Can't get loan because appraiser screwed up

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Can't get loan because appraiser screwed up

Mike S.
Member since 2010 · 2 posts · 0 votes

I wasn't sure where to post this. I don't know if it's better suited for the buyer or seller forum. I'm asking this to hopefully help an elderly friend who is trying to sell their house.

They recently got their house appraised and the appraisers screwed up and even though they corrected their mistake, the bank will not give a loan to the buyers because of the mistake. The appraiser mistakenly stated that there was a problem with the foundation. I think something was mentioned about the floors and walls needing repainting and reflooring. The bank says the floors and walls need work before they will give a loan.

As of right now, the buyer is trying to get some sort of special loan where I think they have to fix up the house before buying it. I don't understand it but the end result is that my friend will not be able to buy a house for 2-3 months (the time it will take for the buyers to get the loan) and instead will have to rent which is an incredibly huge problem. It would be better all around if the bank would just give the loan right now. Is there a way to get around the mistake the appraisers made? Even though they fixed it, the bank is acting like they didn't. Is that even legal? What if the buyers just used another bank? Can they do that? I'm sorry I don't have more information, a lot of this stuff goes right over my head. I'm just trying to help my friend who is on the verge of a nervous breakdown.

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  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    16y

    Appraisers and lenders have become extremely conservative. It seems they're looking for any possible reason to deny a loan. Have these borrowers tried another lender? Do you know if this is an FHA loan?

    Even with the strict guidelines, I do not think any bank would deny a loan based on either messed up paint or nasty carpets. OTOH, if the floors or walls are uneven and they think the is a foundation issue, they might well deny the loan. Conventional loans require the property to be habitable. If the buyer's of this house are being pushed into a rehab loan (an FHA 203K loan, perhaps), then there probably really is a problem with the house.

    Sounds like your elderly friends are wanting to sell their house and then use the proceeds to buy another one. And they have some hard and fast date to move? If they can't sell for 2-3 more months, why don't they just stay in this house? Unfortunately, delays are par for the course in selling houses, especially with the tough lending environment we have right now. If its really going to take 2-3 more months to close this loan, there's a good chance the buyer's will get cold feet and find another house.

    Have you actually looked at the appraisal, or at least the statements regarding problems in the appraisal, and then looked at the house to examine the supposed problems? Your description is quite vague. Sellers tend to minimize any problems, and taking a hard look at the issues the appraiser identified is certainly in order. Appraisers, in my experience, usually don't say "there's a foundation issue". They say "noted uneven floors. Buyer may want to have foundation inspected by a certified engineer" or similar wishy-washy statements. The way to counter those statements is to hire someone to inspect the noted problem and to write a report on what they find. If there really is no issue, the bank should accept their findings. If you're just trying to argue with the bank that there really is no problem, the bank may give you lip service but may assume the problem is real. A proper inspection should give an answer the bank will accept, one way or the other.

    Have your friends considered offering owner financing on the property? Collect a down payment and then collect a stream of payments.

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