The FHA Review Appraisal

PC300017If you have read my post “FHA 90 Day Flip Rule … A Major Pain” or the latest “FHA 90 Day Rule – Revisited” you will know that you cannot sell a house until the 91 first day of ownership.  So the thought is, if you wait the 90 days and put the property under contract you should be okay, but just wait:

The FHA Guidelines also State:

that for resales that occur between 91 and 180 days where the new sales price exceeds the previous sales price by 100 percent or more, FHA will require additional documentation validating the property’s value. FHA also has flexibility to examine and require additional evidence of appraised value when properties are re-sold within 12 months.

For my properties and experience it seems the company providing the loan has huge discretion in what happens in the 91 to 180 day period.  They can ask for additional comps, a letter justying what you have done to the property or a full out review appraisal.

On two properties we have had the bank ask for a review appraisal.  On House #6 and on House #12, for House #6 the review appraisal actually came in $20,000 under what our original appraisal did.  The original appraiser wrote a letter and somehow convinced the bank to adjust the value up.  House #6 had some unique attributes about it which helped the appraiser get some comps thrown out.  For House #12, the loan processor got to order the second appraisal which helped us discuss the property and the upgraded performed to justify the value.  The underwriter also forced to get a letter from an engineer to state the property was structurally sound.  We sent in an engineers letter, a copy of our building permits and all the inspection sign offs and some before and after pictures.

Here are some things that have helped us along the way:

  • Take good pictures of the property.  For House #2 and House #6 we made a four page document that outlined the things we did to the property to add value and we made two pages of before and after pictures.
  • You are not going to get a value way above everything else in the rest of neighborhood.  So realize that you are not going to get paid extra to make the best property in the neighborhood better.
  • Look for value adds… if you legalize additions, or add your own sq footage it is a great appraisal value play and something where the costs can vary greatly (eg. the bank can justify you selling it for $90,000 more than you purchased it for).
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