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Appraiser refuses to finish appraisal, says land is worth more than home. What do we do now?

We found a great older, small farm house with a lot of upgrading and improvements done by the sellers. The home is on an undeveloped acre near the river. Sellers had a year-old appraisal, made an offer, got in contract, only to find out that FHA refused the loan because of the lack of crawl space and our lender refusing to switch to a conventional loan because appraiser said land worth more than the house.

What do we do now? Would be just be wasting our time to look for another loan? Sellers purchased the house about 6 years ago and had a conventional loan so we are just baffled by the appraisal. We're told sellers are considering renting us the property while we look for a new loan. Not sure we should risk buying a home that is hard to get a loan on and investing more time and money into finding an a different lender. Should we just start shopping for a different home again and give up on this one?
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September 22 2012 - Albuquerque
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Answers (2)

Profile picture for sunnyview
Your lender is refusing to switch to a conventional loan? You may need another lender to take a look to see if there is another option. If the house will not go FHA due to the crawl space issue, that will limit your pool of buyers in some areas when you go to sell, but if you like the house it should not be a deal killer alone

Personally, I would not rent the place instead of exploring your options to buy. If you cannot get the financing issue handled, then you may need to find another house, but I would not give up quite yet. Many of the Zillow lenders post most Mon-Fri business hours. I would repost this question in the mortgage section Monday morn with a heading like "What do I do now? FHA refused house, can I switch to conventional?" They are smart and helpful and may be able to get you on the right track.
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September 22 2012
Only you can make that decision. If your plans are to stay there either forever or a long, long time and you can afford cash or a conventional mortgage, then go ahead and buy the home. On the other hand, if you qualify for a FHA mortgage and that is what you are going with, there's no sense shopping around. FHA guidelines are not the lenders guidelines. It's what must be adhered to if you are getting a FHA loan. The reason the length of time you plan to live there enters into it, you will probably have trouble selling it later on since chances are very good that the next buyers are going to have the same problem.
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September 22 2012
 
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