September 1, 2015
FHA appraisals can be tricky to understand, depending on the outcome. For example, we get asked several times a year why an FHA appraiser required corrections on cracked or peeling paint on surfaces in a given home.
The question is usually associated with the seeming cosmetic nature of these corrections. “Why,” the readers will ask, “is this a must-fix when it’s just some paint peeling off a windowsill or door frame?”
The answer in this particular case has a lot to do with lead abatement. Depending on the age of the home, lead paint may or may not be present. The FHA appraisal process requires mandatory correction of peeling paint in order to reduce potential or actual lead hazards.
It’s true that this could, in certain cases, be perceived as a bit over-protective, but FHA appraisal rules must be followed and it would seem that a “better safe than sorry” approach is what’s at work in some cases.
But that’s only one aspect of the issue. FHA loan rules are designed to protect the borrower’s investment (and the lender’s financial risk in issuing the loan). A home that has uncorrected lead paint issues may be put up for sale again at some point in the future once the loan has been issued. Could those uncorrected paint issues affect the resale value of the home?
Keep in mind that FHA loan rules do not directly address that concept in the appraisal rules, but it seems a fair inference to make. Peeling paint represents more than a mere cosmetic issue depending on circumstances. Since the appraiser has no way of knowing whether the original, now-peeling paint contains lead or not, the corrections are required.
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It’s designed especially for real estate websites–a widget that displays FHA loan limits for the counties serviced by those websites.
It is easy to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today: http://www.fha.com/fha_loan_limits_widget
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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