We all sometimes have sales where the appraisal comes in below the contract price. What now? Below is a quick summary of what the agencies say:
Fannie Mae and Freddie Mac leave it up to the lender to decide what to do. In many cases if there is incorrect information on the appraisal or if the appraiser becomes difficult to work with to resolve issues, underwriting may choose to allow a second appraisal. Fannie Mae will allow for time adjustments for older sales of comparables.
FHA (Federal Housing Administration) does not allow another appraisal to accomplish an increase in value. Only the direct endorsement underwriter is able to determine if the appraisal is materially deficient. If the second appraisal comes back over five percent lower than the first, the FHA requires using the second appraisal.
VA (Veterans Administration) will allow a reconsideration of value only after the release of the Notice of Value (NOV). The veteran must provide a written request and the underwriter can give additional market data along with the veteran’s request to the VA Regional Loan Center for their review. The VA will have five business days to review and issue a new NOV only if there is a change in value.
USDA (U.S. Department of Agriculture) provides no guidance on the matter.
Please note that these are only agency guidance and each lending institution may have their own set of overlays (rules) over and above the conventional and government agency guidelines.
If you have questions about appraisals or need help with financing, call or text Mike Stoffer (NMLS# 373858) of Stoffer Mortgage at (330) 936-2312.
