FHA Appraisals 101
What's the difference between Conventional and FHA appraisals?
CONVENTIONAL - VALUATION
1. Determine market value of property.
2. Evaluate condition of property as it relates to value.
FHA - VALUATION AND INSPECTION
1. Determine market value of property.
2. All FHA appraisers must follow strict HUD minimum property standards for health and safety. In most cases, property issues uncovered during an FHA appraisal can be resolved easily. Once corrected to the appraiser's satisfaction, the deal can move forward.
3. FHA appraisals are transferrable.
4. FHA case numbers stay with the property, not the borrower.
NOTE: A separate home inspection is typical with most purchase transactions during the initial Attorney Review, regardless of loan product.
What are the most common issues found in an FHA appraisal inspection?
PAINT
Due to lead-based paint concerns, homes built before 1978 cannot have any evidence of peeling/chipping paint. If so, the surface must be scraped and painted. Additionally, any exterior paint that is peeling to the point of exposed wood must be painted.
UTILITIES
The following utilities must be turned on at main power source, so the appraiser can sample at the time of appraisal: Outlets, lights, plumbing, appliances, heating and cooling systems.
WINDOWS
Barred windows in bedrooms without exterior access must have security release hatches.
HANDRAILS
All steps and stairways must have handrails.
WELL, WATER SUPPLY AND SEPTIC SYSTEM
The water well or septic tank and leach lines to ensure they are equipped, identifiable, and acceptable distance from property lines and sources of pollution. The FHA has specific criteria for location of these systems (e.g. a property must be more than 300 ft. from underground storage tanks).
Any additional FHA property requirements?
There are a number of additional requirements set by the FHA that must be met for approval. FHA inspections require a different level of detail than a standard inspection. Here are some unique property FHA appraisal requirements:
- Condominiums: FHA Project Approval required
- New Construction: Copy of plans and specs must be furnished to appraiser prior to inspection.
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