  Bank thought it had to do with the sale price being more than 4x what I paid for it.  Is anyone else still experiencing this?  Fortunately, both appaisals came in above sale price but just another thing to worry about.

J Scott · Answer

This decision is completely up to the underwriter, and can work both ways.  While it hasn't happened on my deals, I've had other investors tell me they've sold FHA in under 60 days with just ONE appraisal.
          
          Some underwriters will be comfortable doing things like this, and others will want extra documentation on deals they perceive as "risky."  Just the nature of the business, and there is no reason to argue or fight the underwriter (you won't win).

I've had an underwriter ask for 3 appraisals in the past...it ultimately made him comfortable approving the deal, and we went to closing.  Just part of the "game" these days...
          
          In the future, find a lender/underwriter who is comfortable with the types of transactions you do and makes things easy, and then stick with that lender/underwriter for all your future deals.

Bill Patterson · Answer

Mike, from my understanding of the FHA guidelines, it would be a profit of over 20% that triggers a second appraisal.  Make my day and tell me that your rehab costs were the same as your purchase price and that you made a 100% profit!

James Ward · Answer

I have recently been a party to a few transactions where the underwriter required 2 Appraisals.  All were Short Sales where the investor was immediately reselling the property for profit.  So, the underwriters felt better knowing that 2 seperate Appraisers had placed a value on the property.

Luis A. · Answer

FWIW,I ran into the same on my last flip. Even though it had been more than 90 days they still required a 2d appraisal due to it being more than 100% of previous purchase price.

Ted Akers · Answer

Good advice here.  Pay for it, close it, rinse and repeat.  J Scott is right.  We used to be able to make rationale arguments to underwriting.  They have all taken huge losses and are very gun shy.  I am funding a deal for an investor to a FHA end-buyer that required three appraisals, because it has a huge spread.

Stephen McKee · Answer

Pay for it and move on. In your next transaction be sure to state that any additional appraisals and/or inspections are to be paid by the buyer in your counter offer.

Adrian G. · Answer

Either way if you have a deal ready to close  pending a 2nd appraisal, just eat the costs and move on to the next. My .02 cents

Bill Patterson · Answer

Mike,
Way to go!  After a few more of those reinvestments, you can let you wife have some of the $$$.  You may be surprised and she will want to keep on the investment track!

Mike V. · Answer

Bill,
I wish I could tell you that was true but my rehab was double my purchase price. Still was enough profit to cover my down payment and closing cost on a SFR rental just a mile from my house that I just leased yesterday for $1300/mo.  Got to reinvest that profit fast before my wife finds a better use for it.

Ted Akers · Answer

Mike,
It is about lender comfort and part of the game, especially in a declining market.  But it is more so an underwriting parameter these days.  Appraisals used to be good for up to six months with a "recertification" of value after three months.  In this market most all lenders are now saying the appraisal is outdated as of that 90th day.

FHA still requiring 2 appraisals?

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