Whoa! Our FHA Appraisal was $22,000 BELOW Contract Price - What Can be Done?
As luck would have it, we had some appraiser from another town (an hour's drive away) appraise our cute little property a full $22,000 below what our buyer (and other buyers) said the property is worth. Yes, you read it right, a full twenty-two THOUSAND BELOW the contract price.
We thought we could be at risk for maybe $5 or $10 thousand, but $22,000. OUCH - that is a major hit to our profits!
Here were our choices:
- Reduce our sales price and take the hit on our profits.
- Get the buyer to allow a second mortgage and pay us over time (not allowed according to FHA).
- Let the deal fall through, rent the property out for 6 months and try again.
- Sell it "owner finance".
- Contest the appraisal.
After a sleepless night, a lot of research, reading all of the fine print on the appraisal, and reaching out to mentors, I decided to ask the bank to reconsider the loan amount.
I wrote a very respectful and compelling letter to the loan officer with several undisputable data items that supported my case. After a seemingly LONG 48 hours (which is a lot when a weekend falls in those 48 hours), the bank approved a $10,000 increase to the appraisal amount - yahoo!
But that's not all, they allowed changes to the loan so the closing costs were only $1,000 (down from $5,000). Overall, our $22k hit got raised $14k. OK, the FHA world made us reduce our sales price by $8,000 but that's a lot better than just going along with the FHA rules.
The moral of this story? If you don't ask, you won't get.
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