As a seller, what do we do, concerning FHA loans, about an appraisal that was inaccurate?

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Your agent should contact the mortgage professional and speak with the appraiser if possible & provide evidence that their measurements were inaccurate and therefore comparable properties used in the original appraisal were also inaccurate. They should be able to reassess.

I have had this happen to me 3 times in the last 6 years and it is very frustrating...first thing I did was contact the appraiser, lender and buyer's agent to show them proof from other recent sales that were the exact same floorplan, and even a builder's listing of what they declared the square footage as...long story short, they would not budge so my seller had to decide to either move on or take the lower sales price and move on. They had a home with a contract on it, so they decided to accept it and go forward. On another I did have evidence and the lender allowed the seller to pay for a new one to compare with. It came out correct and they used the second one instead. I dread going through the process, but as a seller's agent we must protect their interests and go the extra mile to do our best to correct the inaccuracy if possible.

FHA appraisals can be wrong, getting them corrected is not easy. If it's a matter of the sq ft being wrong that should be easier to fix they will need proof and that very well may mean another appraisal but the second will only be used for correction of the first.
I have tried to fight appraisals in the past and have not been victorious. Best of luck.

Your agent should contact the Buyers' agent. Once the final appraisal has been submitted, the client is the person who can speak directly to the appraiser. It is in everyone's best interest to do so. Provide the Buyers' agent with the pertinent information, so the client is well prepared to address this discrepancy with the appraiser. The client can designate others to speak with the appraiser-you, the Sellers' agent, or the Buyers' agent. All communications should be in writing.

There are several appraisers that offer service to come in and measure the home. Might not be a bad investment to combat this from happening again.

Have you contacted the appraiser and asked for corrections? Or clarification?

Paul,

Your best resource is going to be your listing agent for the property as he/she should have a plan of action ahead of time for if this situation of not making value was to arise since we see it often in this seller's market.

Due to supply and demand, there is low inventory and a large number of buyers. Buyers drive the real estate market and they the stage on what they are willing to pay for a property and, in a seller's market, list prices increase accordingly. This is where we see market value and appraised value differing and appraisals coming up short, sometimes drastically short.

There are a variety of factors that go into appraising a home, square footage being only one factor and appraisers do not determined value based on price per square foot. Appraisers do know how to measure a home accurately and every appraiser should obtain the same measurement within a few square feet. I'm wondering why you feel there is a discrepancy.... Does the appraisal district report a similar square footage that the appraiser got? What does your appraisal show from when you purchased the property? How short did the appraisal come up? Garages, unpermitted additions, non-airconditioned and non-floored rooms, and stairs are not counted in the square footage of a home.

Also, at the end of the day appraised value is completely based on properties that have sold and do not take into account those homes that are pending and active, although they may include these in their report.

An FHA appraisal does stay with a home for 6 months. As the seller you do have the option to appeal the appraisal. Your listing agent can send comps to support the sales price. All this being said, based on experience (my husband and I own a residential appraisal company) rarely will an appraiser change his/her value. A second appraisal could be an option but I definitely wouldn't put this on the buyer and honestly the lender wouldn't have to accept it and they are only going to lend at the appraised value. The Third Party Financing Addendum details how this works.

When a property doesn't appraise for FHA financing the buyer does have the right to terminate and receive earnest money. They could also bring the difference of appraised value and market value in cash to the closing table. However, this option is not likely in this situation.

I trust all this information is helpful!
Feel free to have your agent contact us if you have any further questions.

Darby Grimmett
Keller Williams
darby@darbygrimmett.com
936-827-9217

Your agent can contact the buyer's agent and voice your concerns about the inaccurate measurements. Sometimes the HCAD's square footage may not be an accurate measurement. If you have the prior appraisal (when you purchased the property), you can show it to your agent so they can let the buyer's agent know.

If there is a big discrepancy, the buyer's agent can advise the buyer's lender and it may be possible to have a second appraisal done. But then again, the buyer may not want to pay for the second appraisal.

Let us know if you have any other questions.