Convertible Appraisal - Conventional and FHA

In today’s lending environment it’s challenging to know what type of appraisal to order from the very start. With values always in question and various programs available, the decision to go FHA or Conventional is sometimes a tossup.

Due to this ordering appraisals can sometimes be a guessing game. Do you order an FHA appraisal in hopes the property meets FHA minimum standards and that the value isn't high enough to go conventional? Or do you order the conventional appraisal through the third party then pray it comes in high enough to meet the GSE's guidelines?

What happens when the you order a conventional appraisal and value isn’t high enough for conventional but the property does meet FHA's guidelines? 

In the above situation you basically have two options:

1. If the appraiser is FHA approved, the appraiser or management company could charge an "upgrade fee" usually $100 - 200 to go back, reinspect the property to meet HUD's standards, rewrite the report for HUD and be on your way. If the management company or appraiser refuses to change or accept the upgrade you would have to order an entire new appraisal which is not cheap and can take several days to a week to complete.

2. If the original appraiser isn’t FHA approved you are forced order a full new appraisal and pay the additional full cost.

What if there was a better way?

What if there was a way to get both upfront?

There is a better way! We have the idea of a convertible appraisal. Essentially it’s an appraisal done by an FHA approved appraiser, the inspection, the report and all reporting requirements are completed as if it was FHA, but the only difference is that it doesn’t have to be FHA and doesn’t cost as much as an FHA product.

It’s an either or type situation. The scope of work from the appraisers prospective is:

"Appraisal for FHA or Conventional financed will be based on a final determination and underwriter approval"

It can either be FHA or Conventional. All it takes is a phone call and an e-mail. You can really have it your way!

MORE IMPORTANT NOW THEN EVER

As FHA adopts the HVCC this is going to be vital now more than ever before. No one wants to order two appraisals and pay for two for the same property. With the convertible appraisal no one has to ever!

There is no "upgrading" when it comes to most management companies. Changing the defined scope of work based on the original assignment means more money from your borrower and appraisal fees upwards of $600.00 for one appraisal. With the convertible appraisal this will not happen.

So what’s the advantage?

You will pay a little more upfront than a regular conventional appraisal. However, if the case ever arises where it needs to be switched, it won’t be an issue. The original scope of work was defined as an appraisal with conventional or FHA financing which means it’s just a few simple changes and you’re off to the closing tables.

The advantage is clear. With flexibility of Conventional or FHA it enables both the lender and the loan officer to offer the best product to the customer at the most affordable price.

FAQ:

Aren't FHA's values less?

No. FHA does have stricter property standards and require repairs before financing can take place. However, the comparable selection, listing, and general reporting requirements are very similar, and almost identical to a conventional appraisal.

What is the difference between an FHA and Conventional appraisal?

They are very similar. Except, FHA requirements are a little above the conventional reporting requirements. There are some required repairs by FHA that must be done.

How much extra is the Convertible Appraisal?
$15