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We were set to close on a house last Wednesday for the listing price of $73,900. The house was previously bought by a non-profit organization for $50,000 before the house made it to hud's public bidding market. The organization installed many upgrades including: tile floors, brand new carpet in bedrooms, granite countertops in kitchen/baths, tile backsplash in kitchen/baths, craftsman style cabinetry in kitchen/baths, brand new appliances, new paint/trim, has privacy fence. Basically, it was move in ready and had upgrades one would see in a much more expensive home. 3 weeks ago our loan officer said the appraisal was good for the asking price. The day before closing last week our loan officer tells us that the private mortgage insurer wants to do their own appraisal, now it's the day before closing again and we were informed pmi does not agree with the appraisal of the house. We have the only key to the house, so I assume they didnt even go by the house. We love this house and believe it is well worth the asking price. Does anyone have any advice or experience with this type of situation?
You need to challenge the appraisal. The PMI company evidently did a drive by appraisal without ever going in. All drive by appraisals are inferior to appraisals with interior inspections. They have to be, as they have no idea what the interior of the home looks like or its condition.
The PMI company when reviewing the loan probably noted the previous sale price and is not happy with the " flip". That is the renovation and resale of the home for much more than what it was worth.
They sent out an appraiser or did a BPO ( broker's price opinion) without having someone go into the house. That person based their value on the what they knew of the previous sale of $ 50,000.
This sounds like you are also using a conventional loan. The PMI appraisal is an overlay of typical underwriting. You might have to find a lender who does not do this overlay on loans.
Scream loud and long. Tell them you'll complain to your state banking commission if they are relying on a drive by as compared to an interior appraisal. . But it also won't likely do you any good. The PMI company is nervous about writing the loan and is looking for a way out.
You may have to go back to square one and find another lender who never does PMI overlays. Ask this question first.
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