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HELP! Stalled FHA loan due to lack of comps!

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kimberjoih

Thread Starter
Freshman Member
Joined
Dec 1, 2008
Professional Status
General Public
State
Georgia
Here is my situation: We have applied for & been approved for an FHA loan. We have found the perfect place, but it's in a rural area on a large parcel of land (19.7 acres). We have jumped through several hoops already due to the strict requirements of FHA, and my lender has assured us that all will work out in the end. We had the appraiser come out and visit and he said some things needed to be fixed prior to closing. We fixed those things, and his second visit went well and he has approved everything on his end. It appraised at $185K according to him. However, the lender is now saying that his comps are not acceptable. The house has an open floor plan, and the kitchen, living room, and dining room are all one big room - so the house is actually considered to have 4 rooms total. The comps submitted had 5-7 rooms (LR, Kit, DR all separate) even though square footage and acreage was similar. This is now the only thing holding up our loan from being approved. We've complied with every request thus far, and have already put a lot of time, money, and labor into this property (yes we have known all along that it's not a done deal until you're walking away from the closing). Oh, and it's also a foreclosure, so we're dealing with a bank as the seller. They've been pretty amenable so far, coming off their original list price by $32K already. In today's market, what are we to do if the appraiser can't find comps that have sold within the last 90 days in this very rural area? How can we work around this? It's a no-brainer that a fairly new house in good condition on 20 beautiful mountain acres is worth more than what we've offered. But I know dealing with a bank on one end and the government on the other presents problems. Is there any hope, or does anyone have suggestions?! We're frustrated and ready to move!! Thank you!
 

Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
Here is my situation: The house has an open floor plan, and the kitchen, living room, and dining room are all one big room - so the house is actually considered to have 4 rooms total. The comps submitted had 5-7 rooms (LR, Kit, DR all separate) even though square footage and acreage was similar.

Seems to me that you have found an Underwriter who is making up rules on the spot, and found an appraiser who isn't very experienced with FHA. It's in the HUD handbook somewhere, and I don't have time right now to find it, but if you could feasibly put in a wall to make it a separate room (kitchen, dining, and living), then it is counted as a separate room.

BTW, it may be easier to ask your loan officer to submit the package to a different lender. Maybe then you'd get an underwriter who knows the rules and won't make stuff up to deny a loan.
 
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Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
Well I did find it...
4150.2, section D9 on page 127
Comments about room design and count should reflect local custom. A dining area built as an Lshape off the kitchen may or may not be considered a room depending on the size. To determine whether one or two rooms should be counted, hypothetically insert a wall to separate the two areas that have been built as one:
If the residents can use the resulting two rooms with the same or more utility without increased inconvenience, count the room as two.
If the hypothetical wall would result in a lack of utility and increased inconvenience, count the room as one.
This represents a hypothetical condition that must be reported in accordance with USAP.
The room count typically includes a living room (LR), dining room (DR), kitchen (KT), den (DN),
recreation room (REC) and one or more bedrooms (BR). Typically, the foyer, bath and laundry room
are not counted as rooms. A room is a livable area with a specific use.
 

kimberjoih

Thread Starter
Freshman Member
Joined
Dec 1, 2008
Professional Status
General Public
State
Georgia
Thanks for the info... I think my LO was going to submit the file to another lender as well, so we'll see what happens. I would hate for this to be a deal-breaker. We already had one deal fall through and this was the "it happened for a reason" replacement home! :) Anyway I'm hoping the excerpt you wrote above may help our cause, thanks so much! Still up for any other input... :)
 

Walter Kirk

Senior Member
Joined
Jun 24, 2003
Professional Status
Licensed Appraiser
State
New Jersey
This is just a thought. Since the seller is a bank, would the bank be interested in making an FHA loan on the property?
 

TJSum

Elite Member
Joined
Nov 12, 2007
Professional Status
Certified Residential Appraiser
State
Maryland
Or they could ask the appraiser to write an Addendum letter explaining how they counted the rooms, and per the above FHA guidelines posted above, the home has very similar functional utility to the comparables utilized. Seems to me an addendum letter explaining all this in more detail would solve the problem.
 

Greg Bell

Senior Member
Joined
Jul 7, 2006
Professional Status
Gvmt Agency, FNMA, HUD, VA etc.
State
Louisiana
Ask for a loan to facilitate with the original lender...
 

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
Keep in mind you are dealing with a UW. Question is is the Underwriter the bank UW, probably a functional moron, or the Direct Endorsement Underwriter...the one who should know the rules? UWs for the lender should not have a say in any of this. Only the DEU.
 

kimberjoih

Thread Starter
Freshman Member
Joined
Dec 1, 2008
Professional Status
General Public
State
Georgia
Thanks for all of the help... My LO is excited about the possible loophole in the FHA handbook so thanks for that...hopefully it helps. Also, they found a few more comps and the appraiser is supposed to drive by them all today and take pictures to show they are indeed similar properties. Our due diligence ended last night...It was either terminate the contract and start over in order to save our earnest money or let it ride and gamble that this situation can be worked out. Since we're a bit gun-shy from the last house, we are taking a risk and gambling on this one. I'm hoping we can work this situation out since they are TELLING me that it is the only issue... I'll let you know if it works out. Thanks!!!
 

kimberjoih

Thread Starter
Freshman Member
Joined
Dec 1, 2008
Professional Status
General Public
State
Georgia
I just wanted to post an update and thank Mountain Man on the tip from the FHA handbook. This totally made a difference, and things went through just fine with the second lender. He was able to up the room count to 6, allowing the comps he submitted to be more acceptable. Even better, we got a better interest rate with the second lender! We are set to close on Friday! Thanks so much for the advice!
 
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