March 20, 2023
Here’s a common example of a home buyer question that is asked after the purchase of a house with an FHA home loan has closed, the new owners have moved in, and suddenly discover there are serious issues with the property:
“I did not get a home inspection when I purchased my house, and now there are problems. Do I have any recourse?”
If what is meant by “recourse” involves some form of intervention or relief from the lender or the FHA, the general answer is no–you don’t have any avenues of recourse when buying a home if you choose not to pay for the optional but essential home inspection and choose to rely only on the FHA appraisal instead.
An FHA appraisal is NOT a home inspection in spite of the fact that many in the industry casually refer to FHA appraisals as “inspections”.
How can you tell if your house has been appraised and not inspected? Because you, the borrower, are the one responsible for hiring a qualified home inspector to perform a thorough review of the house. If you did not arrange for an inspection, it didn’t happen.
The other sort of recourse would be legal in nature–and the best advice we can give in such cases is to retain legal counsel with experience in your state’s real estate law to learn what options may be open to you based on the laws of your state.
The FHA official site contains a publication explaining the whys and hows of home inspections titled, “For Your Protection, Get A Home Inspection”. That document includes the following:
“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.”
The inspector’s job is to review the property including its physical condition: the structure, construction, and mechanical systems. The appraiser will Identify items that should be repaired or replaced.
The appraiser will also estimate the remaining useful life of the major systems such as electrical, plumbing, heating, air conditioning, equipment, structure, and finishes.
FHA appraisers DO NOT perform home inspections, and FHA appraisals must never be mistaken for an inspection. You also cannot assume the FHA as “approved” the property condition even with the appraisal.
For Your Protection, Get A Home Inspection also reminds us, “Lenders require appraisals on properties prior to loan approval to ensure that the loan amount is not more than the property’s value. 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.
FHA appraisals are not meant to tell the borrower the home has zero defects and that the property is ready to buy. Only a home inspection will make the true condition of the home apparent.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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