Property Manager · San Bernardino, CA · Member since 2014 · 473 posts · 238 votes
Hello BP,
The situation: I purchased a house, rehabbed it and had it under contract (In escrow) to another buyer within less than 90 days. So according to HUD guidelines, two appraisals must be completed on the house. The agreed upon sales price was $165,000, no concessions.
The first appraisal came in at $155,000.
The second appraisal came in at $165,000.
The buyers obviously want to go with the first appraisal and from what I have read on HUD guidelines, if the two appraisals are further than 5% apart, HUD says you have to choose the lower one.
Regardless of HUD's guideline, I have found an obvious deficiency in the first appraisal. The first appraisal did not account for the numerous and quality improvements that we made to the house, but the second appraisal did. If you look at the second appraisal you will see that we received an added $10,000 to the value of our house because of all of the improvements we made.
What can I do besides laying down and accepting to sell the house at $155,000? Can I challenge the first appraisal? I would rather not have to wait 90 more days to reset the appraisals and I would rather not hold onto it and rent it our for a year or two.
your only option is to have the lender contest the first appraisal with whoever it was ordered through. You will want to provide as much information to the lender as possible, including receipts and paperwork if they will accept it. After that it is up to the appraiser. With the way the laws have been set, the appraiser can basically say no if they want no matter what your provide.
With that being said, the lender works for the buyer, so it may not be in the lenders best interest if they feel it gives there borrower a bargaining chip. Unfortunately for you only the lender who ordered the appraisal (who is technically the client, even if the borrower paid for it) can challenge the value.
Investor · Portland, OR · Member since 2014 · 11 posts · 0 votes
12y
Depending on the buyers lender they may allow the buyer to bring more cash to closing outside of the contract price. If FHA, probably more difficult. For example if you can agree to meet in the middle at $160k sale price but keep contract price at $155k and the buyers have the funds available to bring an additional $5k cash to closing. Some lenders will not allow this since they would rather have the buyer contribute these funds to the down payment to reduce the lenders risk. Talk with title company also.
Either way it's a tough situation for you the seller. Usually the seller loses, but worth exploring all your options. Good luck!