June 15, 2016
One of the most important things a borrower can do is to pay for the optional home inspection prior to making the commitment to purchasing a home, or making the purchase of the home conditional on the results of the optional home inspection. FHA loans require an appraisal, which is NOT the same as a home inspection, and does not guarantee that the home is free of defects.
Recently a reader asked us a question about a situation that may have involved a home inspection that didn’t catch a serious problem. “My daughter and son in law just bought a house two weeks ago with an FHA loan, they did pay for a home inspection which had small repairs to be done, once those were completed they closed on house and moved in 1 week ago.”
“The first they took a shower and tried to do laundry there was water in the basement. Apparently it is a sewer issue and the home warranty with the sale did not cover it. They just had a baby, and now are being told it will be $2500 4000 to fix. Are the sellers not responsible at all for informing the buyers? The inspector who did not find it? Please give direction because they dont make a lot of money, and she was on unpaid maternity leave.”
The first thing to clarify in cases like these is whether the borrowers have mistaken the FHA appraisal process for an inspection. This is a common mistake and we get many questions where the borrower says something to the effect of, “We had our FHA inspection and they missed something important”. The FHA does NOT inspect homes for defects.
An FHA fee appraiser reviews the home to insure it meets MINIMUM standards and also to assign a fair market value based on the condition of the property.
In cases where the appraiser finds a condition requiring a correction or repair, depending on the severity of that condition there may be a recommendation for correction as a condition of loan approval. But even in cases like these, the appraiser is not inspecting the home nor promising that the home is free of problems-even if the home “passes” the appraisal.
In situations where a home inspector (not the FHA appraiser) misses something, the borrower might have legal recourse, but the services of a lawyer may be required to determine what that recourse is, who is to be held responsible, and how to proceed with a legal/financial remedy.
Where the law needs to be involved, only a trained legal professional with expertise in this area may be able to answer the question of what might need to be done.
In general terms only, the home inspector’s job is to provide a more complete picture of the condition of the home. Missing a major defect in the home could be a serious issue in terms of competency and liability for the services rendered. However, problems with a home may not have been “pre-existing conditions” and it’s not safe to assume that an issue with a purchased property existed prior to its purchase. That’s an issue the legal expert will deal with when determining what recourse might be available.
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today:
http://www.fha.com/fha_loan_limits_widget
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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