The FHA appraisal process is a tool used by your lender that not only provides a market value opinion for your property, but is also used for determining if your property meets the minimum requirements and eligibility standards for a FHA mortgage.
In the performance of your FHA appraisal, the appraiser will denote applicable deficiencies as well as the repairs necessary to make your property comply with FHA’s Minimum Property Requirements and/or Standards, as well as provide an estimated cost to cure (repair) those deficiencies.
Cosmetic repairs are not required (i.e. – generally worn flooring, surface treatments, beautification or adornment not required for the preservation of the property) but are considered in the appraiser’s overall rating and valuation of the property.
The physical condition of your existing building improvements is examined at the time of the appraisal to determine whether repairs, alterations or professional inspections are necessary – essential to eliminate conditions threatening the continued physical security of the property. A property with defective conditions is unacceptable until the defects or conditions have been remedied and the probability of further damage eliminated.
Required repairs are limited to the three S’s (Safety, Soundness, and Security). The appraiser will require repairs to:
- protect the health and safety of the occupants (Safety)
- correct physical deficiencies or conditions affecting structural integrity (Soundness)
- protect the security of the property (Security)
Some typical conditions that would require further inspection or testing by a licensed professional include:
- infestation – evidence of termites
- inoperative or inadequate plumbing, heating or electrical systems
- structural failure in framing members
- leaking or worn-out roofs
- cracked masonry or foundation damage
- drainage problems
Based upon the inspection of your property, the appraiser will provide an appraisal report in accordance with one of the following bases:
- As Is: No repair(s), alteration(s) or inspection conditions noted by the appraiser
- Subject to Completion per Plans and Specifications: New properties where construction has not started or is less than 90% complete
- Subject to the following Repairs or Alterations: Repair or Alteration Condition(s) noted by the appraiser. New properties that are more than 90% complete with only minor finish work remaining
- Subject to the following Required Inspection: Required Inspection(s) by licensed professionals as noted by the appraiser
The FHA Appraisal Inspection will include observations in the following areas:
- Site Hazards and Nuisances
- Soil Contamination
- Grading and Drainage
- Individual Water and Sewage Systems
- Wood Destroying Insects
- Private Road Access (if applicable)
- Floor Support Systems
- Attic (Note: access to the attic space must be made available to the appraiser. Any clothing, furniture, or other items must be cleared of the attic access point prior to inspection.)
- Crawl Space
- Furnace/Heating System (Note: Inspection/testing of these systems is dependent on seasonal conditions)
- Electrical System
- Plumbing System
Certain areas of the country have state and local requirements for smoke and carbon monoxide detectors/alarms as well as double strapped hot water heaters. If you live in an area where building codes have specific requirements for these items, your appraiser will be including compliance with these requirements in the FHA Appraisal Inspection of your property.
Be advised that the above information is not exhaustive of FHA Minimum Property Requirements/Standards and other unrelated conditions may affect the eligibility of your property.
About the Author
John Golden is the National Quality Control Manager for Landmark Network, Inc. He is a former certified residential and FHA appraiser and is currently on HUD's 203k consultant roster.