FHA & USDA Appraisal Inspections
With the rapid increase in FHA & USDA insured mortgages, many real estate professionals and homeowners are unaware of the FHA appraisal guidelines. This is not intended to be a complete list, however it does cover some of the most common appraisal inspection issues. Correcting or addressing these issues prior to the appraisal inspection will cut down on the costs associated with re-inspections.
1. If the home was built prior to 1978, any peeling, chipping, or cracked paint on the exterior or interior will have to be corrected. These areas will have to have all loose paint scraped, primed and painted prior to the inspection. Areas to check are all windows, sun exposed areas, garage, and doors. Bare wood is not acceptable for exterior paint surfaces in home constructed pre or post-1978.
2. The home must have a good representation of operational fire detectors. Washington State Law now requires sellers to install carbon monoxide detectors. The will appraiser note if detectors are installed. Many lenders now require CO detectors in purchase transactions.
3. The electrical system must meet the homes needs. If the current electrical supply appears to be inadequate for the home, the appraiser may require a qualified electrician to determine the proper capacity required. The appraiser is required to test a representative of electrical switches and lights.
4. The appraiser is required, at a minimum, to make a head and shoulders inspection of the attic area. Therefore the appraiser will have to gain access to this area. If the scuttle door is painted shut, or the home is newer construction the seal will have to be broken. A clear path should also be provided to this area.
5. The heating and cooling system will have to be tested. Any programmable thermostat should be set to manual.
6. If the home is vacant, or it’s an REO property, all utilities will have to be on and in working order (water, electrical, and gas) at the time of the appraisal inspection.
7. Garage door opener(s) will have to be tested for functionality and reverse mode. It’s important to note that if the reverse function is not working properly severe damage to the garage door can occur when testing.
8. Well & Septic Systems: Properties with well and septic should have a site map of their location made available. They should also be clearly marked with a stake (drain field, septic tank, and well), or some other marker when possible. The well must be a minimum of 50' from septic tank, 100' from septic drain field (if local code allows), and 10' from property line. A home that has a private well and septic, and public utilities are available, may be required to hook-up to such utilities. There are special hardship guidelines, contact the lender for details. A well located within the foundation walls of a dwelling is not acceptable. Shared wells may serve existing properties that cannot feasibly be connected to an acceptable public or community water supply system. A shared well shall have a shut-off valve on each dwelling service line as it leaves the well. A shared well shall service no more than four living units or properties. A shared well must have a shared well agreement and shall be binding upon signatory parties and their successors in title.
9. If any area around the home has negative drainage (sloping towards the house), this area will have to be corrected.
10. If appliances are part of the sale, the lender may want to know if they are in working order.
11. Items that are considered deferred maintenance typically aren’t required to be fixed, unless they are deemed to be a safety issue. Safety issues could be large cracks or settling of walkways, loose windows or doors, trees to close to the roof or power lines, faulty steps, major settling of the foundation, etc..
12. The appraiser will need a clear path to all crawlspaces for inspection. FHA guidelines require a minimum of 18” in the crawl space; however lenders have been known to waive this.
13. There must be adequate access/egress from bedrooms to exterior of home. At least one window in each bedroom must open and close freely in order to allow escape in case of fire.
14. Leaking and/or worn out roofs must be inspected and then repaired. If there are three or more layers of shingles on the leaking/worn roof, then all existing shingles must be removed before re-roofing.
15. Major plumbing problems will require inspection and repair. Water heaters must have a non-adjustable pressure relief valve and plumbed to the outside or within 12” of a concrete floor. All water heaters must be installed per local building code regardless of location. Rental water heaters are not acceptable
16. Manufactured Homes- must be built after June 14, 1976, and have the HUD seal (a small metal tag approximately the size of a credit card) visible on the exterior of each section (see example here: HUD Tag.png ). If the seal is missing HUD can issue a “Letter of Label Verification” e-mail or fax request to Manufactured Housing Standards Division. An interior HUD data plate is typically required by the lender (see example here: Data Plate.png ). The living area must be at least 400 square feet. The property may not be within a FEMA rated flood zone (A or V). The manufactured home may not be within a condominium project. Skirting is required. A licensed civil engineer must certify the foundation meets the standards described in the Permanent Foundation Guide for Manufactured housing. Some alterations to a manufactured home require L&I (Labor & Industries) inspection. In WA State the manufactured home must have a recorded Title Elimination to be considered real property. The home can only be moved one time (from the factory to it’s current site).
17. New construction homes that are less than 95% complete at the time of inspection by the appraiser will require plans and specifications.
18. Condominiums: Projects must be at least 51% owner occupied and may not have a "right of first refusal" clause in the association documents. Condominium projects must be on the HUD approval list unless spot loan approval is given.
19. For USDA insured loans: The subject parcel may not be subdividable under its current zoning designation.
20. The appraiser must have interior access to all detached garages and other outbuildings.
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