Help!! FHA Underwriting Guidelines - Has this happened to anyone else?

[David Begley]

I just received a call from a Buyer's agent regarding "issues" with the FHA underwriting on a rehab under contract. Evidently, my property appraised for more than the sales price, good inspection, financing approved, and the Buyer even wanted to close earlier than planned. However, the FHA underwriter informed the agent that FHA has a maximum percentage increase from the previous sales price to the contract sales price, and since my property was acquired through a tax foreclosure, the previous sales price is showing $0.00. The broker further informed me the FHA underwriter stated they only look back two years for a previous sale - if no transfers, use the appraisal. If sales/transfers within the two years, the property can only increase by X%, and that X wasn't divulged. The broker indicated they had never dealt with a tax deed transaction and was at a loss as to what to tell the Underwriter.

Has anyone encountered this issue, and if so, how was it resolved?

Thanks!