What are the options on getting an inadequte FHA apprisal modified. In the event the current apprisaer does not modify, there are options. I did investigate the options. I'm also curious if any one has successfully disputed a FHA appriaisal , please let me know. The following is a option on getting a appraisal reviewed and modified.
Once an FHA appraisal is completed, it is stored in a system called FHA Connection, which keeps track of all matters related to FHA loans, appraisers, underwriters, etc. FHA Connection can only be accessed by FHA lenders, and only the lender which originated your FHA insured transaction may access your file (which is why your FHA Case Number must be transferred to proceed with a new lender).
Once the appraisal is completed, the appraiser provides both the lender and FHA with a copy. The underwriter must carefully review the accuracy of the report and verify that the report and your home meet FHA guidelines. The underwriter may also add comments in FHA Connection regarding the appraisal. The comments become part of the appraisal report file stored in FHA Connection.
It is important to know how "close" your application is to an FHA Direct Endorsement (aka FHA DE) underwriter. All FHA insured transactions must be signed off by a DE underwriter, and only a DE underwriter may approve an appraisal. An FHA DE underwriter must be an officer of the lender or have the authority to bind the lender to a contract with FHA (loose quote from HUD's policy manual on lender eligibility).
Many lenders (and all mortgage brokers) are sponsored by another FHA lender. Simplifying greatly, that FHA DE underwriter who reviewed your first appraisal may not work directly for the lender who is processing your application. This means that it may be more difficult to get the DE underwriter to request the appraiser to update the appraisal with additional sales comparables or to remove a certain sales comparable.
In the current DE underwriter determines and is unwilling to overrule the appraisal , your FHA Case Number and file may be transferred to the new lender with a new underwriter that acknowledges a under value and inaccurate appraisal.
Keep in mind that both the DE underwriter and the appraiser are held responsible by HUD for inaccurate appraisal That's the main reason why the appraiser and first lender appear to unwilling to revise the appraisal estimate.
If you enjoy reading Gov't manuals, here is a link to the relevant chapter in HUD's policy manuals on the procedure for underwriting FHA appraisals.
If the first appraiser is willing to withdraw, a competent FHA DE underwriter should be able to approve the reason for the change in appraisers, approve the second appraisal in place of the first, and sign off on your transaction (assuming everything else meets guidelines).
By "competent" I mean a DE underwriter who knows her business... probably someone who has been underwriting FHA insured mortgages for many years. This paragon of virtue is most likely employed by a bank.
The local Field Office in Colorado: http://www.hud.gov/local/index.cfm?state=co&topic=offices