I was throwing around google search terms looking for some perspectives on FHA financing and this post came up so I figured I would resurrect it and add some clarification on certain points so anyone else finding this can have accurate information.
Does an FHA appraisal "stick with the property"?
Yes, BUT only for FHA loans. When people have mentioned that in this thread they failed to make the distinction that the appraisal only "sticks" if the new buyer is getting an FHA loan also. It's been said that if you get an FHA loan it's a risk because it could "devalue" a property for up to 6 months and it has to be noted that the FHA appraisal value would only apply for a new buyer getting an FHA loan because FHA case numbers expire in 6 months. So, if someone gets a conventional loan then there is a new appraisal ordered and you wouldn't use any FHA appraisal previously completed.
If this puts a seller in a bind it's only in the case where the new buyer is going with FHA. Furthermore, if an appraiser says the property is worth $50,000 less than what it's listed for there is a reason. There are very few agents that have a better opinion of value and do more work determining that opinion than a certified real estate appraiser, which is why lenders require an independent, unbiased, 3rd party to do the work. I've had plenty of agents want to argue with me about a low appraisal and only a handful even try to do the work to provide actual evidence of why the appraised value is incorrect; you usually get a bunch of bellyaching and complaining but not much evidence to justify a value increase. Some agents try to provide proof and 99% of the time the appraiser's information is more accurate. Most of the time it's just that the agents are insulted, worried about the deal going through, they look bad to their clients that they got the value wrong by such a large margin, and the appraiser is basically calling them out on it. I've been pissed about appraisals before too; when I was just starting out I remember trying to challenge a few myself. Then I learned how to actually do the analysis the appraiser is doing and what guidelines are restricting that analysis. After a few hundred you begin to trust the analysis more than any real estate agent's valuation. A property is worth what someone will pay for it, I get that but it really only applies to cash deals that don't involve other people's money. If you want to set a new value with your cash go right ahead but if you're using other people's money they are the ones typically setting value.
As far as comments about FHA not going through or having problems closing you can put that all on the particular loan officer involved and their management not doing good enough quality control. QC is becoming a bigger and bigger issue as the cost of origination increases. If you have a lender not informing people that a deal isn't closing until 3 days before closing that is an issue the lender created. This is not specific to FHA and happens across all loan types with unprofessional "professionals". Many mortgage companies and MLOs are just bad at their jobs in general, like many real estate agents. People are people, real estate transactions are more complicated than collecting a commission and the barrier to entry just isn't that high for a 'salesperson' level license in real estate or mortgages. They didn't tell you until 3 days before closing because they are just bad at their jobs, don't knock FHA for that.
FHA is the whoops loan? I've heard this before. Again, there are borrowers that are borderline for any deal. This is not specific to FHA. If you've got a qualifying credit score 3 points above the threshold then it's the MLOs responsibility to properly coach their borrower through the next few months in finding a property. Proper coaching is key for most loans. Many of you would be surprised how many people do silly things like go out and finance a new car before closing so they can have a sweet new ride to go with their house. If you know how the process works inside and out then you can give people some pointers that will help in a variety of ways. MLOs should know these things but most don't and there again it comes down to people not being very good at their jobs and/or being inexperienced.
FHA loans are somewhere around 20% of the mortgage market in total. Roughly 80% of those are first time buyers. The FHA is a great program for a variety of reasons and nobody should be basing whether or not they take a deal strictly on whether or not it's financed by an FHA backed mortgage. Being financed by an FHA mortgage should be considered the same as financing with any type of mortgage because the confidence level in the financing going through should be based on the MLO and company involved and not the product type.
