What do you need to know about FHA appraisals? There are plenty of details to be concerned with depending on the nature of the property you want to buy but some issues loom larger than others.
FHA Appraisals Are Not Home Inspections
That’s an obvious one. The FHA appraisal is meant as a tool for the lender and not the borrower. What’s not so obvious? The appraisal process does not require the appraiser to be an expert in all systems of the home.
That means your roof may have problems the appraiser can’t identify, or the HVAC system might be experiencing symptoms unfamiliar to your appraiser.
In some cases, the appraiser might not even set foot inside a building to be appraised. It’s not so hard to understand why you should not trust the appraisal the same as a home inspection with that fact in mind.
FHA Appraisals Compare The Home To Others Like It
Your home is not reviewed as a stand-alone, but rather how it compares to other properties like it that may be for sale in your housing market.
That is one reason why some find it hard to get certain types of home loans for tiny homes, barndominiums, etc. There simply may not be enough comparable homes in the area to help the appraiser arrive at a fair market value for the home.
FHA Appraisals Rely On Local Building Code
The FHA does not maintain a repository of all state and local code and there are no FHA loan rules on paper describing each individual issue or problem with a home that could arise. State and local building codes will play an important role in whether or not the home “passes” the appraisal process.
If you have questions about an issue on a property you or someone else is selling, you should refer first to the applicable local building code to see whether the issue meets local standards. If it does not, chances are good it may not survive the appraisal process, either.
Some people ask about wells, septic tanks, and other issues; if there is a local building code, health code, or other law applicable, it likely will apply to your transaction depending on circumstances.
FHA Appraisals Are Not Free
Ask a real estate agent or lender what typical appraisal fees might be in your local area, as no two housing markets may have exactly the same fees. Home inspections are also not free, and while they are optional (technically speaking) you should never buy a home without one.
FHA Appraisals May Require Corrections
If the appraiser recommends corrections, there may be a time frame for completing those corrections and the need for an additional “compliance inspection” to ensure the work was done, that the corrections meet FHA and local standards, etc. It’s smart to anticipate the expense of the additional compliance inspection when saving for your mortgage.
You’ll be glad you set aside some extra money for this, and depending on the nature of the property you want to buy you may not need corrections or the compliance inspection.