The Homepath Renovation loan program is a sham...

We found a home and put in an offer that was accepted about four weeks ago for a house with this program. The asking price was $49, 000. We paid for an inspection out of pocket, got estimates on repairs, and everything seemed to go just fine. The total loan amount was going to be about $61, 000 for the home and repairs. Then we paid for an appraisal last week, which is required for this program to satisfy the unerwriters, and the house appraised for significantly less that the asking price that we had offered weeks earlier ($39, 000 with no repairs; $50, 000 with repairs done). So, we could not get a loan for $61, 000 and the only way we could buy the house would be to pay the difference( $61, 000 - $50, 000 = $11, 000) plus all the other closing costs. The seller (bank) would not come down on their asking price to enable us to get the loan to buy it, and we were furious! We are now out the money for the inspection and appraisal- a total of over $500!

The listing agent and our selling agent both assumed the house would appraise high enough to not cause this issue. In fact, we did too as the house is a nice concrete house on half an acre in a nice neighborhood. The bank is not going to sell this house to anyone for the asking price with it appraising so low, so I don't understand why they won't lower the asking price to reflect the actual value. Our real estate agent says that if we want to pay for another appraisal, we might get a different person who might appraise it higher, but that there is no guarantee. We are not going to spend any more money out of pocket at this point.

What doesn't make any sense to us or our real estate agent is that no one will be able to get a loan and buy this house for anything more that $38, 000 without repairs or $50, 000 with them done because of the appraised value. The bank knows this, but still won't come down on the price. We feel like the bank is just waiting for a cash offer, and even though the home is Homepatch approved, it will never qualify for the program because the bank is not being realistic about what it is worth. Seems like a plot by the bank or listing agent to get an appraisal done on the property and not have to pay for it.

My advice to anyone looking to buy a house through the Homepath program is to not do it. But if you really think the house is a good deal (like we did in our case), you should appraise the house yourself before even making an offer. Check other houses that sell in the area and compare price per square foot to make sure it will even appraise as high as the asking price. But even then, you may have the same problems as us when the official appraiser is done because each appraiser is different (appraisals are just educated opinions). The home we were going to buy had appraised through the tax collector for $95, 000 in 2010, but only for $50, 000 a year later! Personally, we are never going to consider a Homepath loan ever again. The banks should get the houses appraised before even putting them on the market.