How to get new FHA appraisal before first one gets logged!!

Question

So my FHA appraisal on the triplex I’m under contract to house hack and purchase just came back $52,000 LOWER than agreed upon offer. My lender, agent, listing agent, and anyone I’ve shown the appraisal to thinks it’s a complete hack job of an appraisal.

My deal, which I’m very excited about because it works so well for me in so many ways, is likely to fall through without an adjusted appraisal or a new one. I don't need an appraisal to come up all 52k, but it would need to come up to a reasonable actual fair value for me and seller to strike a deal, otherwise the logical step would be to relist and grab a conventional offer for tens of thousands more.

My options are two either:1. Appeal the appraisal, which from what I've gathered is less likely to be successful than winning the lottery, or2. Very quickly cancel the entire loan before the FHA appraisal gets logged into the system and start a whole new loan over and order a new appraisal.-- I'm looking for suggestions and advice mostly on option TWO. Does anyone have experience getting this scenario fixed and sorted out in a timely manner. Disclaimer: Im aware seller COULD drop asking price or that I COULD bring a ton of extra cash to the table. Neither of these options is a solution for this deal.

Cara Lonsdale · Answer

The appraisal is "locked" already.  It will follow your FHA #.  Additionally, it is now a material fact.  So, you will have to disclose it to the Seller, which I don't think is your issue here, except to point out that you have contractual obligations to alert the Seller if you are backing out due to appraisal shortfall.  In AZ (where I am), that is 5 days.  I don't know what it is in your market.  If you go beyond that, you have released the appraisal contingency.

Is going back to the Seller to ask for a "meeting in the middle" price point not an option?

I have had good experience challenging appraisals, but maybe it is different in different markets.  I don't think it has to do with the appraiser's pride.  I think they just need justification for the higher price.  If you can provide them comps, how could they ignore those?  In my experience, appraisers give lower values when they don't have anything else to comp to.

What about my other idea of ordering a second appraisal (different appraiser), and offering them comps upfront?  By the way, challenging your first appraisal doesn't exclude you from ordering a second appraisal.  It's just about the time.

David M. · Answer

@Ryan Newport

The appraisal has been made.  It will go into the system now.  So, you have nothing to lose if you lose the appeal.

Do you have to use a FHA loan?

Ryan Newport · Answer

Hi @Cara Lonsdale, thanks for your insight. My only concern is that between the research I've done and the large amount of feedback and comments I've gotten from posts I've made in other forums/groups, the consensus has been that getting the appraisal changed by appealing or challenging it is less likely than hitting the lotto. I have spoken to dozens of individuals who've stated its always been a waste of time in their experience, and not a single person who's had success in doing so. The main reason contributing to appraisers not liking to admit they were wrong or have to put any additional work or effort into getting anything changed. I just don't want to challenge the appraisal, then have it locked which would prevent me from being able to order a second one, and end up wasting time getting no result.

Cara Lonsdale · Answer

So, if I understand you correctly, you are the Buyer?  There is some confusion when you mention that you could "relist and grab a conventional offer for tens of thousands more".  That sounds like a Seller position.

Anyway, going with you being the Buyer, there really are only two options to move forward on the current path if you are not willing to pay the $52K difference.  You must challenge the appraisal, or you must order another appraisal.

If everyone around you says that the appraisal was surprisingly low, it must mean there are comps that could justify the higher amount.  Don't be discouraged by this process.  Appraisal challenges can yield different results.  I have seen it happen in my market (AZ).  What happens is that you and/or the Seller submit comps that you feel the property should be judged by, and any explanation that justifies your added value, and the underwriter reviews them with the appraiser.  Adjustments are made based on what the underwriter and appraiser can justify as being accurate comps for the subject property.  Keep in mind, FHA has a layer of criteria that conventional appraisals do not have.  FHA appraisals have to make sure that the property is habitable by FHA standards.  So, many times, the appraisal comes back with repair conditions.

As mentioned above, you can also ask for a second appraisal to be completed.  You run the risk of the second appraiser coming back with the same result, and it will cost you to have the other one done, but it could also give you the result you are looking for.  Make sure that you have the comps that justify the value ready to show the appraiser when they complete the appraisal.  That may help.