mortgage

Fixing 3 common FHA loan snags

Problem: Appraisal comes in low
Problem: Appraisal comes in low

Pity poor property appraisers; many took flak for inflating property values during the real estate boom. Now, angry sellers and homeowners are browbeating them for appraising properties too low.

"With the number of short sales on the market today and the foreclosed properties, it's obviously difficult for a property appraiser to come up with comparable sales that represent an accurate value," Geist says.

These factors may boost the chance an FHA appraisal will come in below the price you've negotiated, bringing FHA mortgage plans to a screeching halt.

Solution: Renegotiate the price

You could try to pony up a bigger down payment to make up the shortfall between the appraisal and the negotiated price. A better approach, Ahumada says, is to "use that appraisal to renegotiate the purchase price."

If the property isn't going to appraise at the price the owners are asking, "no one's going to be able to buy the house unless they come in with a really big down payment, and nobody does that anymore," he says.

Sellers who are sufficiently motivated might decide to accept the lowered offer. If they don't, you may want to consider moving on.

However, if you want to save the deal, "there is an appeal process (for a low appraisal)," Geist says.

"The customer or the originator can ask for a reconsideration of value, but it can only be given with documented, verifiable comparable sales that were not considered on the original appraisal itself."

Geist says that this method can work, "but it's a difficult process."

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