October 17, 2011
A recent reader question came in about FHA appraisals. “How do I file a complaint about a lemon home? It was inspected by an FHA approved inspector.” This question raises two very important issues. Does the FHA “inspect” properties? If not, who does?
The FHA requires an appraisal before an FHA loan will be approved and can move to closing. The appraisal is designed to insure the property meets minimum standards, is safe and livable, and the appraisal also establishes a fair market value. But an FHA appraiser is not an inspector. The FHA appraisal process is not designed to guarantee the home is free from defects or problems.
The appraisal process does not guarantee your home is problem-free. Before a borrower commits to purchasing the home, or as a condition of the purchase agreement, he or she should hire a home inspector to give the property a complete review to find existing or potential problems in areas such as the foundation, the roof, electrical system and plumbing.
The inspection must be paid for at the borrower’s expense and is not required for the purchase of a home with an FHA mortgage–but it is a critical part of the home buying process. Buyers have no recourse with the FHA if they purchase a home going solely on the FHA appraiser’s report on the property, and the government routinely warns house hunters to pay the extra money an inspection takes.
The U.S. Department of Housing and Urban Development, Federal Housing Administration released a publication in 2009 called, “For Your Protection, Get a Home Inspection”. It reminds FHA loan applicants, “An appraisal is different from a home inspection. Appraisals are for lenders; home inspections are for buyers.” The same publication warns, “If you find problems with your new home after closing, FHA can not give or lend you money for repairs, and FHA can not buy the home back from you.”
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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