August 15, 2017
Can I get a second FHA appraisal? There are a few reasons why a borrow might feel motivated to ask that question, but in many cases it could be due to a disagreement about the outcome of the original FHA appraisal.
Ordering A Second FHA Appraisal
FHA loan rules in HUD 4000.1, the FHA single-family home loan handbook, clearly state the FHA’s position on ordering second appraisals due to a dispute over the outcome. “The Mortgagee is prohibited from ordering an additional appraisal to achieve an increase in value for the Property and/or the elimination or reduction of deficiencies and/or repairs required.”
That is simple enough. However, there may be situations where one party to the loan feels that the appraisal was not done competently or that the appraisal is otherwise flawed. Page 128 of HUD 4000.1 addresses this:
“A second appraisal may only be ordered if the Direct Endorsement (DE) underwriter (underwriter) determines the first appraisal is materially deficient and the Appraiser is unable or uncooperative in resolving the deficiency.”
It’s clear to see the inference from the above quote-if there is a dispute the lender and appraiser may discuss the situation prior to any action being taken and see what resolution may be possible.
What Could Require A Second Appraisal?
According to HUD 4000.1, material deficiencies of the original appraisal would be the primary motivation for trying to order a second appraisal. But what ARE “material deficiencies”? The FHA Handbook classifies them as follows:
“Material deficiencies on appraisals are those deficiencies that have a direct impact on value and marketability. Material deficiencies include, but are not limited to:
-failure to report readily observable defects that impact the health and safety of the occupants and/or structural soundness of the house;
-reliance upon outdated or dissimilar comparable sales when more recent and/or comparable sales were available as of the effective date of the appraisal; and
-fraudulent statements or conclusions when the Appraiser had reason to know or should have known that such statements or conclusions compromise the integrity, accuracy and/or thoroughness of the appraisal submitted to the client.”
An Appraisal Is Not A Home Inspection
Borrowers should know that even if an appraisal has deficiencies which are addressed by a second appraisal (which the lender must pay for, not the borrower), the results of the second appraisal do NOT mean the home is defect-free or that it has a guarantee from the FHA that the home is a good purchase.
Only a home inspection-a separate, optional, and borrower-initiated process-can give the borrower real insight into the nature of the home. “Passing” the appraisal does not mean the home is worth the money. Only the home inspection will give insights into that issue.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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