FHA Appraisal Requirements
If you are looking to buy or sell a home that involves an FHA mortgage, the lending guidelines will require an appraisal from an approved FHA appraiser.
This appraisal of the home will accomplish two things: first, to find out how much the home is worth in comparison to other similar homes in the nearby area, and second to make sure that the property is in line with the HUD guidelines. HUD is the name of the Housing and Urban Development organization operated by the US government.
The FHA guidelines of the appraisal are intended to protect the buyer as well as the lender. It protects the buyer by disqualifying a home if it has too many issues that need repair before purchase. It protects the lender by making sure the home is worth the asking price of the sales contract.
Listed below are the basic property requirements for every home, regardless of location.
Basements or Crawl Spaces
A crawl space beneath a home must be accessible by the appraiser. The guidelines state that the appraiser should be able to get a minimum of his/her head and shoulders in the crawl space.
The crawl space should have free-flowing air, with nothing blocking the air and no standing water of any sort.
If the home has a basement, the FHA appraiser will be searching for any problems that can impact the foundation of the home. The appraiser is also checking for an excess amount of moisture or even standing water.
If the home has a sump pump, the pump will be tested to see if it is working properly.
Much like a crawl space, the appraiser must be able to at least get his/her head and shoulders into the attic space.
Beyond that, the attic will be checked for several issues. First, the appraiser will determine if there is an adequate amount of insulation. The amount will be determined by the geographical area as well as the type of insulation used.
Next, the appraiser will look at the rafters and decking to ensure the wood is in good shape with no appearance of damage, moisture, or mildew.
Moving on from the rafters and decking, the appraiser will diligently search for signs of any type of leaks. Leaks can come in the form of a hole through the shingles and decking, or they can be around a chimney or vent. A leak in a roof can lead to serious damage if it is not corrected.
If there are any wires in the attic, they will be inspected for fraying or other signs of damage.
A brief look will be made in select spots to see if there is an infestation of insects or rodents.
Finally, the appraiser will look to see that air can flow through the attic without any obstructions.
Any items that are stored in the attic will need to be moved to the side or removed completely for the appraiser to have an unobstructed view of the necessary components.
The fuses, breakers, and wiring of the home should be able to handle the basic needs of the property on a normal day. Any wire that is exposed or shows signs of fraying will need to be repaired. Faulty fuses, damaged or outdated breakers may need to be either repaired or replaced.
Beyond the wiring, the FHA appraiser will check the outlets and light switches to make sure they are functioning properly.
If there is some question about a part of the electrical system, the appraiser might request an inspection from a licensed electrician.
Working Condition of Appliances
If any of the appliances are staying with the home after the sale, then the appraiser will need to determine if the items are in working order. Examples of appliances that need to be in working condition are
- Washing machine
- Garbage compactor/disposal
The FHA appraiser will note which appliances are staying with the home and which, if any, are being removed after the sale.
Cooling and Heating System
The FHA guidelines state that the HVAC system (Heating, Ventilation, Air Conditioning) must be in proper working order and allow the home to be comfortable.
Each room must have a source of heat. The heat source must be supplied by resources that are common to that area. This means that the heat can come from electricity or natural gas.
There are a few exemptions to this rule in places like Hawaii and south Florida.
A home that relies mainly on either a solar-powered heating system or some type of wood-burning device is also required to have an alternative heating device that can get up to a minimum of 50 degrees Fahrenheit.
While a space heater can meet the temp requirement, it usually does not qualify as a home’s main source of heat.
A central air conditioning system is not required by any of the FHA guidelines. But, if such a system is present, it must be in working condition. The appraiser will inspect it and notate any deficiencies in the system in the appraisal report.
Water can cause a lot of damage to a home, and it can come in more than one form. One of the tools to combat the effect of water is to have correct drainage.
Drainage can be controlled from the roof by having an adequate gutter system with downspouts that push the water away from the building and, most importantly, away from the foundation.
The grading of the yard can also play a part in diverting water away from or around the foundation of the home.
If a draining problem is present either from the roof or from the contour of the yard, it will be noted in the appraisal and will need to be remedied before the loan can close.
As previously mentioned in earlier sections, the FHA appraiser will take a good, long look at the foundation of the home to make sure there are no current problems, or that deferred maintenance will not impact the foundation of the home.
Some foundation issues can be noted in an appraisal and can be fixed to continue with the FHA loan. There are other problems, such as a home that is not centered on the foundation properly, that can cancel the loan process altogether.
A recurring theme is to make sure water is not causing any type of problem to a home. This also includes the plumbing system for the home.
The appraiser will make sure that there is an adequate supply of freshwater, both hot and cold, to the kitchen as well as all bathrooms.
The water needs to drain correctly in all areas, including the kitchen sink, bathroom sinks, toilets, and showers/tubs.
There needs to be no evidence of leaks in any of these areas as well.
The water heater will be inspected too, as part of the plumbing system. The water heater needs to have an adequate supply of freshwater, correctly heat the water, and show no signs of leaking or other types of damage.
The FHA appraiser will also make note of any external factors that can cause the property to be unsafe. Some examples of unsafe external factors are things like unusually large amounts of traffic, harmful fumes from nearby manufacturing or waste disposal factories, gas lines that are under extremely high pressure, or power lines that pass directly over the structure.
Any of these items could cause major damage to the house or the inhabitants if some faulty issues occur.
A medical study found that lead paint can be harmful to people. This led to a new rule in the year 1978 which stated lead could no longer be used in producing paint for the exterior or interior of homes.
A home that was made before the year 1978 may have been painted with lead in it.
The appraiser will inspect the painted surfaces of the home to check for any type of crack in the paint or peeling. The idea is to look for exposure to old coats of paint.
Thankfully, the presence of lead paint can be easily remedied. By scraping away the visible paint, and then covering the area with new oil-based paint, the problem is solved.
The appraiser is only required to mention the lead paint presence if there are any signs of peeling, cracking, or chipping. This can occur on walls, doors, ceilings, and along the window frame.
The FHA appraiser will also be looking at the foundation, attic, and walls for any sign of termites. Termites can destroy a home if they are not caught in time.
If the FHA appraiser suspects the presence of termites, then a full inspection may be ordered from a licensed exterminator to assess the level of infestation and come up with a plan to remove the insects.
Expected Life of Roof
The current roof needs to be in working shape and not be a costly burden to the new owner.
The appraiser will detail what type of material is used for the roof (shingles, metal sheets, clay, etc.) and a general comment about the current state of the roof.
The FHA appraiser will not only look over the roof and try to spot any potential problems, but also inspect the connecting parts such as a chimney, the eaves of the home, any skylights, and the connection of the gutters to the roof.
It is important to note that the roof must appear to be in good enough condition that it should last at least 24 months after the new buyer takes possession of the home. If the roof does not seem in good enough shape, a professional roofer may be contacted to inspect it and provide their opinion.
The FHA Appraiser Found Problems with the Home: What do I do?
If the appraiser discovered a problem with the home, it is wise that you do not panic. Many homes that seem to be in excellent condition when you walk through actually have a few underlying issues.
Some of these issues can be minor, such as replacing a small cracked windowpane or adding a different type of cover to an electrical outlet.
Other items, like foundation problems or a leaky roof, could be much more costly and time-consuming.
After finding out that there are issues to be addressed, your first call should be to your real estate agent. Find out if the seller is willing to either make the repairs or negotiate the price of the home to compensate for the repairs.
Secondly, if you have not done so already, you should order a home inspection. An appraiser’s main job is to determine the value of the home and point out any issue that may lessen the value. A home inspection will search all over the home and look for problems. The home inspection can give you a better idea of the depth of the problems and give you a chance to decide if you want to fix the property or choose another home.
Depending on your approval status with the lender, another alternative could be to get an FHA 203K loan. This type of loan allows you to borrow money above the purchase price to make repairs and/or renovations to the home. This is something that you would need to discuss with your lender.
The overall purpose of the guidelines for FHA property requirements falls into one of three areas:
- The lender wants to make sure that the borrowers have a reasonable level of safety in the home
- The lender and buyer wish to determine that the home is structurally fit for new owners
- The lender needs assurance that the property is worth the value of the loan
Summing Up FHA Minimum Property Standards
These FHA guidelines help provide confidence to the buyer that they know they are getting a safe and sound home, and the lender feels that the property is adequate collateral for the home loan.
About the author: This article on “FHA Appraisal Requirements and Standards” was written by Luke Skar of MadisonMortgageGuys.com. As the Social Media Strategist, his role is to provide original content for all of their social media profiles as well as generating new leads from his website.
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