Question 62

Paying the $15,000 difference between contract price and appraised value is acceptable to the FHA.

In the scenario described, the FHA allows buyers to cover the difference between the appraised value and the contract price, which is a common practice when the appraisal comes in lower than expected.

A) Making sure this loan is not insured because of the lower appraisal

This option is incorrect because the FHA does not require loans to be uninsured solely based on a lower appraisal. Instead, they have guidelines that allow for certain adjustments and methods to address appraisal discrepancies, making this option unfeasible.

B) Giving the improvements more value and adding money to the appraisal

This option is not acceptable as it implies artificially inflating the appraisal value, which is against FHA regulations. Appraisals must reflect the true market value of the property based on objective criteria, and manipulating the appraisal is not permissible.

C) Paying the $15,000 difference between contract price and appraised value

This option is correct as it aligns with FHA guidelines that permit the buyer to pay the difference in cash. This practice allows the transaction to proceed without altering the appraisal or the loan terms, thus maintaining the integrity of the FHA loan process.

D) Allowing the buyers time to find a property closer to their approved loan amount

While this option may seem reasonable, it does not directly address the issue of the current appraisal. Allowing more time to find another property does not resolve the immediate situation regarding the lower appraisal and the existing contract.

Conclusion

The correct answer, paying the $15,000 difference, directly resolves the appraisal issue while adhering to FHA guidelines. Other options either misinterpret FHA practices or fail to address the immediate concern surrounding the appraisal discrepancy, demonstrating why they are not viable solutions.