Guest Blog! How to Prepare for an FHA Appraisal Inspection in Delaware

Dated: August 6 2021

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This week's guest blog is brought to you by Michael S. Brown, SRA. A Certified Residential Appraiser with Flagship Appraisals, Inc. located in Smyrna, DE. With over ten years of collective experience in the appraisal business. There is some great info in here. 

How to Prepare for an FHA Appraisal Inspection in Delaware

A Federal Housing Administration (FHA) loan allows buyers to get their foot on the property ladder and buy a home with a smaller down-payment and/or lower credit score. While FHA loans are extremely beneficial for many, the nature of the higher risk the FHA is taking in guaranteeing the loan means that there are additional requirements the home must meet.

Whether you’re a buyer using an FHA loan or are a seller that has received an offer from an FHA buyer, it’s a good idea to familiarize yourself with what the FHA appraisal inspection involves. Read on to find out how best to prepare for an FHA appraisal inspection.

What’s the difference between a traditional appraisal and an FHA appraisal inspection?

Appraisals for traditional mortgages look for any obvious surface problems and look at the home from the buyer’s point of view – the appraiser's job is simply to confirm the house is worth more than the money being lent. The FHA appraisal inspection goes deeper, and while they won’t go as deep as a home inspection, they won’t be able to overlook some issues a standard appraiser can.

During the appraisal of a home for a traditional mortgage, the appraiser may simply adjust their valuation down if there is a window that does not open that should. It likely won’t be a big deal and is unlikely to prevent a sale from moving forward. However, one of the requirements of the FHA is that all windows must be fully operable, so it’s likely it would need to be fixed before the sale could move forward.

Generally, for a standard FHA loan, any issue found must be fixed before closing.

What are the FHA loan appraisal inspection requirements?

The FHA uses the HUD’s “minimum property requirements”  for all homes, and their “minimum property standards” for new construction homes. The main checks an FHA appraisal inspection will be making are:

• A structurally-sound foundation

• Water drains away from the foundation

• All utilities must be turned on for the appraisal and will be checked

• All appliances must work

• Adequate water pressure

• That hot and cold water is available

• Well-maintained paint inside and outside the residence (no significant peeling or chips)

• All windows must be fully operable

• All switches and outlets must work

• A roof that is free of leaks and won’t need to be replaced for at least 2 years

• Damage-free and well-ventilated attics and crawlspaces

• No active pest infestations

• In a “livable” condition, “reasonably” free of environmental hazards, noise and odors.

What can you do as a seller to prepare for an FHA appraisal?

As a seller, if your buyer plans to use an FHA loan, there are several things you can do to be best prepared for the FHA appraisal inspection:

Roof: Check (or have someone else check) your roof to ensure that it’s got at least 2 years of life left in it and that it doesn’t have any damage that may lead to a leak in the future.

Structure: It’s unlikely that your property has significant damage without your knowledge, so it’s not worth worrying about this too much before the appraisal. If you want to check, take a flashlight and shine it at the exposed structure of the home to check everything looks in good order. Don’t forget to check any outbuildings that are included in the sale.

Utilities: make sure all utilities are turned on (most important for homes that are currently uninhabited) so the appraiser can check them. Check the electrical box doesn’t have any exposed or damaged wires.

Pests: check your home for obvious signs of pests, especially termites.

Paint: check the quality of paint inside and outside the house. If anything is peeling significantly, consider sanding down the area and repainting. One of the more common problems I’ve seen in Delaware is wood rot and flaking paint on people’s sheds. Don’t forget that all structures on the property will be inspected, not just the house.

The appraisal isn’t something you need to worry about – it simply checks that the house has all the essentials and can be lived in immediately. There are very few issues that will disrupt the sale of your home if it’s somewhere you are currently inhabiting. Simply take a walk around your property and look for any areas that are in disrepair and check that the home is still in good working order.

What can you do as a buyer to prepare for an FHA appraisal?

While there’s little you can do as a buyer to prepare for the FHA appraisal inspection, but it is a good idea to know about what you can do if the home you want to buy has any issues that cause it to “fail” the FHA appraisal inspection.

What happens if the FHA appraisal finds issues?

If the appraiser finds issues, they’ll usually make recommendations for how the sale can move forward. They may recommend getting another professional in to properly assess how much of a problem an issue is (remember, appraisers aren’t tradespeople), or recommend certain repairs. The buyer and/or mortgage company may ask the seller to make these repairs.

If the seller is unable or unwilling to make those repairs, the buyer can either move on to find an FHA-compliant property or choose a different type of loan.

If the repairs are something you, as the buyer, are willing to do you can either try to get a conventional mortgage, which has fewer appraisal requirements, or choose a FHA 203(k) loan  which is a special type of loan called a “rehabilitation mortgage.” This will allow you to finance the repairs and the purchase of the home. This is a good option if you’ve fallen in love with the home but found it has a problem, or wish to buy an older home that is in need of modernization.

The FHA appraisal inspection isn’t something you need to be worried about, but it is a good idea to be aware of any potential issues that it may bring light to. Whether you’re a buyer or seller, there are always more options available to you to move ahead with the current home or buyer or to move on and find a new one.

Michael S. Brown, SRA, is a Certified Residential Appraiser with Flagship Appraisals, Inc. located in Smyrna, DE. With over ten years of collective experience in the appraisal business.

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Randall Elser

Working out of Weichert's Pike Creek office, I have been applying a mix of cutting-edge technology and old-fashioned customer service to Real Estate. I have a friendly and professional approach which ....

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