would you trust your inspector OR lender appraisal more

[Tim Taylor]

would you trust your inspector OR lender appraisal more ( I know they look for different things but what the FHA appraiser missed is convenient)

property - 1980's, 2k sqft single level duplex, ~$160-180k, 2/2 each side, 1 reno and marketable and 1 not (for 1 year will be owner occupied, both sides will be occupied after)

there's a duplex we're 2 days away from closing on.

our home inspector found about $40k+ worth of things wrong with property, which puts the property about $50k over value compared to comps. These are major things like (all estimated include labor + materials):

1. roof with heavy granular loss and near end of live (needs replacement) - estimated $9K

2. foundation grading needs - estimated $1k

3. new HVAC needed - estimated $12k

4. wood rot on housing in numerous places + wood trim repair/replacement - estimated $2k

5. new water heater needed on 1 side - estimated $3k

6. rotted facia and soffet - estimated $3k

7. soil grading - estimated $1k

8. bad electrical wiring that must be rectified by electrical - estimated $1k

9. exterior vent repair - $500

10. broken window repairs - $500

11. exterior paint - $3k

one entire side is not renovated (which is fine - but still alone needs it's only 10-20K worth of work to make marketable like the other side - flooring, paint, appliances, and cabinets)

estimated total without renovated duplex side: $36-40K

estimated total WITH renovated duplex side: $56-80K

what's making me think twice:

lender and agent are close (not unusual)

things that the appraiser DID NOT find compared to the home inspector made it a perfect pass for FHA loan. Example: with the bad roof, broken windows, problematic HVAC, etc it would have never passed FHA approval BUT somehow in the lender appraisal NONE OF THIS was noticed. In fact, the appraisal said the roof has 15 years left and multiple inspectors that came of the house said otherwise.

the appraisal came back at the PERFECT amount of the agreed upon (over asking) price (ex. contract price was $200k and WOW appraisal came back at $200K) EVEN though the home is not a matching condition of the comps used in the appraisal

A lot of single family homes were used in appraisal for comps which I've seen typically have higher value than duplexes. Ex. They compared our 2/2 on each side (total of 4 bed/4 bath) with 5/4 single families and they were the staple of the higher value homes.

my final question is - What would you do?

The numbers would still make sense until the next appraisal.

I don't think putting in $40k would even lift the next appraisal value by $10k, but the monthly cash flow is almost breakeven (which is fine - we're living on other side and has appreciation potential). Market has not sold a duplex in 12 months for what we're paying + reno.

Follows the 1% rule.

But something about the deal is just not feeling right.

[Virginia Marphis]

Appraisers have a checklist. Inspectors are looking for a lot more. Inspectors work for the buyer (or seller in some cases). Appraisers work for the Lender.  After their checklist is complete, they are good to go. Appraisers miss things all the time. There is no personal contact or need to please like the inspectors have. If an inspector misses something it could be really bad business. Appraiser miss something, and someone gets a house with less hassle.   Trusting is relative.  I rely more heavily on my inspector to find EVERYTHING. They go all the way into the crawl space and into the attic, on the roof and look in every nook and cranny. They are testing electrical, appliances, switches, plumbing and doing their best to find anything that the buyer (or seller) might need to know about before they move forward with the transaction.