What an FHA appraiser has to note about property condition

What standard does an FHA appraiser measure the house against?

The appraiser checks the property against HUD's Minimum Property Requirements. HUD Handbook 4000.1 states the general rule: every FHA insured home must be safe, sound and secure.

The handbook tells the appraiser to observe, analyze and report whether the property meets those requirements, and to note every instance where it does not. New construction must also meet HUD's Minimum Property Standards. The lender makes the final call on eligibility. The appraisal is the first check.

What kinds of problems get written up?

The appraiser must identify readily observable defective conditions. The handbook's list includes defective construction, continuing settlement, excessive dampness, leakage, decay, termites and environmental hazards.

For problems that can be fixed, the appraiser gives an estimated cost to cure. Defective conditions must be photographed in the report. Where repairs are needed, the appraisal is typically completed subject to them, and the lender decides how they get handled before or at closing.

Which parts of the house does the appraiser check?

The major systems get a visual check and a few simple operating tests. Nothing gets taken apart.

The handbook covers heating that can keep the home at a healthy temperature, wiring with no visible frayed or exposed conductors, a sample of switches, lights and outlets, flushing toilets, running a sample of faucets, and a relief valve on the water heater. The appraiser also looks at the roof, foundation, attic and crawl space.

The limits are written in too. The appraiser does not have to probe inside the electrical panel, move insulation or furniture, or cut into walls. If an attic or crawl space opening is tight, putting head and shoulders through it is enough. HUD calls this observation visual and not technically exhaustive.

What happens when the appraiser cannot tell if something passes?

The appraiser can require an inspection by a qualified individual or entity, and has to state the reason.

The handbook lists examples: standing water against the foundation, faulty mechanical systems, signs of possible structural failure, evidence of pests, and leaking or worn out roofs. It also says appraisers may not call for inspections only to limit their own liability.

Does an FHA appraisal replace a home inspection?

No. HUD says so on the notice lenders give FHA borrowers.

The notice states that FHA does not perform home inspections and does not guarantee the value or condition of the home. If problems appear after closing, FHA cannot lend money for repairs or buy the home back. A home inspection is built to report systems that are unsafe, not working properly or near the end of their useful life.