November 9, 2017
Does FHA have an inspection checklist? The question is a popular one, but it reveals a common misconception about the nature of FHA appraisals. It is one that’s extremely important to clarify-the FHA appraisal is NOT a home inspection and shouldn’t be considered one.
The FHA Appraisal Is A Tool For The Lender, Not The Borrower
In spite of the fact that an FHA appraiser is required to insure the property to be purchased with an FHA home loan meets minimum standards, the real usefulness of the appraisal is NOT for the borrower. The lender uses the appraisal to determine the fair market value of the home and that purpose should be considered its’ primary end result.
That means the FHA appraisal is NOT a stamp of FHA approval, or an indication that the home is problem-free. Do not rely on the appraisal to tell you things about the true condition of the home-you will be disappointed if you do.
The Optional, Borrower-Initiated Home Inspection Is The Only Way To Make An Informed Purchase
Those who buy a home without paying for a home inspection (which is NOT the appraisal) are buying a home on good faith alone. The only way to know more about a home’s true condition is to have the property inspected by a professional. The home inspector will examine the roof (in ways the appraiser is not required to) and other areas of the home in a much more detailed and involved way.
Is There A Home Inspection Checklist?
The requirements and procedures for home inspections vary from state to state. The inspector should review all areas of the home including the electrical system, the roof, crawlspace, foundation, etc. Your home inspection should give you an idea of the remaining life of the roof, the basic condition of the home including foundation, the severity of any issues such as leaks, seepage, etc.
What IS The Difference Between The Appraisal And The Home Inspection?
The appraiser will “walk through” the property. Any defective conditions observed will be noted along with any possible corrections. But if you have ever watched an appraiser at work, you will note that they may spend less time looking at a given home than might be taken as a potential buyer walking through.
The appraiser is not required to be an expert on plumbing, electrical, HVAC, roof repair, etc. The appraiser’s job is to note the general condition of the property, take notes, and compare that property to other “comparables” in your housing market.
The home inspector will carefully examine all areas of the property to determine their actual condition. The inspection is what the name implies; the inspector wants to give the borrower an informed opinion about the nature of the property as a way for the buyer to measure whether it is a sound investment for the price.
FHA appraisals do have a set of guidelines and procedures the appraiser must follow, but again, the end results are intended for the lender and not the borrower.
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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