FHA appraisal rules are found in HUD 4000.1, which is the rule book for all FHA single family mortgage loans, refinancing, and reverse mortgages. There are some specific instructions where aspects of the appraisal are concerned, including systems found in the home such as heating, cooling, and plumbing.
For example, where heating the home is concerned, FHA loan rules begin by stating, “The Appraiser must examine the heating system to determine if it is adequate for healthful and comfortable living conditions, regardless of design, fuel or heat source.”
There may be situations where the heating system installed is not quite up to the task of managing the entire residence. Rules for the FHA appraisal address this directly:
“The Appraiser must notify the Mortgagee of the deficiency of MPR or MPS if the permanently installed heating system does not:
-automatically heat the living areas of the house to a minimum of 50 degrees Fahrenheit in all GLAs, as well as in non-GLAs containing building or system components subject to failure or damage due to freezing;
-provide healthful and comfortable heat or is not safe to operate;
-rely upon a fuel source that is readily obtainable within the subjects geographic area;
-have market acceptance within the subjects marketplace; and
-operate without human intervention for extended periods of time”
The rules state that centralized systems are not required, but “if installed, must be operational. If the air conditioning system is not operational, the Appraiser must indicate the level of deferred maintenance, analyze and report the effect on marketability, and include the cost to cure”.
Where plumbing is concerned, HUD 4000.1 states, “The Appraiser must notify the Mortgagee of the deficiency of MPR or MPS if the plumbing system does not function to supply water pressure, flow and waste removal.”
This section of the rules give the appraiser specific instructions. “The Appraiser must flush the toilets and operate a sample of faucets to check water pressure and flow, to determine that the plumbing system is intact, that it does not emit foul odors, that faucets function appropriately, that both cold and hot water run, and that there is no readily observable evidence of leaks or structural damage under fixtures.”
And when it comes to the water heater, there are some additional requirements of the appraiser:
“The Appraiser must examine the water heater to ensure that it has a temperature and pressure-relief valve with piping to safely divert escaping steam or hot water. If the Property has a septic system, the Appraiser must examine it for any signs of failure or surface evidence of malfunction. If there are deficiencies, the Appraiser must require repair or further inspection.”
Septic systems may be subject to additional regulation due to local or state ordinances, so it is good to remember that FHA appraisal rules are not the only guidelines that can affect the appraisal in this area.