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HUD HOMES with FHA financing take a STEP BACKWARDS!!!

Mortgage and Lending with Homestar Financial Corporation

Hello Fellow Realtors,  

 This is a HUGE set back and I am interested to see how PEMCO is going to reward bids on HUD houses with this news.  

 Mortgage E letter  March 8, 2010  

 You can no longer order a 2nd Appraisal on a FHA HUD REO if the appraisal is still valid (180 days) UNTIL APRIL 1ST 2010 AND THEN DROPS TO 120 DAYS  


If You have a FHA loan on a HUD home currently in the pipeline the PEMCO Appraisal will be the appraisal used for Value. If it is still valid as per above rule changes.  

 What does this mean to you ?  

Well in a nutshell: If your buyer bids more than the appraised value posted on the HUD listing, then they will have to pay the difference between the appraised value and the sales price unless the appraisal is 4 months or older.

 Example - Sales Price $100,000  Appraised PEMCO value $95,000  Max loan amount on a $100 HUD with FHA financing  $94,900   

 Your buyer would have to bring $5100 to get their deal closed.  

The problem here is that as PEMCO does not release the full appraisal until AFTER the bid has been awarded, there is no way to know if there is an option to get a second appraisal ( in the case you get lucky and it is out of date) or not.    

 I hope this helps you and your buyers.  

 Remember call or email me for loan scenarios and pre-approvals.

That's a bit tough to take.  It seems that sometimes they come up with new regulations without having thought it all through.

I am still assuming that the buyers do have the choice to either opt-out since it didn't appraise or bring the extra to the table if they want to go through with it.   





Yes, I am sure they can, but how will Pemco fairly award a bid when the buyers with FHA $100 down financing come in at the same asking price...? How do you make a bidding auction an auction when you cap the sales price?

My problem with this is that it removes the most important concept of value, in that a home is only worth what the market will pay for it. Before, a buyer could bid over the asking price if they felt it was still a good value, and if the PEMCO appraisal was lower, then a simple secondary appraisal could help. We are already using HVCC so we are unable to influence price and if the second appraisal supported the price, it worked well for everyone.

Fare well Fair Market Pricing.



Thanks for sharing, as you mentioned it will be a challenge going forward.