Real Estate Consultant · Bloomfield, NJ · Member since 2010 · 2k+ posts · 1k+ votes
Greetings everyone. I have a property I'm selling where the buyer has agreed to pay $25k above what it was last appraised for 2 mos. ago when another buyer was purchasing using a conventional loan. That buyer initially decided not to pursue the deal but has since changed his tune. However, he's too late and is now the backup buyer.
But I want to make sure my FHA buyer won't have any issues with HUD in agreeing to pay $25k more than the appraised price with the understanding that HUD will only loan against the appraised amount and nothing more. Comments by anyone in the know?
BTW, long story but the appraisal came in low because the appraiser didn't know historical homes or historical neighborhoods (which this home is and is in, respectively). Property came in about $50k BELOW asking price although we've had plenty of buyers agreeing to pay asking price and above. Go figure.
Well, the good news is the previous appraisal wasn't for FHA, so it won't "stick to the property" for 6 months. Bad news is, FHA is only going to lend the 96.5% od whatever the new appraisal is. If it comes in above, the buyer will have to make the difference with cash, and that's okay with FHA.
Regarding your comments "Well, the good news is the previous appraisal wasn't for FHA, so it won't "stick to the property" for 6 months", Wayne Brooks (and I'd like your input as well J Scott) - are you saying that whatever this property is appraised at from the FHA Appraisal will stick to this property for 6 mos.?
I already have 1 low appraisal on the conventional loan side. My concerns is that if I go with the FHA guy and the appraisal comes in low AND the deal falls through - I will have a tough time getting a higher appraisal for the next 6 mos. even if I decide to do a light rehab to the the property and place back on the market.
Yep, that's the game....FHA will be a tougher appraisal and yes they buyer can pay the difference, so long as they still have adequate reserves after closing to qualify.
You could counter with a conventional loan if he has cash to burn, why not more down?
Regarding your comments "Well, the good news is the previous appraisal wasn't for FHA, so it won't "stick to the property" for 6 months", Wayne Brooks (and I'd like your input as well J Scott) - are you saying that whatever this property is appraised at from the FHA Appraisal will stick to this property for 6 mos.?
That's correct. If an FHA appraisal is done and recorded with FHA (typically done after the lender reviews it), that appraisal will stick with the property for 6 months, during which time FHA won't lend above that amount, regardless of any other appraisals you might do.
I haven't seen someone do any rehab, after an initial FHA appraisal. I would Guess they would take the rehab into consideration. An FHA lender should be able to tell you, if the other guys don't know.
Very true, if you get throgh an FHA appraisal and it's loanable, there aren't any deficiences to fix, but if you improved the property, add a garage, decks and pool house, add a room, rearrange the floor plan turn another bedroom into a master suite, or do a kitchen gut rehab and update electrical, you'll need another appraisal. Significant improvements... :)
OK Thanks everyone. Yes Bill Gulley - I knew I would need (and should want) another appraisal. But I wanted to make sure that I would get the opportunity to have another appraisal should I decide to renovate the property and sell to another buyer.
I changed my mind and decided to go with the Buyer with the conventional loan who came in late with the extra $25k. Both offers were the same but the late guy is stronger being that the appraisal, mortgage commitment and inspections (home and CO) are out of the way.
However this is THE last time I sell an as is property that requires extensive work to a retail buyer. Lesson learned.
I wouldn't write off retail buyers at all, many sellers say they won't sell FHA! Having a punch list before closing is a PITA, but you need to accept that as part of the business, every property won't be in perfect shape, every buyer won't be ideal, you'll get your share of title issues, additional closing requirements and other last minute issues. As you get your share of stuff, learning to roll with the punches and working through issues is part of it....it's always a learning experience. :)
I wouldn't write off retail buyers at all, many sellers say they won't sell FHA! Having a punch list before closing is a PITA, but you need to accept that as part of the business, every property won't be in perfect shape, every buyer won't be ideal, you'll get your share of title issues, additional closing requirements and other last minute issues. As you get your share of stuff, learning to roll with the punches and working through issues is part of it....it's always a learning experience. :)
I hear you Bill Gulley and I'm not writing them off totally at all - But having rehabbed for 12 years I've been through a lot with retail buyers. But always with renovated properties which we've renovated completely. And the issues were usally related to either title related or lender related and their mortgage commitment. But to sell a large home that needs a lot of repairs to a retail buyer who is always second guessing themselves as to whether or not they are getting in over their heads.....no thank you. I would have done a lot better either wholesaling this one or renovating and selling retail.