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Can I contest the results of an appraisal?

Hi, I posted some of this in another thread yesterday regarding communication problems with my realtor and the listing agent for a property I am trying to buy, so it may sound familiar.  I am using a conventional loan, and the reason I went with conventional is because I am looking for country property and most farms do have dilapidated buildings, chipped paint on sheds and barns, etc, and I know FHA won't loan on those types of defects.  Well the appraisal came back Friday on the property I'm buying and it said "in order to meet the minimum requirement of a C4 rating required for loan approval the following criteria must be met:  1.) the utility room must be drywalled and flooring installed 2.) missing siding must be rewrapped and restored 3.) both barns are safety hazards and need raised or removed". The home is only 6 yrs old and the only room not finished was the utility room. I ageed to finish that room on my own during negotiations with the seller. As for the missing siding, yes, that did come up in the inspection and the seller agreed to repair it. As for the barns, only one barn is dilapidated and in the process of falling, but the other barn was professionally rebraced, reroofed and reanchored to the foundation last fall. The appraiser obviously didn't look at it too well, he must have just seen several missing boards (because the seller never got around to finishing it) and called it dilapadated. IT IS NOT! My first question is, why were these issues brought up for a conventional appraisal?  I thought these things were only issues in FHA loans. My second question is, how do I make the appraiser or lender understand the one barn IS structurally sound and what do I do about the utility room that I agreed to finish? Please help!
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November 24 2013 - US
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Answers (6)

The appraiser is doing their job properly and has to report on issues relevant to safety & property condition for FHA or Conventinal lending. But a good lender would have already adequately discussed solutions with you.
1. The utility room has to be finished
2. The missing siding has to be replaced
3. If the one barn is structurally sound, find a contractor (like the one who did the work) to state that it is after re-inspecting it.
4. The bad Barn probably has to be removed or improved.
Federal Government guidelines now regulate the mortgage lenders , and protect the appraisers integrity. You may need to seek out another lender, but no one can lend with missing siding & unfinished utility room.
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November 25 2013
re: The utility room is inside the house between a bathroom and the bedroom. 

So its part of the GLA - gross living area- and yes, it needs to be finished. The seller needs to understand short of someone paying all cash, most lenders will require it complete. If its not complete, the house is technically still under construction. Have the seller pay someone to finish it off to a minimal to get the house sold. You can add nice finishes later. 

Keep in mind, the lender, since they usually lend 80% of the value of the home, considers themselves more of an owner than you, and they need it be have certain standards complete, just as you would if you were lending your own money to someone else to purchase a home. 

Also the appraiser who appraised it will probably be the one to come out to re-inspect the property to see if the issues are resolved. Maybe talk to them - or the loan agent - to see exactly the minimal that needs to be done is done. In these cases, I leave my card and make it clear how to 'cure' any issues quickly and with the least amount of cost for everyone. Keep in mind most lenders WANT to get the deal done - if it dies they make no $$...
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November 24 2013
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The price came out fine - it appraised at $100,000 considering the repairs be made, and my contract price is $98,000.  The utility room is inside the house between a bathroom and the bedroom. The house is only 6 years old, and the seller never got around to finishing the room.  Its not like it is damaged and unsafe; just unsightly.
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November 24 2013
My first question is, why were these issues brought up for a conventional appraisal?

Any appraiser can bring up health and safety issues. The appraiser is supposed to be the eyes and ears of the lender. If you buy the property, leave town and the property is left to the lender, then the lender finds these issues on the property they 'assumed' was OK, they can go after the appraiser to 'fix' the issues, so the appraiser tries to avoid that scenario.

There can be grey areas though. An appraiser is not an property inspector. Some appraisers will let things go where others wont. I just did an appraisal yesterday where the property to be purchased has a storage room / guest unit - not permitted. I know the verbiage to say to make it fly, or to cause problems.

Is your situation, the issues are really issues, or the appraiser just made them issues, I dont know. But if you want to go with THAT lender (and the appraiser - in essence - works for THAT lender), you have to 'cure' what needs to be cured.

My second question is, how do I make the appraiser or lender understand the one barn IS structurally sound and what do I do about the utility room that I agreed to finish?


If you stay with that lender, talk to them via your loan agent on how to get it done. A physical inspectrion report OKing the BARN may be required. Find out if you can get some type of waiver on the utilty room. ...is it 'living area' so some type of addition?

Sometimes, though, nothing you can do will make it right with this lender, or financially feasible for you. You may have to do pull the ripcord and research a lender who isnt as anal as this one is and who will accept all of these issues. You find that lender via your mortgage broker. If you dont have one, get one.

Good luck!
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November 24 2013
Was the value of the appraisal OK?
You can dispute the appraisal, but normally the disputes arise form a low value. Ask your Loan Source how to dispute the barn issues, and the utility room issue. Is the utility room in the garage, and/or outside the conditioned living space.?

Some of this stuff may not actually offend your Loan source, even though the appraiser mentioned it. As Amanda says, you need to talk to the Lender. Determine their exact position on each issue and then determine solutions.
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November 24 2013
Trish,

It sounds like the person you need to be talking to is your lender. You could provide the receipts for the work done to rebrace, reroof, and reanchor the one barn, but wait until after the seller completes the other required repairs.

It sounds like you will need to have the seller remove the 2nd barn.

See if your lender will give you an exception to get the utility room finished after closing. If not, you may have to renegotiate with the seller to get these repairs completed prior to closing to meet the underwriting requirements for this lender.

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November 24 2013
 
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