If you’re reading this article, you’re either being proactive in learning how to avoid closing delays as well as extra costs or there’s an appraisal issue and you need to understand why. Hopefully, it’s the first reason. Either way, understanding what an FHA appraiser is looking for will help solve a lot of problems. Actually, whether you are a buyer, seller, buyers agent, or listing agent, each one may be affected by an FHA appraiser’s opinion. Since FHA home loans are one of the most popular ways to finance a first time home buyer or repeat buyer purchase, it should not be ignored. Therefore, understanding the FHA appraisal requirements is key to a successful closing. So, let’s discuss how both the seller and buyer sides can successfully navigate through the FHA appraisal process.
How Sellers Can Meet FHA Appraisal Requirements
As a seller, you do not want to ignore FHA requirements. Sure the buyer is getting the FHA loan, but their appraiser is going to decide if your home is FHA worthy. Obviously, sellers want everything to go smoothly and close on-time. Thus, with some up-front knowledge and preparation, chances improve dramatically of having a successful FHA appraisal. So, in order to reduce the likelihood of appraiser re-inspections, extra costs, or possibly a buying backing out, check out this list below.
Sellers and Listing Agents Should Make Sure That…
- All areas of the property are available and unlocked such as the attic, crawl space, rooms, etc
- Utilities such as hot water, heating system, and power are working prior to inspection
- Any safety concerns are repaired such as exposed wires, missing outlet covers, curled up or ripped flooring (tripping hazard), loose handrails or steps, etc
- Peeling paint on homes built prior to 1978 is fixed – Possible lead paint issues
- Extra dwellings on the property are addressed, such as a manufactured home
- Water stains source is found and corrected
- Rotten wood in window casings, handrails, steps, or soffit are replaced
- Missing built-in appliances (stove for instance) are in place
- Missing or excessive broken shingles are replaced
- Excessive water or moisture in crawl space is remedied – Consider an enclosed crawl space
- Signs of termite damage are investigated, treated, and repaired – Also, remove loose wood or cardboard from underneath the house since it promotes termites
- Partially completed improvements or repairs are finished
Buyers and Buyers Agents Should Know FHA Appraisal Requirements
Why should the buyer side worry about this stuff? Wouldn’t the seller or at least their agent know FHA appraisal requirements and have everything fixed already? If you are thinking either of these, you would be wrong a lot. Actually, its quite amazing how many times the simplest of items from the above list causes delays and extra costs to the buyer. Believe it or not, inoperable utilities and no access to areas of the house are very common issues. This means the appraiser would have to make another trip to the property. Guess who usually pays this extra cost. Yep, the buyer!
So, what can the buyer’s agent and even the buyer do to prevent issues? Again, reading this article and learning other helpful FHA or appraisal tips is a great first step. A good idea is to have the above list with you during the initial visit to a home. If the home seems like a possible choice, check out these areas. Then, when the buyer’s agent contacts the listing agent for an offer or pre-appraisal discussion, these areas could be addressed. I’m telling you that a buyer’s agent who will bring these areas up to the listing agent will have much less closing issues.
Other FHA Loan Areas to Avoid
Other than knowing some FHA appraisal requirements, there are other potential FHA pitfalls. Fortunately, many can be avoided early. So, here’s a few.
Want to learn more about FHA loans or appraisals? Ask an OVM Financial loan officer.