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An FHA appraisal
is unique as it is required to meet all
of the guidelines for USPAP, the lender
and HUD as well as standard appraisal
guidelines. The appraisal is a critical
component of an
FHA
mortgage. FHA
recently adopted similar guidelines to
the HVCC and to aid our clients and
prospective clients we have prepared a
best practice
implementation guide.
- FHA Appraisal Compliance
- Reverse Mortgage Appraisal
FHA Appraisal independence guidelines
are very similar to those of the
recently sunset HVCC and newly
Frank-Dodd Bill. They do not allow a
mortgage originator to select or
retain an appraiser. Due to this
regulation most appraisals will be
ordered through a third party appraisal
management company.
Our apache
appraisal management system allows
us to track, manage and route FHA case
numbers to the designated staff member.
The system also allows the client to
update the case number within our system
to ensure the appraiser assigned has the
case number before the inspection We
only use FHA certified residential or
certified general apprasiers and the
average appraiser has over 15 years of
appraisal experience. .
FHA Property Standards and Guidelines
With the extensive property and
inspection requirements an FHA appraisal
must meet. It can become confusing as to
what needs to be fixed or not as well as
what is acceptable by FHA. The HUD
Handbook is over 450 pages thick and
that is exactly why we have summarized
important information below.
FHA has always had stringent appraisal
requirements in that even minor defects
in the properties condition needed to be
remedied prior to closing the loan. In
December 2005 FHA made a number of
changes to their requirements, allowing
for "As Is" appraisals, even if minor
defects to the property condition exist
which makes it much easier to obtain FHA
Financing.
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Requirements for FHA appraisals may be lightened slightly but there are still a number of conditions remaining.
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You must use an appraiser from
FHA's approved list
which is the FHA Roster.
- As of Oct, 1 2009 FHA requires
appraisers be certified residential
or certified general. All licensed
appraisers have been removed from
there approved list in the effort to
ensure accuracy of appraisals.
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- The lender must provide the appraiser with a case number for inclusion on their report.
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- Major deficiencies in the property's condition still require a cost to cure.
It is always best to let the lender select the appraiser but even more so if you are getting an FHA appraisal because the appraiser must be well versed in FHA requirements.
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Further Details of FHA appraisal changes:
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FHA appraisals occurring on or after January 1, 2006 now only require repairs for conditions that rise above cosmetic defects, minor defects, or normal wear and tear. Appraisers must report ALL deficiencies but lenders can use professional judgment and prudent underwriting practices to determine when a property's condition is a threat to safety or jeopardizes structural integrity. |
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This is a list of examples that no longer require automatic repair to existing properties, but are not limited to:
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- Cracked or damaged exit doors that are otherwise operable
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- Defective paint surfaces in homes built after 1978
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- Minor plumbing leaks such as faucets
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- Worn or soiled floor coverings or finish
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- Rotten or worn out counter tops
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- Damaged plaster or sheet rock or other wall and
ceiling material on homes constructed after 1978
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- Trip hazards such as sidewalks or badly installed carpet
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- Lack of all weather driveway surface
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Examples of conditions that may be of risk to health and
safety of occupants or soundness of property that continue
to require automatic repair, but are not limited to:
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- Inadequate access/egress from bedrooms to exterior of home
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- Leaking or worn out roofs
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- Structural problems such as foundation damage caused
by settlement
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- Defective paint surfaces in homes built before 1978
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- Defective exterior paint on homes built after 1978
where finish is unprotected
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FHA Inspection Requirements |
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FHA no longer mandates automatic inspections for the
following items and or conditions in existing properties:
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 Wood Destroying insects: only required if there is
evidence of active infestation or appraiser states a
need for one, mandated by state or local jurisdiction,
or at lenders discretion
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- Well (individual water system): It is required if
mandated by state/local jurisdiction, if suspect of
contamination or requires purification system, or when
there is evidence of: pipe corrosion, intensive
agriculture, coal mining/gas drilling, dump, junk yard,
land fill, gas station or dry cleaning operation with in
1/4 mile, or if there is a bad smell, taste, or
appearance
- Septic: only required if evidence of failure,
mandate, or lenders discretion
- Flat or unobservable roof
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Examples of conditions that still require automatic
inspection, but not limited to: |
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- Standing water against foundation, or excessively
wet basement
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- Hazardous materials on site
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- Faulty mechanical systems: electrical, plumbing, or
heating
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- Structural failure: settlement or bulging foundation
walls
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