Can I Get a Refund on My FHA Appraisal?
This is an important issue. When you make an offer on the house you want to buy with an FHA home loan, there must be an appraisal.
Why Appraisals Are Needed
The lender needs this process to ensure the house meets minimum standards and to establish the current fair market value of the property. The appraisal is not optional for FHA mortgages.
If an appraisal assigns a fair market value lower than the asking price of the property, FHA loan rules say you cannot be forced to buy the home. You can walk away from the transaction without penalty according to HUD 4000.1, the FHA Lenders Handbook.
Some borrowers walk away from the property, not liking the terms or the price, or both. When this happens the borrower is entitled to a refund of earnest money paid up front, where applicable.
Are FHA Appraisal Refunds Possible?
Should a buyer expect a refund on the appraisal as well as their earnest money?
Unfortunately, this is not possible. Why? Because the appraisal is a service and you pay for the service and not the outcome of that service. Like paying a lawyer to represent you in court--if you are found guilty you still have to pay the lawyer.
An FHA appraiser is paid, like the lawyer, to perform the service. The outcome is not guaranteed.
Those who disagree with the results of an appraisal are free to appeal, but HUD 4000.1 says appraisals cannot be reaccomplished simply because the buyer or seller disagrees with the value of the home. The logical question at this point is what conditions WOULD permit a re-appraisal?
Are FHA Re-Appraisals Possible?
A new appraisal is possible, according to the FHA official site, when there are “material deficiencies” in the original appraisal report. If this is true in your case you will need to discuss such concerns with the lender and you may wish to contact the FHA directly for guidance.
In some cases it may be necessary to hire legal counsel with experience in such matters, but in other cases it may be best to walk away from the transaction and find another property.
It should also be noted that this issue is NOT the same as getting a new appraisal if the old one was allowed to expire. That’s a separate issue and the topic for another article.
What You Need to Know About the Appraisal Fee
The Appraisal is an Important Requirement
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