FHA Appraisal Process Versus Other Home Appraisals
This Article On FHA Appraisal Process Versus Other Home Appraisals Was PUBLISHED On May 13th, 2019
Home buyers who are seeking a home loan by a lender, the lender will require a home appraisal. Every loan program has its own home appraisal requirements.
- FHA Loans are the most popular loan program in the United States
- Home borrowers who get qualified on FHA Loans need to obtain an FHA Appraisal
- The lender orders the appraisal
- The FHA Appraisal Process is like any other home appraisal process
- However, it needs to be done by an FHA Approved Appraiser
In this blog, we will discuss the FHA Appraisal Process.
What Is A Home Appraisal
All lenders require a home appraisal. A home appraisal is an assessment of the subject property.
- The main purpose of a home appraisal is to determine the value of the subject property a borrower is purchasing
- The appraiser visits the subject property and evaluates the condition of its exterior and interior
- The appraiser will research nearby comparable homes in the area that recently sold
- The value is determined not by the listed homes but similar and like properties similar to the subject property that has sold recently
- The subject home needs to meet minimum HUD Property Guidelines with emphasis on health, safety, and security
- If the property does not meet HUD Guidelines, the appraiser will give the parties time to correct issues and a re-inspection can be ordered
- Once the appraiser reviews comparable sales in the area and the property meets HUD Guidelines, the appraiser will determine a value for the subject property
The value of the property per appraisal is the value lenders, buyers, sellers will go with.
FHA Appraisal Process Versus Other Home Appraisals
FHA Appraisal Process need to abide by HUD Property Guidelines.
- FHA Appraisal Process details how the home appraiser needs to inspect the subject property
- FHA Appraisal Process sets apart by other appraisals
- Other home appraisals mainly are concerned with the value of the property
- With FHA, the appraisal needs to state the value of the property as well as the condition of the property
- Furthermore, the property needs to be safe, secure, and habitable
- With conventional home appraisals, the lender is mainly concerned with the value and the subject property. The property does need to be habitable
- The condition of the property based on the property’s market value is the main concern on conventional appraisals
Peeling paint, damaged and/or unsecured handrails, broken windows, non-working garage door openers, and/or other safety, health, hazard issues are taken into account with FHA Appraisals.
FHA Appraisal Process And HUD Guidelines
Per HUD 4000.1 FHA Handbook Mortgage Guidelines, all homes that are purchased with an FHA Home Loan must have an FHA Appraisal completed by a certified HUD-APPROVED Appraiser.
- The appraiser needs to physically be at the subject property and inspect both the interior and exterior of the home as well as the area around the property
- The appraiser needs to take photos of the subject home and have it included in the file
- The photos of the sides, front, and rear of the property need to be taken
- Photos of any additions to the property and/or added-value to the property need to be included as well
Photos of comparable sold homes need to be taken and included on the subject property home appraisal.
Home Inspection Versus Appraisal?
An FHA Appraisal is not a home inspection. Home buyers need to order a home inspection.
- FHA Appraisals are mandatory whereas home inspections are not
- A home inspection is not required by the lender
- However, it is highly recommended that a home inspection be done on all home purchases
- Appraisers will look at the general condition of the property
- They will take an in-depth look at the roof, foundation, lot grade, ventilation, HVAC units, electrical wirings, basement, crawl space
- Appraisers will check for violations and/or whether it works and not inspect
The home inspector, on the other hand, will thoroughly inspect the longevity of the roof, HVAC, appliances, mold, foundation/crawl space, plumbing, electrical systems, and other mechanical systems.
FHA Appraisal Property Inspection Report
Many homes that are built prior to 1978 may still contain lead-based paint. Lead-based paint has been proven to be a health hazard. The appraiser’s responsibility is to inspect the property for peeling and/or chipping paint. If there is peeling/chipping paint, it needs to be corrected prior to getting the FHA Appraisal approved by the lender. All the stairs need a handrail. This is due to safety concerns. HVAC systems need to be fully functional, safe, and per code. The roof needs to have at least 3 years of life. All bedrooms need to have excess to the exterior with windows and/or doors in the event of a fire. No cracked foundation or signs of flooding.
According to HUD Handbook 4150.2, the home “must be free of all known hazards and adverse conditions that may affect the health and safety of the occupants. The bottom is that if something poses a threat to the health and safety of the occupant, or to the structure itself, it will probably be marked as “subject to repair.” This is the central theme that runs throughout the appraisal guidelines. More: For a complete checklist of these and other appraisal requirements, refer to HUD Handbook 4150.2
What If Appraiser Finds Home Does Not Meet HUD Guidelines
Most people are under the belief that FHA Appraisals are much more strict than other home appraisals. Many homeowners will not sell their homes to home buyers who are only qualified for an FHA Loan. FHA Appraisals were strict prior to the 2008 Housing Bubble and Real Estate Meltdown. However, it has eased up tremendously. The health, safety, security requirement has gotten lenient over the years. If the home fails to meet HUD Property Guidelines, the appraiser will give the homeowner time to fix it and the appraiser will come back for a re-inspection. Most deficiencies can be corrected by the seller and/or buyers. A re-inspection costs around $100. Broken windows, peeling paint, and other health/safety issues can easily be corrected. For more information on this topic and/or other mortgage/property related topics, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at firstname.lastname@example.org. We are available 7 days a week, evenings, weekends, and holidays.