What To Do When An Fha Appraisal Comes Back Lower Than The Purchase Price?

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
San Diego, California
Recently we’ve been seeing that the demand for properties in some cases is outweighing the actual value of the home based on comparable sales in the area or lack thereof. When someone is qualifying for a home purchase via FHA and obtains an FHA appraisal, that appraisal is now attached to the property and can in some cases be difficult to change the value.

What happens when an FHA appraisal comes in low?

Ultimately there are 3 options and one of them I’m going to be explaining in detail that will not negatively impact both the seller and buyer.

Option 1: Cancel the contract and re-list the property and hope for either an all cash offer or a conventional loan option. At the same time hoping the appraised value comes in at the sales price on the future appraisal. This is not the best route for either party involved in the transaction.

Option 2: Have the buyer come up with the additional cash required to get the loan to 96.5% or the FHA loan limit in the area out of their own pocket. Going this direction ultimately is unfair to the buyer because they are technically paying more than the home is worth.

Option 3: Qualify for a rehab loan, let’s say the appraised value comes back at 330K and the list price is 345K. The borrower can then do the rehab, upgrade appliances or whatever it may need to increase the value typically above the contract price which will permit the renovations being made. That way the buyer of the home gets to customize it within their liking and the seller of the home sells the home for what they want to sell it for.

If you have any questions about this product please feel free to reach out me directly at: [email protected] or 800-779-4547
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