December 10, 2021
Can you buy a house relying on the appraisal alone to tell you about the home’s condition or should you shell out the money to pay for a home inspection? That’s a question more than one home buyer has answered in the wrong way.
Here’s one version of a very common question asked about FHA home loans, appraisals, and the inspection process.
“I bought a house and I am discovering major problems and code violations. I did not have a home inspection and was told the FHA does its own inspection. Can you explain why the FHA inspection did not find these violations of code?”
To start, the FHA does not inspect homes and you should not expect the FHA appraisal process to be anything more than what it is intended to be–a tool for the lender to make sure the home meets MINIMUM requirements and to establish the fair market value of the home.
The appraisal is in no way meant to be a consumer tool to help the buyer evaluate the true condition of the home–that is the job of a home INSPECTION which must be arranged by and paid for by the borrower.
The FHA and HUD warn borrowers not to skip the home inspection, this warning is in an item published on the HUD official site titled, For Your Protection, Get A Home Inspection which states in part:
“An appraisal is different from a home inspection and does not replace a home inspection. Appraisals estimate the value of the property for lenders. An appraisal is required to ensure the property is marketable. Home inspections evaluate the condition of the home for buyer.
If you don’t have the home inspected, you really can’t buy the home truly informed about its condition. The FHA appraisal is, as mentioned above, not a seal of approval on a home. The FHA does not “approve” the home with an appraisal and the appraisal carries no guarantee that the house is free from problems.
Did you buy a home that wound up having issues? Inspection or not, you may need to talk to a lawyer experienced in real estate law in your state to learn what remedies might be open to you.
It can be confusing to discuss this “inspection versus appraisal” problem in the planning stages of your home loan as some in the mortgage industry use the term “inspection” interchangeably with the term “appraisal”.
But do not be fooled–they are likely not deliberately being misleading, but confusion is often the result when there is a lack of accuracy in the terms.
It cannot be repeated too many times–it is crucial to understand the difference between a home inspection, which should be a complete top-to-bottom review of a property versus an FHA appraisal– a tool for the lender to establish the fair market value of the property and make sure it meets the minimum requirements for safety, livability, etc.
You’ll do well to research home inspectors in your area. Choose one that gets consistently good reviews and has a reputation in the community for doing good work. Finding a home inspector is a lot like finding a lender; you’ll want to shop around for the right price and expertise. You’ll be glad you did.
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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