Doing a 2nd appraisal (FHA) one month later

[AppraizinAZ]

I was asked to do another appraisal I did 30 days ago. It's an FHA purchase. There are recent sales which would definitely bring the value up, although only slightly. They had a 2nd appraisal only a few days old and now they want me to do it again and look for new sales. WTF?

Is this legal? I'm happy to do the work again, and I would use new sales and new market study, etc. I would of course disclose that I did an appraisal at this property 30 days ago. My question is, why wouldn't they just use the one they just had done? Why do they need ANOTHER one by me? Is it legal for me to do another one 30 days later? Effectively, this is 3 appraisals in 30 days. I asked the client this and he said he didn't know, the lender just wanted me to do it again. I thought this kind of "shopping for a higher value" was a huge no no especially for FHA. Is this legal for me to do? I'm saying it's questionable but I'd like to have the FHA specifics before I return the call, but I would like to hear from my FHA peers?!?

 

[Doug DeMars]

As far as I know...there is nothing that prohibits the use of 100 appraisals for a given property within any time frame.

New effective date...new assignment...new fee to you if you are wise enough to collect it.

How do you know they are "shopping" around? That sounds speculative to me.

 

[Marty Boone]

Is the Case Number the same?

According to FHA.gov, “Effective for all case numbers assigned on or after January 1, 2010 the validity period for all appraisals on existing, proposed, and under construction properties, including HUD REO appraisals that have an effective date of on or after April 1, 2010, will be 120 days.”

FHA loan rules do not permit the re-use of an appraisal once the loan has closed. According to FHA.gov, “For example, an appraisal used for the purchase of a property cannot be used again for a subsequent refinance, even if the appraisal is within the 120 day validity period. A new appraisal is required for each refinance transaction requiring an appraisal.”

 

[RSW]

Marty is correct. Look at mortgage letters 2009-29 and 2009-30 for your answers.

 

[Doug DeMars]

Marty is correct. Look at mortgage letters 2009-29 and 2009-30 for your answers.

RSW...what do you think is going on in the OP's case? "bad" value (related to value shopping) or something as simple as incompetentce on the loan processor's part?

Is the Case Number the same?

(per Marty)
This is a good question.

As far as I know...unless the report has been uploaded to FHA connection, HUD doesn't know of any reports as of yet. IMO, this is not the responsibility of the appraiser. As long as the appraiser is consistent with his/her responsibilities then their is no "hot water" to be found in. Of course, absolutely disclose prior services (per the USPAP).

There are recent sales which would definitely bring the value There are recent sales which would definitely bring the value up, although only slightly. They had a 2nd appraisal only a few days old and now they want me to do it again and look for new sales.

Maybe there is a prior transaction within the past 90 days? And/or a value increase of more than 20% between the prior transaction and the current? Is this an investor flip scenario? I do know that 2 appraisals are required in these situations and I've met and/or at least talked to the other appraiser at times.

I'm not certain which value they have to use (e.g. the lower of the two appraised values if different). But I also don't care. Again, this is the lender's responsibility.

Personally, the 120 day rule (formerlly the 180 day rule) is stupid and I can't think of one logical reason why it exists. Certain real-estate pockets have reflected a 3% per month increase...60 days could significantly alter the value of a property. Maybe the first appraisal didn't quite reflect the edge of this up-swinging market? Maybe the 2nd appraisal (by the "other" appraiser) better reflected the market conditions and "hit the contract" (that evil contract hitting appraiser!). Maybe with the new market evidence, the contract is better supported?

IMO, don't worry about the lender's responsibility...follow USPAP (which extends to your responsibility with HUD/FHA and its guidelines) and you will not be found in hot water.

 

[Doug DeMars]

MORTGAGEE LETTER 2009-29



TO: ALL APPROVED MORTGAGEES
ALL FHA ROSTER APPRAISERS


SUBJECT: Appraisal Portability

This mortgagee letter addresses the portability of appraisals for the purpose of facilitating the loan process when a borrower switches from one Federal Housing Administration (FHA) approved lender (first lender) to another (second lender) and an appraisal was ordered by and completed for the first lender. This mortgagee letter will be effective for all case numbers assigned on or after January 1, 2010.

FHA prohibits “appraiser shopping” where lenders order additional appraisals in an effort to assure the highest possible value for the property and/or the least amount of deficiencies and/or repairs are noted and required by the appraiser. However, a second appraisal may be ordered by the second lender under the following limited circumstances:

1. The first appraisal contains material deficiencies as determined by the Direct Endorsement underwriter for the second lender.
2. The appraiser performing the first appraisal is on the second lender’s exclusionary list of appraisers.
3. Failure of the first lender to provide a copy of the appraisal to the second lender in a timely manner would cause a delay in closing, posing potential harm to the borrower.

Potential harm includes events outside the control of the borrower such as loss of interest rate lock, purchase contract deadline, foreclosure proceedings, and late fees.

For cases in 1 and 2 above, the lender must ensure that copies of both appraisals are retained in the case binder. For cases in 3 above, the first appraisal must be added to the case binder when it is received. In all cases, the lender must document why a second appraisal was ordered and retain the explanation in the case binder.

Appraisal Transfer and Change of Client Name in Appraisal Report

In cases where a borrower has switched lenders, the first lender must, at the borrower’s request, transfer the case to the second lender. FHA does not require that the client name on the appraisal be changed when it is transferred to another lender.

In accordance with the Uniform Standards of Professional Appraisal Practice (USPAP), the lender is not permitted to request that the appraiser change the name of the client within the appraisal report unless it is a new appraisal assignment. To effect a client name change, the second lender and the original appraiser may engage in a new appraisal assignment wherein the scope of work is limited to the client name change. A new client name should include the name of the client (lender) and HUD.

Appraiser Selection in FHA Connection

Lenders must assure that the appraiser who actually conducted the appraisal that is used for an FHA-insured mortgage is correctly identified in FHA Connection.

Lender Compliance

Lenders who fail to comply with the requirements set forth in this mortgagee letter will be subject to administrative sanctions.

First...this letter is related to portability...but that's a minor point. The OP didn't mention if it was the same lender/client (in addition to FHA).

The highest possible value reason is still speculative...it may be true...but how do you prove that? The "deficiency" may be related to the effective appraisal date reflecting a lower value. But who knows?

Lastly, lenders must comply with these requirements...not appraisers.​

 

[sputnam]

Doing another appraisal on the same property is not a problem. Be sure to disclose the prior service. The client may find that they can't use the 2nd appraisal to support the transaction they had in mind... but, that's kind of the lender's problem, not the appraiser's.

 

[Doug DeMars]

The 2009-30 Mortgagee Letter only states the "validity period" of an appraisal. It does not however state that the lender is prohibited from ordering another appraisal with a different/new effective date...which could very well have a different value. This may be excactly what is going on with the OP's scenario.

 

[Mr Rex]

It does say that lenders can't "appraiser shop".

 

[JSmith43]

Like others have said, disclose the prior appraisal. In this instance I would immediately contact the lender & disclose that you did one of the prior appraisals. Sometimes the left hand doesn't know what the right hand has done, so be proactive on this one.