BiggerPockets

I'm in the process of refinancing a hard money loan. I bought a nice property, fixed it up and it is now rented on a 12 month lease. So far so good.

the original appraisal was for 90K, and I borrowed 50K. The lender of course wanted another appraisal and this one came out at 102K. Smiles all around :D....

I am only requesting a loan to pay off the HM loan, no cash out. I am well within the LTV. I have good credit in the 700's and I intend to hold the property so no flipping going on ........

Today the lender informed me that a stop was placed on my loan because it was a flip. He contested that by requesting an exception. This was given and the loan can now proceed but the lender requires yet another appraisal, that I have to pay for.

I have practically had to give over the birth cert for my firstborn child, and have waited a full 60 days to get this far when originally promised a closing by the end of July. I am constantly asked the same question over, ie: to prove that there is no loan on another property I own in Florida.. on which there hase NEVER been a loan, but how do you prove a non existance, its easier to prove something exists.

At the point where I was asked to pay for yet another appraisal I have dug my heels in...... the two appraisals i already have are reasonably close, and i have been given no reason that the appraiser had anything out of line in either appraisal...

i'm considering going to another lender, but since this one has cost me 60 days time loss at the HM loan interest rate and the cost of the appraisal it's hard to start over again...

any thoughts or advice would be helpful.. I repeat I have GOOD credit and have never been turned down for a home loan before ever!!

Lesley

If the first appraisal was for the HML, the permanent lender cannot use it. Appraisals are not portable in Conventional financing, so to the bank you only have one.

Quite possibly the investor that would be purchasing your loan is asking for a second appraisal because of an increase in value since purchase.

I have to have 2 appraisals for all investment properties worth under 100K. For investments worth over 100K, I have to have 1 appraisal and 1 field review. These overlays to the Fannie guidelines are introduced by the investors to mitigate against risk. Every lender has to structure the guidelines so that the loans can be sold. In Jon's example, his lender requires 6 months title seasoning whereas I do not. I can refinance a HML the day after it closes.

I would ask the loan officer why they need the second appraisal. Loan officers do not make any money off of appraisals, so either his guidelines have changed since you started the process, he made a mistake, or he needed two from the beginning and didn't tell you upfront.

If you don't mind, post the explanation here and we can see whether it is valid or not.

I truly believe all appraisals are suspect. In most areas comps are all over the place. Since appraisals typically use only three or four comps the right (or wrong, depending on your viewpoint) comps can tell a wide range of stories. I'm not surprised lenders want to see more than one appraisal.

Anytime you try to beat the system and do a hard money loan you better be prepared to deal with this type of issue. If all you have to do is pay another $450 for an appraisal, though the 3rd one now, I would pay it and stay if I were you. Moving to another lender will just start the whole thing over and maybe you will have even more issues. Hold tight and let this lender get it done.

There are a number of underlying issues at work here.

1) Your original purchase price was probably much lower than the appraised value. If this is the case, did the underwriter ask for any receipts or work orders? Often times when you buy low, it can cause the underwriter to kick-back for a valuation recheck and justification for the difference between your original purchase price and the new appraisal. When I refi my rentals, I always take before and after pictures, include a list of improvements, and copies of all receipts and workorders. I put it altogether for the appraisers, agents, tenants, and even lenders.

2) Non-owner occupied refinances are some of the most heavily scrutinized loans. The mortgage company has to make sure all is within the guidelines of the investor purchasing the note. Fortuantely, the second appraisal can actually be reimbursed (sometimes) so push your mortgage contact to credit your closing for the appraisal. But, I have yet to do a cashout refi that I have not yet needed a second appraisal.

In the future, you can find a mortgage lender that holds the note (a.k.a. warehousing) for seasoning. You are running into this situation becuase they are going to sell the note and the investors has specific guidelines to which the lender must adhere.

3) Florida's market is one of the worst in terms of risk, so you really should appreciate the risk they are taking and should understand their caution.

As others have stated, it is worthwhile to stick with this lender. Remind your broker that there will be more deals down the road, but he/she needs to help you get this done timely or your going to walk with this deal and your future deals to another mortgage office.

For future deals, it might be a good idea to shop around to a more investor friendly firm.

Good Luck!

I agree that the anti flipping does not apply and I think this is why I was considering it so unfair...

however i'll expect a 2nd appraisal next time.

what actually happened was:
I agreed to the 2nd appraisal but will not pay for it until the loan closes, which they were happy with so I suspect it's a formality or they would not have done that. It was ordered tuesday am:...

Originally posted by Lesley Jacques

I appreciate this input.

Actually the loan is in Georgia even though i'm in S. Florida.

I have another refi that needs doing, do you have any suggestions for the above, either in Florida or Georgia??

I am sorry i do not have a better suggestion since there are very few large banks warehousing anymore. Mostly, you will need to find a state bank or community bank locally. However, I do recommend the following:

1. Consider joining your local REIA organization. This is where I get the best information when it comes to what others are doing to be successful in my local market.

2. Take your business to a state or even local bank. In my experience, I get much better results becuase I open accounts for each of my investments and it helps to develop a nice track record of in flows and out flows which will go a long way in establising capacity for borrowing.

3. Make some calls to state or community lenders and ask if they resell refinace loans on the secondary markets. Credit Union will also offer investors the ability to borrow, but the tend to be very conservative. However, it may be worthwhile checking with one.

Over the years we have gotten away from one on one based lending where you develop a relationship with a human being instead of interacting with a customer service group. one thing I have learned over the last two years is that we need to redevelop banking relationships with local instituitions that have local ties.