November 30, 2018
When buying a home with an FHA mortgage, should you skip the home appraisal? Some buyers may wonder about this, especially in light of talk in late 2018 about whether the current real estate appraisal system should be kept or if appraisals should only be required of homes of a certain value or higher.
According to data released by the National Association of Realtors, one big cause of home loan closing delays? Appraisal issues. The question remains; should borrowers skip the home appraisal?
Borrowers Are Not Permitted To Skip The Appraisal Process
FHA loans and other real estate lending require an appraisal as a mandatory part of the process. In spite of what you might see in headlines, borrowers and sellers cannot opt out.
However, some borrowers may be thinking of a home inspection rather than appraisal, and use the term interchangably. But doing so is not accurate-the appraisal and the inspection are not the same and serve different functions.
The FHA Appraisal
The FHA appraisal is a tool for the LENDER. It is not meant for the borrower. The appraisal tells the lender whether the home meets minimum requirements and has a remaining economic life for the duration of the loan.
Borrowers cannot trust the appraisal to tell them if the home is completely defect-free. It was never intended to do so.
The FHA and HUD remind borrowers of this with a form called For Your Protection Get A Home Inspection. This form establishes a major difference between an FHA appraisal and a home inspection.
The Home Inspection
The home inspection is an optional part of the FHA loan process set up and paid for by the borrower. The inspection is more complete than an appraisal and should NEVER be skipped.
Those who opt not to have the home inspection risk paying multiple thousands of dollars later to save a few hundred dollars today. The FHA cannot help borrowers who skip the inspection process, buy the home based on the results of the appraisal alone, and find problems with the home after closing time.
Ask A Lender
If you aren’t sure what the purpose or function of the appraisal and/or inspection might be, talk to a loan officer about your questions or concerns. Skipping the appraisal is not an option, and skipping the home inspection should never be considered by the buyer as an option. Know the true condition of your new home before you sign on the dotted line.
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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