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For an FHA loan, must I use the appraiser hired by the lender?

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Or can I have the appraisal done by someone I trust? The lender's appraiser came back with comps more than a mile away when there are several more recent sales of nearly identical homes within a couple of blocks of the home I'm buying.

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June 24 - Winston-Salem

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Preston Ware, "Preston Ware"
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Preston Ware, "Preston Ware"

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With FHA, we still can pick the appraiser. I have a few great ones in your area. At my website, I have created a subscription page for my email series entitled "First Time Homebuyers Workshop" This series includes video designed to help first time home-buyers answer questions well in advance. I also have another series entitled "The mortgage process" which details what to expect once the loan has made it to the bank. Visit me at http://www.prestonware.com or http://prestonware.blogspot.com/

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July 02

Andy Matejka, "tejks"
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Andy Matejka, "tejks"

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I'm a noob, but I am confused. Help me out. Your appraisal came back too low. Therefore the bank will only lend x amount. Seller won't accept x amount? I would say to keep looking. Either that or you would need to pay a premium. It wouldn't surprise me to see the flood of buyer activity begin to boost prices in this market.

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July 01

Frederick Griffin, "Fred Griffin"
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Frederick Griffin, "Fred Griffin"

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On May 1, 2009 the new

"Home Value Code of Conduct" (HVCC, aka "The Code")
went into effect.

It applies to all states, and to almost all mortgages that will be purchased by Fannie Mae or Freddie Mac:

Freddie Mac's Page:

Home Valuation Code of Conduct

--------------------------------
Further reading:

From the May 2009 edition of Realtor Magazine (National Association of Realtors):

Ethical Appraisers are needed at a time when Banks are pushing for Lower Reported Values

Orange County (CA) Register recently ran this Blog on the HVCC:

New Appraisal Law Starts Today
-----------------------------------
Best wishes to you,
Fred

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June 24

nvchaz
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nvchaz

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Yes, and you are going to get f ' ed over. Especially now with the new rules that interpose a mediating agency. Soon appraisals that were $350 will be $900.

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June 24

olrac57
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olrac57

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I'm just concerned because I've had 3 other fee appraisals pull comps for this home and they can't see how he justified using the ones he did. They chose homes that have sold more recently and have more in common with the subject home than any that the appraiser chose.
I want to be sure that there's nothing underhanded going on that I'm unknowingly a party to.

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June 24

Deanna Burkett, "DeannaBurkett"
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Deanna Burkett, "DeannaBurkett"

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The appraiser must be FHA approved and approved by the particular lender you are using, the appraiser usually uses comps that sold in last 12 months and that are with in 1 mile of the property, if they did not use most recent sales there is a reason for it, were they bank owned ? also an appraisal for a purchase is the purchase price even if the property is worth more than the purchase price.

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June 24

NTETS, "Caveat Emptor"
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NTETS, "Caveat Emptor"

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if you have a problem with the appraisal you can either 1) ask the lender to get a different one, or 2) appeal to that one(although usually you dont want to wait untill the appraisal has been submitted.)

with 1 another bank/leander approved appraiser will do a follow up appraisal at your expense, however because of the risk of fraud, the bank will not an appraisal that doesn't meet bank criteria(which usually involves the bank hiring them.

with the second choice you get an appraisal or a realtor to bring comps to the attention of the bank's original appraiser and discuss with him the value that he has/will assign to the property.

my recommendation is to ask a Realtor to get you some strong comparable sales from the last 3 months that suggest the price you are looking for. have these ready to present to the follow up appraiser and make that presentation before he submits his follow up to the bank. you will note that it is in the bank's interest to value properties conservatively to mitigate risk of loss

even so, the original appraiser probably knows more than you do about accurately pulling comps, he does, after all do this for a living. odds are that if the second one comes in close, he will defer to the first, and stay conservative. if there is a strong case, you may have a shot

you might consider too a new lender, new appraisal. it wont be colored because the banks dont share this info.

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June 24

Jason Rappaport, "iccnewyorkjason"
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Jason Rappaport, "iccnewyorkjason"

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Being that we are towards the end of June, sales transactions from 1/1/09 will not be used over sales transactions closed in May 2009. I am no appraiser, but distance and how long ago the purchase closed both play factors into this.

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June 24

Nathan Wolf, "natewolf"
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Nathan Wolf, "natewolf"

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So you're stating that the bank's appraiser is undervaluing your property via this appraisal?

One reason the bank and/or appraiser may be using one in the neighborhood and two outside, is to show the market area for your property. Many past appraisals were OVER valued because they only focused on one neighborhood ONLY.

You can request a review appraisal. But you cannot ask for a particular appraiser. They would have an internal (bank employed appraiser) or a new "pooled" appraiser (randomly assigned) do a followup appraisal. Sometimes called a "drive by".

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June 24

olrac57
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olrac57

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Some follow-up info:
Since 1/1/08, there have been 3 arms-length sales within the same section and phase of the same subdivision of this house. These homes are nearly identical to the house in question. There have been 8 within the same subdivision in that time period, 3 since 1/1/09. There are similar neighborhoods nearby, as well, with a total of 19 comps since 1/1/09 within 1 mile. The appraiser chose 1 of these sales. Others included a home 2.5 miles away, with 1 less bedroom, 1 less bath, no basement (this one has a finished basement), no garage, vinyl (this one's brick).

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June 24

olrac57
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olrac57

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I work with fee appraisers. They're looking at this report and asking "What the heck was this guy thinking???" So, no, I don't believe there were valid reasons. What possible reasons might a bank have for under-valuing a property? Should I be concerned that they might be trying to do something illegal?

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June 24

WAYNE MELTON, "WAYNE MELTON"
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WAYNE MELTON, "WAYNE MELTON"

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The appraiser works for the bank, not the borrower, although you are paying the fee. Too, lessen mortgage fraund and influence by even the lender, the appraisal is assigned to a panel of FHA approved appraisers.

You do not state whether the appraisal is accurate, just that comps closer to your home were not used. Were the comps closer to the subject REO or distress sales? Arms length transactions? There are many FHA guidelines as to what properties can be used for comps that may preclude the closer in proximity comps from being used. The appraiser has to satisfy FHA, no one else. Fortunately, I get an opportunity to offer comps when the appraiser calls to obtain access. If the agent has good comps and information from both MLS and public sources, the outcome of the appraisal should not change regardless of who ordered the appraisal. Too, pointing out that a possible comp was an REO or non arms length transaction, condition of property, etc. will help eliminate a lower sales value that would bring down the sales price on your contract.

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June 24

Nathan Wolf, "natewolf"
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Unfortunately, nobody at the bank cares if YOU trust the appraiser. They care that THEY trust the appraiser. It's their money, they get to choose the appraiser.

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June 24

ExcelDave
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ExcelDave

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On conventional loans a mortgage broker must use the HVCC process but on an FHA loan, the mortgage broker may use their appraiser or you may select one. Hope that helps!

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June 24

Julie Messina, "CNN Mortgage"
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Julie Messina, "CNN Mortgage"

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You must use the lender's appraiser if you want a mortgage. Ask your loan officer to explain the use of comps. There are valid reasons why the comps chosen are over a mile away. You should get a reasonable explanaton that makes sense,

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June 24

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For an FHA loan, must I use the appraiser hired by the lender?

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