In California, the Housing Market has undergone a variety of ups and downs. The Market crash, the foreclosuresand short sales over the past five years have re-created the Home Loan Industry with multiple rules and regulations. The part I want to talk about today is about the process of buying a home that was previously owned by a, short-term investor.
In this scenario, I am calling a short-term investor as a person or entity that has purchased a previously foreclosed or banked-owned propertyfor the sole purpose of selling the home in less than 12-months. Many of these homes are refurbished by the investor and then re-sold at a significant profit to a new buyer. This practice is called, “Flipping” and as you watch my video blog, there are some extra steps that your lender is required to follow when a person buys a property from an investor who is intending to flip.
Appraisal and Review Appraisal
During the new loan process, a standard property appraisal will be ordered for the new loan. In
addition, a lender may call out proof of property improvements, which may include but not limited to receipts and copies of work orders done on any property improvements. This is used to justify the re-sale price that the loan underwriter will review.
As the difference between the Investors original purchase price and the Re-Sale price to the new home buyer widen; so do the inquiries from the lender. The lender who may question the improved re-sale value of the home may require a Second, or Review appraisal. In some cases, the review appraiser my have a different opinion or appraised value of the home.
What do you do when this happens?
The best advice is not to panic. Just like the original appraisal that may vary in value; the home buyer always has an option to question the review appraisal by requesting a secondary review opinion from another licensed appraiser. Remember, these appraisers are human and only offer you their opinion of Market Value of your home. You have a right to question their opinion.
This may seem cumbersome and expensive, however, it is well worth the time and expense of the buyer to request their Loan Officer to exercise all options before going through the sometimes, lengthy, re-negotiation process between the Seller and Buyer with a new sales contract based on a re-vised price.
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