Understanding FHA Appraisals

Understanding FHA Appraisals

From FHA: “Required repairs are limited to those repairs necessary to preserve the continued marketability of the property and to protect the health and safety of the occupants.”

When you do FHA appraising you constantly have the 3 S’s in your mind:

1. Safety – Any safety issues need to be fixed.

2. Security – I like to refer to this one as “saleability”.  It basically refers to protecting the FHA insured mortgage by keeping the property in marketable condition.

3. Soundness – Are there any structural problems?  Floor joists rotted, or a leaking roof?

Having the appraiser do a FHA appraisal does not constitute a home inspection and it is always recommended you hire a qualified home inspector.

Here are 12 of the many things your FHA appraiser will look for:

  1. ALL the utilities need to be ON at the time of inspection
  2. Missing floor covering, fixtures, outlet covers, and/or exterior siding
  3. Rotted wood or evidence of infestation
  4. Chipping or peeling paint – if built prior to 1978, possible lead paint issues
  5. Windows not opening or closing – need 2 means of egress from bedrooms
  6. Roof with less than 2 years of economic life or with missing or damaged shingles
  7. Garage must have drywall on any wall adjacent to living areas
  8. Crawl space should be at least 18 inches, with no standing water, or debris in the crawl space
  9. Attic must have insulation and access if there is an attic
  10. HVAC, plumbing, and electrical must function properly
  11. Electric garage door must have a reverse stop
  12. Wells must be located 50′ from septic tank, and 100′ from absorption field.

If the property has any of these issues they need to be cured (fixed) before closing.

HUD 4150.2 Handbook for appraisals.  This is the original bible for appraisers and it is constantly updated by issuance of new Mortgagee Letters…

FHA Appraiser Resources -Bottom right of page.  The Mortgagee Letters are constantly updated and the appraiser needs to keep track of this information.

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