January 20, 2016
A reader got in touch recently to ask about an FHA appraisal. “…septic system…was discovered bad after closed on and moved in. The home had been for sale for over a year and unoccupied for 6-8 months. FHA appraisal didn’t do any inspection of this system and it appears they should have due to the length of time it hadn’t sold or been unoccupied. It has been replaced and trying to be compensated for the expense. Thoughts?”
It’s very important for all borrowers to understand that an FHA appraisal is NOT a home inspection. Once complete, the FHA appraisal should not be taken as any sort of stamp of approval from the FHA that a home is free of defects.
Borrowers should ALWAYS pay for the optional (but extremely important) home inspection before purchasing the home, or at the very least insure that the purchase agreement contains language to the effect that the sale of the home is conditional upon the results of a home inspection.
Home inspections are the borrower’s responsibility to schedule and pay for independently of the appraisal process and loan closing. The FHA and HUD official site urges borrowers not to rely on the appraisal alone as an FHA appraisal only insures that the home meets minimum standards.
Home inspections include a far more complete examination of the home, its systems, the roof, plumbing and other aspects that may or may not be viewed in great detail during the appraisal process. An inspection should be carried out by a trained professional.
The FHA appraisal process does not require the appraiser to walk out onto the roof, physically examine mechanical systems in the home, etc. Any obvious indications that a property does not meet building code or FHA minimum standards will be noted, but the appraiser does not have to operate the heating and air conditioning system, for example.
It would be noted in the appraiser’s report if the mechanical systems do not appear to be in good repair, or if there is standing water in the home. But the appraiser is not necessarily trained to detect certain conditions that may lead to standing water, leakage, etc. in the future. A home inspector would take a far detailed look at the home you wish to purchase.
The FHA and HUD cannot reimburse or recompense borrowers who purchase a property without a home inspection only to find problems with it later. This is a very important thing to know when considering the home inspection.
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple 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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