2nd Appraisal on FHA Loan Came in Higher!

[David Friedman]

Hello BP,

The situation: I purchased a house, rehabbed it and had it under contract (In escrow) to another buyer within less than 90 days. So according to HUD guidelines, two appraisals must be completed on the house. The agreed upon sales price was $165,000, no concessions.

The first appraisal came in at $155,000. 

The second appraisal came in at $165,000. 

The buyers obviously want to go with the first appraisal and from what I have read on HUD guidelines, if the two appraisals are further than 5% apart, HUD says you have to choose the lower one.

Regardless of HUD's guideline, I have found an obvious deficiency in the first appraisal. The first appraisal did not account for the numerous and quality improvements that we made to the house, but the second appraisal did. If you look at the second appraisal you will see that we received an added $10,000 to the value of our house because of all of the improvements we made.

What can I do besides laying down and accepting to sell the house at $155,000? Can I challenge the first appraisal? I would rather not have to wait 90 more days to reset the appraisals and I would rather not hold onto it and rent it our for a year or two.

Thank you for all responses.