Advise Needed ☺ Loan from under-appraised to over-appraised

[Lin Ding]

Hi BP community,

Let me describe this long story short. So this house I'm buying is a 2-unit small multifamily which I plan on house hacking. It was listed for $850K, and we agreed to $835K purchase during attorney review (attorney is required in the state of NJ). During the inspection, we found an extensive list of things that need repairing due to the unprofessional workmanship of the previous owner. The seller agreed after negotiation to give us $10K in credit towards closing to do the repairs. Then the appraisal came back with appraisal value of $815K. Then the seller refused to lower the purchase price and give us the credit. The seller made us to choose between 1) lowering the purchase price to $815K, and 2) keeping the price at 835K but offering $10k credit.

I didn't want to cover the $20K in price difference as the house was under appraised. Just before I was going to accept the lowered price $815K and waive any credits, the lender came back to me and said they did a re-appraisal which ended up being much higher - $900K. So the lender is saying I can borrow more because the house is re-appraised more, so now I can roll some closing cost into the loan and I have more money to work with to do the repairs needed.

I was planning on using cash to cover the repairs and closing (in the lowered purchase price scenario). But now with the higher appraisal, by borrowing more I'll pay more interest and my monthly payment will increase but I get to keep money in my bank. If I invest that money in stock market, the market is in the negative now. But I guess I can save up for the next property. FYI this house I'm going with 3.5% FHA loan.

All you experienced RE investors have more experience and I'd like to hear what you would do in this situation.

Thank you so much in advance!

Lin