FHA appraisals - Buy your own?

Question

I've been flipping single family homes for a several years now and just like everywhere else the biggest challenge is getting the property to appraise.  I've been "screwed" a few times by appraisers coming in way low on value.  But worse than that I've run across one in particular who is very very anti flipper and always seems to come in with a bunch of ridiculous and expensive repairs that have to be done before she'll approve the value.

I know any FHA appraisal will stick with the house for six months so even if another buyer is found with another lender the new lender must use the original appraisal.  So I'm considering ordering, and paying for an FHA appraisal myself.  The obvious advantages to doing this are knowing the value before the property is listed, and also repairing any issues that the appraiser might find well ahead of time.

So my questions are, has anyone gone this route before and how did it work out?  Can I require the lender to then pay me for the appraisal to recoup my expense?

Matt Stewart · Answer

Good to know Albert.  I plan to make it very clear to the lender that due the appraiser they repeatedly use I will not be accepting offers from buyers that use them as a lender.  The market is strong enough here now where I'm getting multiple offers on every listing so I will be afforded that luxury.  Perhaps if the lender gets enough feedback like that then they can instigate a change.

Albert Hasson · Answer

I too just had some issues with an FHA appraiser on a flip and I can tell you it's not completely random on which appraiser you get.  Certain lenders work with certain appraisal management companies that have a small group of FHA appraisers that they work with.  It is therefore very possible if you go through the same lender that you will get the same appraiser time after time.  In my case I needed two FHA appraisals.  The first one came in close to asking the second way under.  To make a long story short the lender asked the second appraiser (via the management co.) to consider another higher comp. He did revise his appraisal higher but then asked me to perform some unnecessary modifications to the back door and side gate because he said they were not "pool compliant"   My realtor complained and sent the city ordinance showing my house was already compliant to the lender who forwarded it to the appraisal management co.  The management company then sent out a third appraiser to do the final inspection and bypassed the 2nd problematic appraiser.  
It is my understanding that the appraisal management company can choose which FHA appraisers to contract with and that problematic ones can be weeded out by these companies.

Matt Stewart · Answer

Interesting....I've sold three properties using this particular lender, and each time I've had to deal with this same appraiser.   I just assumed that the lender had the option to select the appraiser they used.

Wayne Brooks · Answer

Seems like just an unreasonable appraiser.  But, the lender can not pick the appraiser.  They are required to use an appraisal management company that picks from a pool of appraisers, so it's random.

Matt Stewart · Answer

Thank you for those answers.  I think that answers my questions.

As far as the repairs, I've always had the appraiser come through after the home inspection is done and any issues raised by the home inspector were remedied.  This particular appraiser is then coming through and finding additional issues that were not noted in the home inspection.  While some of her issues are legit, others such as removing an entire tree that lost a limb but was still very much alive, replacing an expansion joint at the end of the concrete driveway, and requiring an electrical certification even after permits and inspection took place are subjective at best.  I've heard from others that she if very anti flipper so she'll come up with numerous expensive repairs to lessen any profit that you'll make from the sale.  And she knows she's got all the power at that point.  I've not had any problems with other appraisers, so I guess my best option is to no longer agree to work with this particular lender that uses her as an appraiser.

J Scott · Answer

You are more than welcome to find an appraiser who does FHA appraisals, and pay him to do an appraisal on your house.  This appraisal will NOT be recorded as an FHA appraisal and will NOT be used if you find an FHA buyer, but you will have an idea of value.

That said, there are a couple issues with this:

1.  Different appraisers will come to different opinions of value, even on the same house.  So, this FHA appraiser may come to a different conclusion than another FHA appraiser.

2.  New comps can always come available.  Just because an appraisers values your property as $X today doesn't mean the same appraiser wouldn't value it at $Y next week, based on new comps or information that might come available.

3.  If you want to get an idea of the repair issue your property has, you'd be much better off finding a good property inspector or GC, as opposed to relying on an appraiser to determine what repairs are needed.

4.  If you have many repair issues that an appraiser is finding, you're not doing good enough jobs on your rehabs.  Appraisers will look for the safety concerns and the things that make the house unlivable.  If you have lots of those types of issues, that's a much bigger issue than the one you posted about.

Wayne Brooks · Answer

I would say no to count 1, so count 2 is out.  An FHA lender is required to order the appraisal, a certain way, through an appraisal management co. I see no way they will accept one you had done.