Bad Appraisal Blues
I purchased an old 1920’s Craftman-style home for $69,900 in October. It was in poor shape. The siding was in need of major paint removal and repair, the foundation needed to be put on cement piers instead of wood, the kitchen and baths were totally gutted and replaced with new cabinets, granite, stainless steel appliances, you get the idea. The city had red tagged the property for multiple code violations, including the unpermitted apartment that was built in the garage. After about 2 months of rehab costing just under $20,000it looked gorgeous and was ready for the market. It was listed and immediately had eight offers (all FHA) submitted. We went with the strongest offer, which was for $157,000 and only asking for 2% closing costs. The first appraisal came in at $157,000. But since the sale price was more than 100% of the recent sale FHA automatically orders a second interior appraisal. This second appraiser brought it in at $133,500, using comps that were un-repaired bank-owned instead of what he should have used which was move in ready repaired comps. So now they are telling me I have to either reduce my price to $133,500, or cancel escrow and try to find a non-FHA buyer (since the appraisal attaches to the FHA file, I am stuck with this appraisal on file.) Does anyone have experience or advice on another step I may be able to suggest?