Can anyone here help with my questions regarding FHA/USDA Mortgage loans?

[Trailrider1951]

I am selling my house to my two friends. I have owned this house for 10+ years, first with a
conventional mortgage, then I refinanced in 2009 with an FHA mortgage to get a lower interest rate. My friends have never owned a house and are very excited to buy mine. They currently live here and rent the upstairs 1 bedroom/1 bath suite of rooms (975 sq ft with living room and kitchenette also) and love it here. They have qualified for a mortgage with income and credit scores and have no other debt other than 1 credit card apiece. Today was to be the FHA/USDA inspection and appraisal.

This morning, the appraiser arrived and began her inspection. Here is what happened: She started talking about the things she found that I would have to fix before we could close on the house. I am willing to fix anything within reason, but she refused to discuss her findings with me and left after being here less than 10 minutes. Here are some of the things she mentioned:
1. Peeling paint on the house wood trim. This is no problem to fix.
2. Old deck at back of house is leaning and needs repair. This deck was in a similar condition back in 2009 when I got the last FHA appraisal and it passed. Nonetheless, I am willing to repair this.
3. Old storage shed in back yard is missing some wall plywood sheeting and needs the roof and flooring replaced. This shed was in a similar condition back in 2009 when I got the last FHA appraisal and it passed. In fact, it was never even mentioned on the 2009 Uniform Residential Appraisal Report, or any where else in the report, including pictures taken. Apparently now it needs to be completely rebuilt or torn down.
4. Windows in the garage were not installed properly and need to be replaced. Those windows were installed long before I bought the house and I have not changed them at all. They are visible on the 2009 appraisal document (picture of garage on page 13). I informed Ms. XXX of this but she refused to discuss it with me, and then got in her car and drove away. In fact, I had a pencil and tablet to make a list of repairs to be made, but she did not want to talk to me anymore and left. If I have a list of repairs to make, I could get started on them, but I cannot afford the time and money to completely rebuild the garage and the shed. I also do not understand why items that were no problem before are a problem now. Ms. XXX refused to explain this to me. She made no attempt to further inspect the house.

The people who did the FHA appraisal in 2009 were XXX Valuation, N. Mopac, Suite XXX, Austin, TX, a reputable appraisal company. I have no other obstacles to selling my house but this one. Can anyone offer any suggestions as to how to proceed with the sale? I have a call into the mortgage broker handling the sale, but I would like some other opinions before I make a decision. Needless to say, my friends are heartbroken that they may not get the house. And I do not want to sell it to anyone else. Thanks for your time.

[we can do it]

1. I would consider tearing down or removing shed. Remove garage windows cover with plywood.

FHA appraisal rules change often. The FHA appraisal stays with the house for (6-9?) months.

[Sedona]

2. I'm a licensed Realtor in three states. Sorry if this sounds harsh.

Last edited Wed May 10, 2017, 04:17 AM - Edit history (1)

The appraiser and mortgage broker are working for the buyer who pays them. They have no obligation to discuss anything with you, the Seller. In fact they have a duty of confidentiality to keep thier findings between themselves and the Buyer. Appraisers are all different. 2009 was a LONG time ago in real estate years. In 2009 property defects may have been overlooked the chaos of a full blown real estate market crash.

Did the appraisal find the property met the value of the purchase price?

Are you being represented by a realtor? Is the buyer? They should explain that FHA requires the property be habitable and in somewhat good shape. If you want the sale to go thru, make the repairs or find another lender or buyer.

If you were my client, I'd tell you to tear down the garage and shed and discount the value of same to buyer toward closing costs.

[Trailrider1951]

3. No, Sedona, no realtor is involved in this transaction

I was totally screwed by a realtor when I went to sell the first house I owned, many years ago. He talked me into signing a six month contract where he would handle the sale of the house. In the next five and a half months, he brought me no buyers and did not show the house once. With two weeks left in the contract, and me wanting to leave the state for a new job, he brought me his cousin as a "buyer" who assumed my mortgage and left me to pay the closing costs. My cash flow from that transaction was in the negative numbers. I haven't trusted realtors since that experience. My son-in-law's mother is a real estate lawyer for the city of Austin. If I want an expert opinion on anything other than government backed mortgages, I'll ask her.

As to your other question:
Q: Did the appraisal find the property met the value of the purchase price? Yes, it did. I owed about $30,000 less than what the house appraised for. The appraised value in 2009 was $103,000. My mortgage was refinanced at that time from a 7.5% conventional to a 5% FHA. Today I owe about $65,000 on the house. My mortgage broker tells me that property values in Williamson County where I am (Round Rock-Georgetown-Cedar Park Areas) have increased tremendously in the last four or five years, so that the value should be much more than my current $103,000 asking price. I could probably get more money on the open market, but my friends really want this house, and I want them to have it. Some things are more important than money.

[Sedona]

4. If money is no object then by all means...

Last edited Wed May 10, 2017, 04:54 AM - Edit history (2)

Do whatever it takes to close the deal or pay for another appraisal which may or may not come out the same. Your garage and shed are probably dragging the value down. What is the condition of the rest of the house? How does it compare with the neighbors?

Honestly with both sides unrepresented by agents I'm not not surprised you are now in this position. A good realtor (or two) would have done a proper comparative market analysis to come up with price that worked and would have given you both a heads up on FHA's rules about the condition of the property. My CMA's usually come within 1% of the appraisal.

Realtors also advise Sellers not to be around during appraisal much less following around taking notes. You pissed her off and got a shitty appraisal. You shot yourself in the foot with that one.

Don't be surprised if the buyers' lender refuses to speak with you. He has a duty of confidentiality to the buyers just like the appraiser.

Since you've chosen to be unrepresented on both sides of this transaction, the only person you can get lender/appraisal info from is the buyer. The buyer can choose not to share it with you. Whats the due diligence period on your contract? Who wrote your contract? If I were the Buyers' agent, I'd tell them to walk away from this deal. If they're approved on your place they're approved on a place that doesn't need so much work.

And please don't paint all Realtors with the same brush. Me and my colleagues don't deserve to be lumped in with a guy who ripped you off years ago. 99.9% of us work our asses off for our clients as well as giving free advice on random message boards.

Did you file a complaint with the real estate dept? That was the oldest trick in the book and agents have gone to jail for less.

[Phentex]

5. Can they find another lender?

You are free to sell your house "as is" but it's up to your friends to find a lender.

Home inspections will find all kinds of things, some big, some small. You can decide what you are willing to fix. And that's part of negotiating the price with the buyer. Sounds to me like your friends need to find a new lender.