The rule on investment properties or flipping homes is that if the home is sold for more than 100% of the original purchase price, then it must have two appraisals. Federal Housing Administration (FHA) states that there must be a second appraisal in order for the property to close. This is an FHA rule not a lender rule. The buyer pays for the first appraisal usually through closing costs, but the buyer cannot pay for the second appraisal. Who is the responsible party for the second appraisal? The seller is the responsible party. The seller has to pay for the second appraisal in advance. As Real Estate Agents we must make sure we inform our clients of this from the very beginning.
My perspective on this is that if the buyer already gets closing costs for appraisals, right? The seller is already paying money toward the buyers closing costs, so this should be included into the closing costs. FHA would have to change their rules, so in the meantime, the seller is the responsible party.
Sincerely,
John Wright
Century 21 Scheetz
The Andrew Neal Group
317-814-5530
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