With low down payment FHA loans are the one of the most popular
financing tool in the current Virginia real estate market. After you submit a loan
application with your FHA lender, they generate a case number for the
buyer's loan. Then the lender sends a request to get the property
appraised from the list of approved appraiser in the area.
How your FHA Appraisal appraise your property?
Similar to conventional appraisal the home will be compared to the
similar homes in the area including sold, under contract and active
homes in the market. Apart from that the FHA appraiser also checks out
the overall condition of the property especially for health and safety.
Please note this does indicate buyer should not get home inspection. Any
repairs that are requested have to be performed prior to the closing
and appraiser has to go back to the property and check on the repairs
done.
What happens if my FHA appraisal is lower than the contracted Sales price?
As per FHA financing contingency addendum which is part of your Virginia
Regional Sales contract if your appraisal is lower than the sales price
following can be one of the solution:
- Seller agrees to the appraised value and that becomes your new contract sales price.
- Seller and buyer agree to compromise and agree to new sales price.
- Buyer comes up with the difference in addition to the down payment.
- Void the contact.
Unfortunately FHA appraisal stays with the property for six months!!!! Irrespective you are planning to sell, refinance or purchase a home. Even if you decide not to work with the current buyer and void the contract, the next buyer submits an offer with an FHA loan the appraiser will stay with the property.
As a seller your best shot would be either negotiate with the buyer or hope next offer is a Convention loan and the appraisal appraises at the home at agreed sales price.
As a Buyer of a New Construction what are my option if the appraisal is lower than the agreed sales price?
That is one of the reason I love FHA loans when purchasing a new home. If takes away buyers anxiety in a declining market what happens if the home values drop.
Most of the builder will meet the FHA appraiser at their model home/office and share the current market contract sales price along with any recent sold comps. Since all the comps may not available/listed on MLS or Tax record. However if the sales price is still lower than your contracted sales price you can take any of the above four solution. Depending on your market builder may want to work with you and renegotiate the sales price. If the demand is high, builder may void the contract since they can take the home as a spec home and resale at the current market.
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