October 7, 2015
We get lots of questions about the FHA appraisal process in the comments section. Here is one of the most recent, which raises an important question about “replacement appraisals” or any request for a new appraisal that has to do with a dispute over valuation of the property.
The reader asks, “I have a buyer who is buying a home. The home they are buying already had an appraisal completed. That deal fell through and my buyers offer was accepted. The sellers agent said that the original appraisal came in short and asked that we order a new one.”
“He said his seller insists on a new appraisal because the original one done a few week before was less that the purchase price. Is is possible to request a new appraisal with the sole purpose of trying to get a high value, I told him no but the agent insists we can. Can you clarify?”
The new FHA loan single family policy handbook has some very simple, direct instructions in this area. According to HUD 4000.1, Part II Section A, under the heading, “Ordering Second Appraisal”, we learn the following:
“The Mortgagee is prohibited from ordering an additional appraisal to achieve an increase in value for the Property and/or the elimination or reduction of deficiencies and/or repairs required.The Mortgagee may order a second appraisal for Mortgages that are in accordance with requirements on Property Flipping.”
Second appraisals are possible in certain instances. HUD 4000.1 states that, “A second appraisal may only be ordered if the Direct Endorsement (DE) underwriter (underwriter) determines the first appraisal is materially deficient and the Appraiser is unable or uncooperative in resolving the deficiency.”
In these cases, the lender is required to, “fully document the deficiency and status of the appraisal in the mortgage file. The Mortgagee must pay for the second appraisal.”
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites–a widget that displays FHA loan limits for the counties serviced by those websites.
It’s very simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today:
http://www.fha.com/fha_loan_limits_widget
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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