January 30, 2017
FHA appraisals are NOT the same as home inspections. This week we received a question about the appraisal process that serves as a reminder of this. A reader asks:
“I purchased a home that was funded by FHA but the foundation is in significant disrepair it. There are whole sections where the beams are not being supported by anything therefore the beams will eventually not be able to sustain the floor. Approximately 30 Jacks or posts need to be added, addition to a few beams, most significantly in one 8 X 31-foot section of the house where there is nothing supporting it other than the outside foundation wall on one side.”
“Basically it needs $35.000+ of work. The FHA guideline says that a structure has to be in good repair and able to withstand all normal loads imposed upon it which clearly cannot. The appraisal says everything is in good working order so I’m not sure why the appraiser didn’t notice maybe it’s because he is unqualified. Or inexperienced or just glanced at the crawlspace and really didn’t take the time to do a thorough appraisal but anybody coming in could see that it should’ve been funded. I did not get a home inspection before committing to a loan…Do I have any recourse?”
The only advice we can give in terms of recourse is to speak to legal counsel to learn what options may be open to you based on the laws of your state and to call the FHA directly at their toll-free number at 1-800 CALL FHA. But addressing the rest of the reader question, we refer to the FHA/HUD publication titled, “For Your Protection, Get A Home Inspection” which states:
“Buying a home is one of the most important purchases you will make in your lifetime, so you should be sure that the home you want to buy is in good condition. A home inspection is an evaluation of a home’s condition by a trained expert. During a home inspection, a qualified inspector takes an in-depth and impartial look at the property you plan to buy.”
That impartial look at the property includes the following activities:
1. Evaluate the physical condition: the structure, construction, and mechanical systems.
2. Identify items that should be repaired or replaced.
3. Estimate the remaining useful life of the major systems (such as electrical, plumbing, heating, air conditioning), equipment, structure, and finishes.
The FHA does not perform home inspections, nor should FHA appraisals ever be mistaken for an inspection or a stamp of approval from the FHA.
According to For Your Protection, Get A Home Inspection, “Lenders require appraisals on properties prior to loan approval to ensure that the mortgage loan amount is not more than the value of the property. Appraisals are for lenders; home inspections are for buyers.” FHA loans cannot move forward without an appraisal, but they can do so without an inspection-it’s the borrower’s responsibility to get the inspection.
Borrowers who fail to pay for this optional, but very important home inspection cannot make a truly informed decision about purchasing the home, leading to situations such as the one mentioned in the reader question here. FHA appraisals are not meant to tell the borrower it’s “safe” to buy. Only a home inspection will make the true condition of the home apparent the way some mistakenly believe the FHA appraisal does.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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