FHA loans have become popular again so it is important to understand the increased
scrutiny in the FHA appraisal process compared to convention loans.
Basically an FHA appraisal starts with a conventional appraisal, then adds additional
requirements designed to insure that any major repairs that will be needed within two
years are identified and completed before the close of escrow. This does not replace
the need for a home inspection as the appraiser does not look for hidden problems or
go into the level of detail of a licensed home inspector.
FHA appraisals are good for three months and stay with the house regardless of the
lender or the borrower. There is no “retyping” necessary for an FHA appraisal.
The appraiser must be on the FHA roster and an FHA case number must be issued
BEFORE the appraisal can be scheduled.
If a property already has a conventional appraisal it CAN NOT be simply "converted" to
an FHA appraisal without a case number and a inspection for the extra FHA items
called out below, most of which are not included in a conventional appraisal.
EXTRA CHECKS REQUIRED FOR AN FHA APPRAISAL
- Identify any chipping, peeling or cracked lead-based paint - interior and exterior
- Verify there are no issues with water damage or drainage
- Insure proper ingress and egress (18") from all buildings to the lot line.
- Test for a properly working heater and, if present, air conditioner
- Test for adequate water pressure and no water leaks
- Validate every bedroom has exterior access
- Test for a working oven hood/fan (carbon monoxide danger)
- Verify a minimum 60 amp electric box
- Test for working electric outlets in every room
- Identify any exposed wiring or missing electric box cover plates
- Verify roof vents are screened and a maximum of three layers of roofing material
- Complete a head and shoulder inspection of attic and crawl space
The general rule is that inside issues must be fixed or replaced while outside items
must be fixed or removed. Central air is considered an inside item.
The three FHA hot buttons are lead-based paint in pre-1978 properties, water damage
or poor drainage, and egress/ingress. The most common issue with the latter is
properties that were built with the garages on the lot line in which the homeowner has
no access to maintain (paint) the side of their garage. Sometimes an easement must
be granted from the neighboring property to allow access for maintenance.
203(k) LOAN APPRAISALS
A 203(k) allows a loan for repairs to get the property into a two-year maintenance free
condition. The lender has to get an FHA approved 203(k) consultant to inspect the
property and make up the appropriate FHA forms of work and cost to repair. This form
is then given to the appraiser. The appraiser inspects the property as normal,
identifies all FHA issues and then reviews the consultants list to be sure they are all on
the repair list. If not, the appraiser calls the lender to have any items added. When
this revised list is returned, the appraiser makes a “subject to” appraisal and includes
copies of all the work to be done from the consultant.
HOMES UNDER 2 YEARS OLD
These homes require additional investigation, including: checking with the airport
commission for location in airport noise zones and “runway clear zones”; check
engineered fall distances and easements for electric, cell, radio, microwave, etc.
towers; looking for gas tanks within 300 ft; etc. Homes under 1 year of age have even
NO CASH OUT FHA REFINANCE
Normally these loans don’t require an appraisal, but if you do one please tell us
because the FHA extra inspections are reduced to just checking for lead-based paint
FHA Appraisal Guidelines
HUD Reference Guide - Appraisal & Property Requirements
List of FHA 203K consultants
FJE APPRAISAL GROUP
Your Southern California Real Estate Appraisers
DIFFERENCES IN FHA AND CONVENTIONAL APPRAISALS