What do appraisers look for during an FHA inspection?

What do appraisers look for when doing an FHA appraisal? These days it’s important to be in tune with FHA appraisal standards so your home can be FHA-ready or so you can know what to expect if accepting an FHA offer. Let’s talk through some of the most common FHA issues below. You can also download an FHA checklist to study or share with clients. This checklist has all the information from this post as well as one additional page.

DOWNLOAD an FHA checklist HERE (pdf)

The Main Idea with FHA: FHA is primarily concerned that everything in the house functions properly and that there are no health and safety issues. The basic concept of meeting FHA minimum requirements is that everything must work as it was designed to work. For example, a window that is supposed to open must open, and a built-in appliance should do what that appliance is supposed to do. If you have a sliding glass door with a lock on the handle, the lock should work.

DOWNLOAD this document for free HERE (pdf)

What do FHA appraisers look for?

  • Utilities should be turned on so the appraiser can test systems and appliances.
  • Appliances must function properly.
  • fha-logoThere should be proper drainage around the perimeter of the house.
  • The heating unit must be in working order (and AC if applicable).
  • Water pressure must be adequate for the house. Appraisers flush toilets, turn on all faucets and ensure that both hot and cold water are working.
  • The water heater must be in working order and strapped according to local code.
  • Attics and crawlspaces are to be viewed at minimum from the shoulder up by the appraiser. When viewing the attic, appraisers make sure there are vents, no damage, no exposed or frayed wires, and that sunlight is not beaming through. When inspecting the crawl space, appraisers make sure there are no signs of standing water or any other foundation support issues. Excessive debris in the attic or crawl space should be removed.
  • Paint must not be chipping, peeling, or flaking on homes built before 1978 because of the danger of lead-based paint (lead was used in paint prior to 1978). However, there must be no defective paint or bare wood for properties built after 1978 because defective paint impacts the economic longevity of the property. Defective paint should be scraped and re-painted (with no wood chips on the soil).
  • Electrical outlets must work (outlets should have a cover plate also).
  • Toilets must flush and be mounted.
  • Any active termite infestation needs to be cured.
  • Minor cosmetic issues such as stained carpet or a need for interior paint are okay. The house does not have to be perfect, but if there are issues that impact health and safety or the long-term economic viability of the property, then those issues must be cured.
  • Windows must open and close and they cannot be broken. Minor cracks can be okay so long as there is not an issue with safety, soundness and security.
  • No dangling wires from missing fixtures or anywhere else.
  • FHA doesn’t require air conditioning, but if present the system should work as intended.
  • Smoke detectors & carbon monoxide detectors are required insofar as required by local code
  • The firewall from the garage to the house should be intact. Missing sheetrock, a pet door installed in the door, a lack of self-closing hinges, or a hollow door could pose a safety issue.
  • A roof should not be leaking and needs to have at least two years of economic life left.
  • A house will be rejected if the site is subject to hazards, environmental contaminants, noxious odors, or excessive noises to the point of endangering the physical improvements or affecting the livability of the property (this isn’t an issue for the vast majority of properties).
  • A trip hazard is a subjective call to make by the appraiser and not necessarily an automatic repair, but if there is a legitimate safety issue it should be called out by the appraiser.
  • There are things any appraiser will call out in an FHA appraisal, but there are times when appraisers have to consider how the spirit of FHA might apply in a situation. FHA is black and white on many issues, but other times appraisers simply need to use good judgment.

Reminder About Difference in Locations: Appraisers in different parts of the country may require some items in their appraisals that might not be required elsewhere. For instance, carbon monoxide detectors are required in most residential homes in California, but this is not the case in many other states. An FHA appraiser in a different state might not even mention a CO detector, but in Sacramento it is commonplace.

DOWNLOAD an FHA checklist HERE (pdf)

I hope this was helpful. If you’re looking for more information on FHA appraisal standards, you can check out other FHA appraisal articles I’ve written.

Questions: Anything else you’d add to the list? Any FHA questions? Appraisers, if you have any stories to share about properties that were rejected, speak on.

This article was originally published HERE for more articles from Ryan Lundquist you can visit http://sacramentoappraisalblog.com.

If you have any comments or would like to submit content of your own email comments@appraisalbuzz.com


About Ryan Lundquist

Ryan Lundquist
Ryan Lundquist is a certified residential appraiser in the Sacramento area. Ryan runs the Sacramento Appraisal Blog, which is a top-ranking appraisal blog in the United States. He has been quoted in local and national publications and has been involved with the Sacramento Association of Realtors for nearly a decade. Ryan is also a board member of the Real Estate Appraisers Association of Sacramento. His clients include home owners, real estate agents, governmental agencies, attorneys, and lenders. Ryan also won the Affiliate of the Year award in 2014 from the Sacramento Association of Realtors.

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    Location or Site issues should be expanded to include Fall distance from High Tension Power Lines, distance from EPA Superfund sites, Landfills, Runway Landing and Take-off flight patterns, Fuel (gasoline, oil, propane…) Stations and Facilities, Sewer Treatment, Water Treatment, Dams, Flood zones, Earthquake faults, Testing Facilities for anything hazardous from Cosmetics to Rocket Engines.

    Trip hazards include steps over 20″ high without a Railing, Balusters without min. 4″ spacing, tread/riser spacing and consistency though the staircase.

    I personally also add – If the place is safe for a 2 year old….

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      Don’t forget stairways need to have a hand railing if the staircase is open. Decks and porches can’t be too high from the ground or else a guard railing must be installed on all sides where the height is greater than 3 feet. Patio doors that open to no deck (plans for a future deck) where the ground is 3 feet or higher to the floor level must be permanently sealed shut…a locked door won’t suffice. The patio door needs to be boarded shut so someone cannot open it even if it is unlocked. Fuse panels must be upgraded to circuit breaker systems. No knob and tube wiring allowed. Box sills need to be insulated. Laundry vents must be vented to the outside properly. Sites must be properly graded to allow adequate drainage. Septic systems if present have to be measured from the house to the pipe to make sure they are far enough away from the house. You have to comment on whether public utilities are available and if so, the cost to connect, and if feasible write the report subject to connection to public utilities. Those are all red flags in my market, along with the mentioned items above and those mentioned by the author of this article. I typically make note of items like that in all my reports, FHA or not. I just don’t make the lender fix the items unless it’s for FHA. Then it’s disclosed and no longer my problem, although I think the built-in statement of limiting conditions in most appraisal software covers it pretty well.

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        Actually knob & tube wiring and fuse box panels are fine with FHA as long as there are no frayed wires and amperage is sufficient (typically 60+ amps).

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    I am quitting FHA work in June, because I decided not to be a home inspector. Enjoy all of my FHA’s everyone!

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    Miss the 6-page checklist!!!

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    Was just wondering if there is a requirement on vermiculite insulation?

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    FHA. House smells of pet urine. Reflected in price of home. Appraiser just deemed it uninhabitable because of the pet urine smell. I feel that this is overreach of the the noxious odors. That is subjective and I am not certain is rises to being a health or safety concern. Further, it is reflected in the price of the home (about 20,000 under market value).

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