A reader asks, “Just bought a home and while in crawl space installing drain tile I realized the main sewer line was leaking. The house was unoccupied for 2 years prior to purchase. I have an FHA loan and cannot afford to have contaminated soil removed and line repaired. I realize that I made a mistake buying this home but I felt protected from major issues in getting an FHA loan. What can I do?”
The most important question in this situation is whether the borrower paid for a home inspection prior to purchase. It can be tempting for borrowers to rely on the appraisal alone to catch problems or issues with a house, but it’s never a good idea to do so. Why?
FHA loan rules are clear–the FHA appraisal is not intended as a stamp of approval on a home or a guarantee that the property is defect-free. a borrower should, regardless of the type of home loan on a new purchase property, always pay for a home inspection. Consider what the FHA official site says about appraisals versus inspections:
“FHA does not guarantee the value or condition of your potential new home. If you find problems with your new home after closing, we can not give or lend you money for repairs, and we can not buy the home back.
That’s why it’s so important for you, the buyer, to get an independent home inspection. Ask a qualified home inspector to inspect your potential new home and give you the information you need to make a wise decision.
As part of our job insuring the loan, we require that the lender conduct an FHA appraisal. An appraisal is different from a home inspection. Appraisals are for lenders; home inspections are for buyers. The lender does an appraisal for
• to estimate the value of a house
• to make sure that the house meets FHA minimum property
• to make sure that the house is marketable
Appraisals are not home inspections.”
That information is found in the FHA/HUD PDF file titled, “For Your Protection, Get A Home Inspection”.
If a borrower HAS paid for a home inspection and a defective condition still appears, you may need to seek legal counsel in order to determine who might be liable and how.
Do you have questions about FHA home loans? Ask us in the comments section.