Why do appraisers hold FHA loans hostage for such minor repairs?

Have you ever felt like an appraiser required ridiculously small repairs? I mean, can an inoperable dishwasher, missing carbon monoxide detector or minor amounts of chipping paint seriously hold up an FHA loan? If a house is worth $200,000 and $20 worth of repairs are needed, is it really legit for the appraiser to require repairs?

It’s understandably frustrating when a sale or refinance is held up by repair items noted by the appraiser – especially for very small-ticket items. However, appraisers aren’t in the hostage business, and they should only be requiring repairs as outlined by FHA / HUD. Any required repairs for an FHA loan should be about bringing the property up to FHA Minimum Property Requirements (MPR) so the property can be guaranteed for a loan by HUD. The appraiser acts as the eyes of the lender and FHA, so the appraiser will put on FHA “goggles” (I don’t literally put on goggles like the picture) to inspect the property to look for FHA standards and any issues that might impact security, safety, soundness and economic longevity. Sure, the appraiser gets paid for a reinspection, but that’s not the motivating factor for calling out repairs (or shouldn’t be).

Does the appraiser actually have to reinspect the property? Most of the time the appraiser is called to go back out to verify repairs were made. It’s my understanding the underwriter can overrule a reinspection, but my clients typically want me to go back out so they know repairs were truly done.

Why can’t the appraiser use photos from the owner or agent? The appraiser cannot verify repairs were completed simply by someone else’s word or even photos. In my experience most agents and owners are telling the truth about repairs (and I believe them), but if my client has hired me to go back out to a property, and I have to sign my name to verify repairs were made, then I need to be the person doing the reinspection. It can sometimes feel like appraisers are being difficult and picky about needing to do a reinspection, but they’re simply following instructions from the client. Besides, if your client hired you to verify work was done, would you sign your name to something if you didn’t actually see the work in person? Here is a recent email conversation that illustrates misunderstanding and frustration about this scenario.

Agent: The repairs are being installed by tonight. Please consider sending in your report tonight. The seller is committed to making sure these items are done. We are truly in a time crunch.
Me: I can only sign off when it is done.
Agent: You’re killing me.
Me: I’ll get out there right away when it’s done.

Common FHA Repair Issues: If you’re going to be selling a property or doing a refinance, you may wish to brush up on FHA standards. Please see the video below (or here) for 25 of the most common FHA repair issues, and take a look at the FHA Appraisal Article Library on the Sacramento Appraisal Blog.

What is the most random repair you’ve seen an appraiser call out? What types of repairs are most common? If you work in the real estate industry, do you find appraisers to be handling reinspections right away? I’d love to hear any stories or questions you have below in the comments.

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Twitter, subscribe to posts by email or “like” my page on Facebook

Comments

  1. says

    Ryan, thanks for posting this. It really helps to understand the relationship between the lender and appraiser.

    I once had a closing held up for 10 days because an appraiser on a FHA deal wouldn’t approve the repairs my licensed general contractor made to the bathroom and roof of the property. We had to pay him to go back to reinspect 5 times. I seriously think he was trying to line his own pockets. This sort of thing makes fix and flippers like me avoid accepting offers from FHA buyers because of all the additional hoops. Not only are our properties scrutinized more closely for flaws, but we are also subjected to the additional time and cost of a second appraisal. It’s no wonder FHA buyers are having so much trouble finding houses here in Phoenix.

    • says

      Thank you Marty. Why would the appraiser have to come out 5 times? Sometimes repairs are not done, so the appraiser has to maybe come out twice (I’ve had that happen many times), but five is a huge number of reinspections. What an enormous cost. Yikes!!

      It’s too bad to hear how troublesome FHA offers are. However, I get where you’re coming from. I see some flippers avoid FHA offers in the Sacramento area too because the conventoinal deals are stronger and a second appraisal is not required (which can lead to problems when a second appraisal is ordered under FHA and does not match the first appraisal).

      FHA loans still dominate the market here, but there is so much cash and so many conventional offers right now too. These offers definitely increase competition among FHA buyers (especially in light of such a low inventory already). In short, sellers have options right now and FHA is sometimes avoided – even when FHA offers are coming in higher sometimes too. Wild market.

      • says

        The appraiser had a problem with the way my contractor was repairing the roof tiles. There wasn’t great communication between the two of them either. I finally made them both meet at the property at the same time so they could get on the same page.

        FHA buyers here are getting squeezed. Sellers don’t like working with them. Too many hoops. I get a lot of emails from FHA buyers asking me to buy for them at the auction. I can’t do it though, too much risk. If their loan doesn’t go through or the house doesn’t appraise I’ll lose too much money.

  2. Jeff Grenz says

    In the Sacramento region, there is no other resale inspection requirement, so the FHA appraisal inspection may be the only critical look a resale home gets.

    If a home has deferred maintenance, I don’t have a problem with a buyer continuing with the purchase as long as they have a handle on the costs and available resources to take care of the problem(s), as is often the case for a 20%+ down payment conventionally purchased property.

    By definition, a minimum down FHA buyer usually doesn’t have resources to fix any deferred maintenance, replace roofs or HVAC systems, so if these items fail shortly after close of escrow, this often leads to failed loans, billed by FHA to the taxpayers, you and me.

    Of course every seller would prefer the cash buyer – at the “FHA” price – what do I mean? FHA minimum down loans create thousands of buyers for us and cause upward price pressure. You have a chance when you evaluate the potential “to-be-flipped” home to consider all the code retrofit items in the cost.

    • says

      Good insight, Jeff. I like where FHA is coming from in wanting to put people in homes that are going to last. That’s the whole purpose behind the minimum property standards (on top of safety of course). I’m wrapping up an apppraisal late tonight and it may not end up going through unless the buyer has some cash to fix some wood siding (and potentially a roof if it doesn’t pass a 2-year roof cert). We shall see. I can understand why sellers would avoid FHA in some cases because of the lack of funds to make repairs.

  3. John says

    Thanks, Ryan. As an FHA appraiser here on the other coast, what continues to amaze me is the number of RE agents that have their sellers sign a buyer contract/offer contingent on FHA financing for a property that is chock full of obvious non-compliance issues. And I don’t mean “obvious” only to someone who knows FHA requirements very well. The one that stands out for me had a wood stove with the flue pipe fun through the window, then turned downward, then out and into a hole cut into the side of an upside down galvanized metal trash can. Really? More typical are: the house is vacant with no utilities; no working heat; and severely peeling paint. Agents aside, if you’re an LO, do you ask any compliance-related questions about the property before you proceed down the FHA path?

  4. Holly says

    I have my FHA loan appraisal report in front of me right now. Under the describe the cond of the property(including needed repairs,deterioration,renovations,remodeling,etc.)says C4;No updates in the prior 15 years;repairs needed repair interior sheetrock and wall holes,repaint interior,replace carpet,replace damaged doors,replace stove/oven,clean exterior vinyl siding,general clean up of entire house,check electrical,plumbing and hvac systems for good working oder. Est repair amount $7500+
    Then below that is the question, Are there any physical deficiencies or adverse conditions that affect the livability, soundness, or structural integrity of the property? marked NO.

    My question is are the “repairs needed” REQUIRED BEFORE the FHA loan approval?
    Thank you!
    Holly

    • says

      Hi Holly. Thanks for checking in. It’s not clear whether the appraiser is requiring these repairs to be made because of FHA standards or simply stating that the property could use the aforementioned repairs. There can be a difference. For instance, in an appraisal I might say something like, “The carpet has stains, one closet door is missing and the walls need paint”, but I could simply be describing the property rather than listing required FHA repairs. These repairs actually might not be required for the property to meet minimum FHA property standards, but I’m not really sure because it’s not clear. Sometimes appraisers list out general repairs in one section of the report and then a list of FHA-specific repairs in another portion. Ultimately if the appraiser is saying these repairs are FHA issues, then they will need to be taken care of before the close of escrow (as long as the underwriter agrees of course too). Does that make sense?

  5. Trinity says

    Hi Ryan, thanks for the insightful page. I’m looking to buy with a FHA loan and I’m ready to make an offer on a home. I’m just a bit worried that it won’t pass the appraisal. There is untreated plywood attached to the foundation, mold in the crawl space and the house is next to a busy road. The seller is willing to fix the majority of the issues.The problem that worries me the most is the busy road. Would the road fail us? Are there any fixes for it, like a privacy fence? The house is about 100ft off of the road which has a 60 mph speed limit. It the busiest between 4 and 8pm. The house is located in a rural area. Thank you!

  6. says

    Hi Trinity. Thanks for checking in. It’s hard to comment on the issues, but mold is something that clearly needs to be handled. As far as the busy street, FHA loans take place all the time on houses found on busy streets. In short, a busy street is not a deal killer when obtaining FHA financing because busy streets are found in every city. FHA is definitely concerned about the location of the property, but an adverse location is okay so long as there is no major detriment to marketing or inhabiting the property. If for some reason the property would not be able to be sold or there was some major issue due to the location, then it would likely not be acceptable to FHA. Ultimately an appraiser can appraise a property and show any negative in value for being located on a busy street, and that is fine for FHA so long as there is nothing significantly detrimental about the location that might somehow impact the economic longevity of the property or impact the health and safety of occupants somehow. Make sense? Let me know. Best wishes.

  7. Trinity says

    That makes sense, Ryan. I’m confident that the seller would solve the problem with the mold and the majority of the other issues. Whether they would fix it before the appraisal or after is questionable. Before, of course, would be more favorable. Thanks for the help, you have quelled my worries about the busy road.

  8. Concernedandworries says

    Hi! My husband and I put a bid on a newer home (6years old) that’s a Hud repo. Our bid was accepted. All appliances are in the home except the fridge and the home looks brand new except (you knew it was coming lol) for the fact that there is some holes in the walls. Two the size of a Standard sheet of writing paper in the front room , two or three in the hall way the size of a fist and in one of the kids rooms there is some small dents, not really holes but looks as if a kid was bouncing balls on the wall. Everything else in the home looks to be perfect, the home was listed on the Huds site as HUDS appraised insureable and didn’t ask for any escrow. There’s no wires behind any of the holes and the paint inside and outside of the home seems to be perfect. Maybe some touch ups need to be done inside the home but thats really a preference and not anything that looks bad. Honestly if this home didn’t have the holes it would look darn near brand new, it looks like from the records that it has sat vacant a year until they put it back on the market which means, the home only had someone living in it for four or so years from the time it was built and sold. Forsure getting a fantastic value here(over $80,000) less than other homes in the area and community for a exclusive home of this manner. (it’s in a private hoa community that’s very hard to get into).

    They’re working on getting utilities turned back on this week and have it unwitnerized so our inspection and Appraisal can be done. Should I be worried about it failing inspection due to the holes in the walls even though it’s cosmetic only with no wires or backing showing? I don’t know what I’d do if I lost this almost brand new home due to some holes in the wall! It looks like they pulled a TV out of the wall in the front room which left the big holes there and the hallway looks as if they put their fist through the wall out of anger. I’ve read what HUD and FHA expects but I’m still confused. Being a first time home owner sure is stressful! Could you please lend some good insight and put my worried mind to bed? Thanks

    A worried Mom

    • says

      Hi Concernedandworries. Minor holes should be disclosed, but they probably won’t be a repair requirement unless they are much larger than you explained and/or pose a threat to the safety of occupants somehow. Holes in walls used to be a bigger deal, but FHA softened their stance a few years back. I don’t call for holes to be filled unless the hole is very big, exposes wires, or compromises the firewall somehow. Keep me posted if you have any questions. Yes, escrow can be stressful. But like they say, it’s not a real escrow unless there is some drama. 🙂 Seriously though, it reminds us all we can do is take responsibility for what is on our end. We simply cannot control the other side of the transaction (sounds a bit like life too). Hang in there. I wish you the best!

  9. Concernedandworried says

    Thank you. We called our loan officer this morning and asked again about what is the worse thing that would happen with the holes. He said we would simply start a escrow for the walls to be fixed within 90 days after closing. I wouldn’t think it would cost to much to fix and if they tell us it’s over $5,000 I’m calling BS (pardon my French ) . Our loan Officer also said that it might not even be listed or if it is that it might not be listed as a safety concern or anything that’s required fixing for the loan to be approved. HUD didn’t list the holes just simply took photos in a way that didn’t show the holes LOL they listed the home as a FHA IN (without anything listed for escrow) . Our loan Officer said we wouldn’t need to apply for a different loan we would just need to bring money at closing, does this sound right? I was worried we would have to requalify for a new loan since we bid at our max but he says no just bring the money and then fix it before 90 days.

    While we was shocked to see the holes we were also shocked to see a Repo listed in the low $200k when it’s a $300,000+ home. How HUD appraised it at $230,000 I’ll never understand. The home sold new for $280,000 in 2009 and they moved out it looks like in early 2014 or maybe even sooner.

    The homes have only went UP in prices especially a home in this town and housing addition. Not down in prices. So I am confused how they appraised it at $230,000 when if there was no holes the home would look brand spanking new or very close to it.

    Now the ultities haven’t been turned on yet , just got the paper from HUD over the weekend for that however, I would be surprised if they found anything wrong. Homes built by this builder normally comes with a 10 year or longer warranty. I’m sure that won’t transfer due to the foreclosure though lol it does give me a bit of sound mind when it comes to everything else they will check during the inspection. It’s been winterized also so that will be undone before inspection. We was hoping to close on May 1st but our Loan Officer said we would be lucky if we closed by the 1st but did tell us if we go by the timeline to have everything done we should close before May 17th. We will forsure do everything as quickly as we can on our end and pray that HUD does their end quickly.

    He said that so far they’ve been very quick. Within a week we have viewed the home , bid on the home, HUD accepted the bid, we sent in the paperwork along with the earnest money to Hud. HUD has sent back their signed paperwork along with the utilities release paper work. I am not sure what a normal time line looks like but our Loan Officer said the contract and Loan paper work was waiting on him today from HUD when he got into the office. So off to sign more paper work tomorrow and our Relator is working on getting the utilities turned on, unwinterizing done and setting up the appointment for the home inspection, pest inspection and appraisal done. The Relator is going to try to get all of that done this week or next week by the latest. What is after that? Waiting on closing and signing more papers with the financing company?

    We read that it’s best to try to close on the 1st because it normally will gave you a extra month before a house payment is due, do you know if this is normally correct? No way will I push it to June 1st LOL I want to move NOW lol but sure would have loved it to have been May 1st and saved that payment for an emergency or better yet paid a extra payment to the loan.It’s just harder when we have to move in the middle of the month because we have to pay here and there so two house payments. Oh well it’s worth it!

    Do you know why they would’ve listed a $300,000 + home for $230,000 and accepted even $5,000 less than that? I can’t wrap my mind around that and I’m confused how insurance works with that because obviously if something God forbid would happen to our home we couldn’t replace it for $225,000 . I’m being told we have received one of the best deals our loan Officer and relator has ever seen, Our Relator was really excited about it and pretty shocked when they accepted our offer. I’ve read that normally the buyers appraisal will match close to what the asking/ accepted price was… If that happens I’ll be even more confused, because to be honest we went from one class of homes to another class of homes by getting this home at the price we got it at. If that makes sense.

    Could 5 or 6 holes make that big of a difference even though they can be fixed I’m sure for under $400/$500 if we paid a professional to fix them, instead of doing it ourselves.( I am assuming that they will want us to pay a professional instead of doing it ourselves ) I’m pretty sure the ones in the front room was from a TV. It’s in the middle of the front room wall and directly in the middle of that wall. The holes are about the same size and height and about 4 or 5 feet apart from each other. Like something was pulled off the wall in that spot. The hall way holes are the size of a fist and the front room holes about double the size of fist maybe a bit bigger, no bigger then a normal size of writing paper used in school. In the one kids bedroom it’s not really holes but small dents like they bounced a ball on the wall in the same area often. If that was my kids, let me tell you! They would be working off the cost to fix it and getting a very long lecture on taking care of things we care about.

    We went from dreaming of a home like this and looking at older homes (some 30+yrs old) to living a dream and putting a contract on a home that I don’t ever see us moving out of.

    I’m pretty excited. Thank you for allowing me to ramble on and most importantly thank you so much for answering my questions!

    • says

      The holes don’t sound like safety issues. The appraiser might not even call for them to be repaired. If they were small holes, I would not call for them to be repaired. The cost shouldn’t be much at all if they do need to be cured. You are correct that the holes should be mentioned and photographed in the appraisal, and their existence probably has little impact to the overall value (since we are talking a few holes, which is not a bit ticket fix). I’m sure your loan officer and real estate agent will be the best person to catch you up to speed with what to expect in the escrow process. From an appraisal standpoint, expect the appraiser to inspect the property and then take a week or so to complete the file. If there are any FHA-required repairs, the appraiser will simply go back out to the property prior to the close of escrow to verify those repairs have been made.

  10. Concernedandworried says

    Thank you so much again for the help. I di have another question, when doing escrow and fixing the items after the closing date (I think they said within 90 days) when we have to have our inspector or appraiser back out do is that for the same fee or is it normally lower since they will only be checking on a certian item? Trust me, I know y’all are worth the money! I’m just wondering if I should budget the cost twice. Thanks again

    • says

      All repairs will need to be made before escrow closes unless you are doing a repair loan (such as an FHA 203K loan, which allows and plans for repairs to be made after escrow closes). Keep in mind a property does not have to be in perfect condition to meet FHA standards. This means some items may be old or scuffed, but they do not need to be repaired or replaced. The appraiser will need to charge for a re-inspection, but the fee is discounted because a new appraisal is not being performed. The appraiser is only re-inspecting the house to verify all required repairs have been made. If the appraisal cost you $450 in the first place, it might cost you $150 to have the re-inspection. I have no idea if those fees are in sync with your market, but you can probably expect a re-inspection fee somewhere around there.

      • Concernedandworried says

        Thank you, yes it would be a FHA loan with repairs done after closing because they said HUD never repairs or allows repairs before closing. From what I understand adding a repair to our FHA loan wouldn’t require for us to redo our loan but simply add a escrow to our contract since we would be bringing the money to closing for the repair. I might be wrong but that’s the way it was explained. I was worried about having to start the loan process over especially since we were at our top loan amount with the bid.

        The fee you quoted does sound like what we are paying for our inspector, it’s good to know it won’t be , or shouldn’t be double when they have to come back out. Our loan Officer is hopeful that while it maybe listed in the report it won’t be listed as a item that has to be done to qualify for the loan. I guess we shall see as soon as the inspection and appraisal is done. We are hoping we can get both done on the same day since we can only have the utilities on for 3 days. Thank you again Ryan, for not only th fast replies but for being so polite and allowing me to rant my fears. I know I can ramble on when it comes to fears.

      • Concernedmom says

        Hi! I just wanted to update you! We have been very happy and living in our home for a couple months now.

        My husband thought I was being paranoid because it seemed like our realtor wanted our home for herself and it turned out I was right! We were delayed for months and had to file for A extension Multiple times with HUD and was always given excuses that honestly didn’t make any since at all. We had to reprint and refax ALL our paperwork multiple times until I finally had ,my husband drive it there in person and refuse to leave until we had a closing date. This was after multipule closing dates had came and gone , a couple being cancelled the night before and two cancelled the day of and one cancelled two hours after closing should’ve already been done.

        I never really felt right about working with a realtor that our loan Officer recommended and shared the same Office space with. It wasn’t until a friend of mine called our local news station and my husband sat in the Office until they showed him they had all the paperwork ready and he refused to leave until we was given a date that closing actually happened. Two days after we moved in there was a knock at our door…

        It was a inspection company needing access to the home to do a inspection for his client… The boyfriend of a realtor that was “going to surprise his girlfriend by purchasing this OUR home for his girlfriend”!!! My husband almost fell over! Obviously, he couldn’t give us his clients name but did confirm again what he had already said. He was hired by a man who’s girlfriend was a realtor and this was her “dream home” and he wanted to surprise her by purchasing it for her. It didn’t take us to long to put two and two together especially since our realtor had told us in the past if she could find a way to purchase the home she would because , it was her DREAM home! She couldn’t believe the deal we were getting and even told us more than once to not get our hopes up because the home must be mispriced.

        I Honestly wonder if she would’ve been honest about us winning the bid if it wouldn’t have been for my husband actually calling HUD personally and being told over the phone that our bid had won. We knew she had put the bid in because my husband walked through it with her when she submitted it. It makes me wonder if there’s others winning bids because they have a friend in the HUD approval Office and in the financing Office.

        We won’t be recommending her and we did end up with a fantastic deal. We are paying $115,000 under Market Value for the home in a very sought after area. Oddly enough the home sat off the market for almost 4 years before HUD put it up for sale 10 days before we bid on it. We bid the last day available for home owners to bid before being released to investors. We found out at our closing that they lived in the home under two years and not as long as we had been told. It was a one owner home and is a very nice designer home.

        The holes in the walls? They ended up costing us around $400 that’s having the walls professionally repaired , textured with the same design the undamaged walls have and painted same colors. You can’t even tell it was ever damaged.

        We went from looking to purchase a nice home to purchasing our dream home and a much nicer home than we ever thought we would ever be able to live in. I would say that we are simply lucky but it’s so much more than just being lucky. We are blessed. Thank you for your advice and just allowing me to ramble on. I know I must have came across as a nut! A very worried one! Lol unless something horrible happens we will live here forever.

        • says

          Thank you so much for the update Concernedmom. I am really glad to hear things worked out. It’s crazy to think you had to drive your papers down there. Someone was dropping the ball (maybe on purpose). Congratulations again, and I hope you and your family have many years of peace in the home. Best wishes.

  11. matthew says

    Conditions of Appraisal
    As a condition of this appraisal the following will be a requirement. (see photos)
    1. Your appraiser was unable to determine location of well. According to the Atlantic County Dept of Health there was no
    site plan on file for the subject. Therefor obtain a site plan to determine the location of septic and well.
    2. Repair water heater extension hose as it does not meet length requirements.
    3. Your appraiser could not determine composition and condition of roof therefore a Roof certification will be required.
    4. Repair front door as it appears to be unstable.
    5. Replace/repair siding where broken on exterior of dwelling.
    6. Install door knob on rear door.
    7. Install sill plate on rear widow.
    8. Install missing siding left side of dwelling
    9. Repair front step where broken.
    10. Install elbow extension on downspout so water will be diverted away from foundation.
    11. Install vent cover on right side under deck.
    12. Repair broken light fixture on 2nd floor rear deck.

    • matthew says

      I’ve already had to pay for a septic already had to pay for a water filter and softener.I’m doing all these repairs to make sure the loan goes through and these people are still living there I’m basically making the house nice for them

        • matthew says

          Why would the lady nit pick minor things that have nothing to do with safty or function just cosmetics things i would probly not even worry about untill i get settled in .the reason i did fha was because i did not have 10000 to put down but they want the make me pay for things i would not fix in my own home. I would have bought a new home if i could so why make me fix it like brand new. Its from 1968

          • says

            Hi Matthew. I am not sure if you are the buyer or seller, but I do understand how frustrating this can be. FHA has what are called minimum property requirements, and a property must meet these minimum standards in order to qualify for FHA financing. It’s not just about health and safety, but that everything works properly as it should and that the house has economic longevity. FHA wants to be sure their Borrowers are getting homes that work and are not falling apart. It seems the items the appraiser has called out deal with safety or things working as they should to protect the home. If the repairs cannot be made out of pocket, maybe the other party can pitch in or maybe an FHA repair loan can be done to help get these repairs taken care of without any cost out of pocket (a common FHA repair loan is called an FHA 203K loan). If you have any questions, let me know. Best wishes.

  12. MJ says

    I am buying a Fannie Mae foreclosed home (in WI) and the FHA inspector marked items as “repairs required.” On the list was missing trim where the wall meets the floor/carpeting. To me this is a cosmetic thing. Is missing wall trim normally marked as needs repair? Another thing on the list was water in the basement. There is rain water that comes through the outer cellar door, down the stairs, and seeps under the interior cellar door. The floor has been dried up and a tarp has been placed over the outside cellar door.

    When the appraiser comes back to reinspect, will the tarp be an issue or should it be taken down? Does the appraiser only look at the items required to repair?

    Thanks!

    • says

      Hi MJ. Thanks for checking in. Missing trim is a cosmetic issue and I don’t tend to call for repairs when there is trim missing. However, it’s hard to visualize by reading your words alone, so maybe there is a reason why the appraiser called for repairs. FHA tends to require repairs if the issue promotes a lack of safety, security, soundness, or somehow impacts the economic longevity of the property. Regarding the water, I would read closely what the appraiser asked for in the repair. Is it just the removal of water or is it the installation of a sump pump to cure any issue with flooding in the future? When appraisers see tarps, it is often a red flag because the appraiser might wonder if there is more to the story than is being told. An underwriter and future investor of the loan probably won’t want to see a tarp in the photos either. The appraiser will come to look at items needing repair, but if the appraiser does happen to see anything else that does not meet FHA’s minimum property standards, there could be more repairs required. Appraisers during a re-inspection are really coming out to verify the repairs were made, but they cannot ignore other issues if seen. Does that make sense? I hope so.

  13. Mrs.Meyer says

    Hello I am trying to buy a home with a chance loan and it is a homeopath home that has a functioning bathroom and then an additional bathroom was being built but it is only studs and has no dry wall, there is plumbing but it is all properly capped, will this pass since there is a functioning bathroom already or will it have to be completed? What about just hanging drywall and leaving pipes capped? Any insights would be appreciated thanks

    • says

      Hi Mrs. Meyer. Thank you for reaching out. You might have a difference among lenders and even appraisers with the answer to this question. I would first and foremost ask the lender if they are going to have a problem with it. Make sure you are on the same page before spending money on the escrow. That is one of the most important elements. Personally it is going to depend on how the bathroom looks. It sounds to me like the bathroom would not meet a C4 condition for Fannie Mae (see link below), so it will be a problem because of the lender’s standards. If the pipes and electrical are inside of the drywall though, that would be perfect for your needs. That way you have a potential bathroom, but nothing has been done or exposed. Realistically I would have no problem appraising a property like this, but it seems Fannie Mae might have a problem with the condition based on their definitions for condition (http://sacramentoappraisalblog.com/2014/03/17/a-quick-lexicon-for-understanding-what-the-heck-appraisers-are-saying/ –> See C4 vs. C5). Keep in mind actually seeing something can change an answer I might give. I hope that was helpful. Any other appraisers are welcome to chip in here too.

  14. Cheryl says

    We have two outbuildings on our property I am concerned about passing an FHA loan requirement for a refinance. We have an old very small farm. The barn is very small but the concrete floor is cracked and the roof is not great. The other building is a metal building in good shape but it has a dirt floor with thick hay on it. We have no animals. We do store stuff in these buildings but that’s pretty much their only function. Is this going to stop our loan?

    • says

      Hi Cheryl. Thanks for reaching out. I am not concerned about dirt floor. I’m not aware of any rule that says a floor has to be concrete (for a shed at least). The outbuildings along with the house should also meet FHA standards, so if there are structural issues or roof-life issues (has to have at least two years of roof life) with the one barn, there might be some repairs needed. Realistically though you might have an appraiser who only measures the barn and storage shed and hardly considers them. Sometimes I’ll go do an inspection on a property that has an FHA loan and I’ll wonder how a loan was obtained in the first place because of all the issues with the outbuildings or something else. 🙂

  15. Lily says

    I am currently in the process of trying to buy the home that I am renting from my landlord. I believe that she is selling me the home for about $20,000 under market value. My lender is wanting me to go FHA, but I am afraid that the home will not pass the inspection due to cracks above the windows and doors. We had a contractor come out and he said that the home is leaning and will need about $4600 in repairs to the foundation. We like this home, but are afraid of paying for the inspection and then being told that the foundation issues will need to be fixed prior. The landlord said that she is selling us the house AS IS, so I doubt that she will make the necessary repairs if needed by FHA. The home itself is otherwise in great condition.

    • says

      Hi Lily. If the appraiser or lender know about the repairs needed, that is very likely going to hold up the deal until the issue is solved. This is not an FHA issue either, but rather an issue that may hold up a conventional loan too. The regulation pendulum has swung far in recent years, so lenders tend to freak when there are issues like this. Cracks are understandable to a certain extent because mostly every house has cracks. But when the cracks look more severe and call in to question structural integrity, the appraiser may very well call for a qualified professional to inspect the house further and remedy the problem if there is an issue. If the cracks are that obvious, the truth is your landlord may need to deal with the issue no matter what unless she is selling to an all cash buyer. Also, for what it’s worth, unless you have the money to come out of pocket to pay for the repairs, might there be a different house out there for you? I am not sure where you are located, but this sounds like a good conversation for you to have with your landlord as well as a couple of professionals such as an appraiser, loan officer, and Realtor. Gleaning advice from those parties could be a huge advantage for you to work out a potential deal for the property… or to know if it’s simply time to walk away from the deal. Best wishes. Thanks for checking in Lily.

  16. Joshua Miller says

    So we are currently having a house appraised and the appraiser left a message for our realtor with no contact information. So when someone was not available to turn on the water on monday after she called on saturday. She came on Monday anyways and did the appraisal but was unable to find out how to access the basement (there is an obvious labeled garage door opener to do it) and said the water wasn’t on. She did not call anyone or notify anyone until a week later when we were pressing our lender for what was going on with the appraisal. The house includes a mother in law apartment in the upstairs with a second kitchen. During one of the discussions with the lender she said one of the needed Repairs would be to remove the second upstairs kitchen because she thinks it is a duplex and the town has it listed as a second family home. appendix D 4150.2 from the HUD website notes that ADU (Accessory dwelling units) are fine so long as the services are shared and entierly on property. Am I missing something or did we just find the bad egg?

    • says

      Hi Joshua. Thanks for reaching out. I’m sorry to hear communication has not been great with the appraiser so far. I hope that changes very quickly here. HUD will guarantee a loan an a duplex or a single family home with an ADU. The issue here becomes what the extra area is, whether an ADU, second unit, or illegal addition on some sort. The answer will come down to what zoning says and how the market sees the extra area. Here is a post on how to identify something as a second unit or accessory dwelling. http://sacramentoappraisalblog.com/2014/06/17/is-it-a-second-unit-or-an-accessory-dwelling/ Sometimes cities have an ADU listed as a “duplex” or “second unit” in Tax Records, but it’s really not. Just because Tax Records says it does not mean it’s true. This is where the appraiser has to talk with the city / county as well as use discretion because it can really change the way the unit is appraised. You might want to get something more definitive from the city so you can pass it on to the appraiser (in terms of what you have and what zoning allows).

  17. Kevin says

    Hi Ryan,
    I was just wondering if the FHA appraisal standards were the same for refinancing? We are currently trying to do a cash out refinance so that we can make needed repairs to our home, i.e. new roof, exterior painting, etc… The home is in good condition but after reading the FHA requirements I am afraid that the house won’t pass the appraisal because of the condition of the roof, and there is some peeling paint on the exterior. Without the refinance I am not sure how we will be able to correct these issues. Is there anyway that we can work with the lender on this?

    • says

      Hi Kevin. Thank you so much for reaching out. Yes, the standards are the same regardless of whether it’s a purchase or refinance. If you are definitely going to go FHA, but you have some obvious needed repairs that should be called out by the appraiser, you might consider doing what is called an FHA 203K loan. This loan pads needed repairs into the loan, so it can be a viable option to fix some things. Keep in mind a roof only has to have two years or roof life left, so it is okay if the roof is not brand new. I like that there are repair loans out there like this because sometimes the money is in the house rather than the bank to be able to cure certain issues. Not all loan officers do FHA 203K loans though, so if you consider this option (or a conventional repair loan), you may want to ask if your loan officer has any experience with this type of loan. I recommend using someone who either has the experience or has a mentor in the office to help get the deal done. Best wishes.

  18. Duane says

    I have had a recent appraisal for a house we are looking to purchase, in which the only thing found was peeling paint in a couple of areas. We have already repaired these areas plus other areas we thought to be cracked paint just in case. We are awaiting the appraisal paperwork to be sent in to our lender as the only condition left to take care of. How long after they receive the paperwork will it take for a relook to be scheduled and will the lender go ahead with drawing up the paperwork for final approval for the loan.

    • says

      Hi Duane. Thanks for reaching out. Lenders will give appraisers different timelines for getting in the final report (the final report is called a 1004D because that is the name of the form that is used). My client’s tend to want me to take care of it within 3 days. Sometimes a client will give as many as 5 days, but I find most are wanting it very soon since the loan is about ready to close. If they need something very fast, they will often pay a rush fee to get it done in one day. Sometimes this whole process can lag though because of how communication works. The loan officer might say the house is ready to be re-inspected by the appraiser, but then the loan officer has to communicate with the appraisal department (or an appraisal management company), then the appraisal department (or AMC) has to communicate with the appraiser. I find sometimes everyone else in the transaction knows the property is ready, but communication is lagging for whatever reason at the appraisal department (which means the appraiser does not yet know about it). So my answer is that it will probably be 3-5 days or sooner, but that is based on when the appraiser gets the go-ahead from the appraisal department or AMC. I find sometimes one of the agents will call me to say things are ready. Then I simply email my client to ask them if they can send over the order for the 1004D. This can help communication flow. The appraiser really does need to wait for the 1004D order to come through, so it’s very important for communication to happen from the appraisal department.

  19. JK says

    Hello,
    We are trying to buy a house in California with an FHA loan. The house itself is in good shape, but it has a free-standing garage that is pretty rough. The sellers are worried that it wouldn’t pass FHA. It has a broken window, missing a door, some water damage near the bottom. I think the roof is okay, but I’m not sure about the electricity… What are the chances of it passing appraisal? Would it be better to pay to have it demolished? We were hoping to fix it up after buying the property.
    thanks

    • says

      Hi JK. Thanks for reaching out. First off, the comments are odd today since for some reason the letter “i” is missing in each comment thread. Hopefully that’s just a bug. Very strange. Anyway, as far as passing the appraisal, it sounds like there are some clear repair issues needed. Keep in mind everything in the parcel lines has to meet FHA minimum property standards. If the structure is so bad, it really might be best to demolish it. If it is there, it should be repaired (or demolished as that is one way to do a very final repair). This should very likely be called out on the appraisal, though sometimes appraisers skip stuff they shouldn’t. Obviously that would be to your advantage in some senses, but it really should be called out if there are broken windows, obvious wood decay, chipping paint, a broken window, etc….

      • JK says

        Hi Ryan,
        So we took the risk and put in an offer. We were accepted and are in the final weeks of escrow now. Our appraiser did require some repairs to the garage, but they were pretty minimal. He required that the garage door be fixed or removed (seller removed) and the paint be sanded and repainted (which the seller did). We have since been cleared by the appraiser for the work being completed. We are so glad it didn’t need more work, that probably would have killed the whole deal!

  20. courtney says

    I am buying a home with an FHA loan. The inspection came back stating we need to finish the trim. We were planing on having 1×4 lumber and making it look a little rustic. I have heard that the trim all has to match and be the same color…is this the case? We have to get the trim done before close and we just wanted to get the trim that was missing up right now and we were going to have the other trim match at a later time. Do you think this will be an issue?

    • says

      Hi Courtney. Thank you for reaching out. I have never read anywhere that the trim needs to match. I doubt some mismatched trim is going to make a huge dent in the appraised value. Technically though an appraiser has to consider marketability during an FHA appraisal. If there is an impact to marketability I can see an appraiser being more stringent about trim matching. But realistically it would be very difficult to actually prove having different trim around a few windows is a marketability issue. In other words, proving there is an impact to value would be very challenging when we are talking about a presumably minor issue. Personally if we are just talking about a few windows, I would require the trim to be painted (not bare wood) and that’s about it (assuming otherwise it is adequate in size and does what it should do). I hope that helps. Did the appraiser require trim to be painted the same color as the other trim?

      • courtney says

        they said that I need finish the missing trim that is all. I think that is the issue….they were not very specific! The trim in the house now is painted white but honestly we wanted to go with a more natural look so it would be unfortunate if we have to paint then all to match and then have to replace them all again. And we do not have the time to be able to replace all the trim just to add the missing ones

        • says

          Okay, this is inside the house. I was answering as if it was outside the house. Most trim comes with a paint-grade white already, so it’s doubtful you would even have to paint it. If it is outside, it really should be sealed with an approved sealant or paint, but inside I would question that it really needs to be painted. (I hope I understand what you are saying correctly). It sounds like you can just replace what is missing and call it a day. Good luck on finishing up the project though with a more natural look.

  21. dre says

    Hi , I put an offer on Hud house, i am in contract right now, and freacking out . everything in the house looks nice, except few things. according to their appraisal on Hud website. also Hud won’t turn the water on for inspection or the appraisal.
    1- the plumbing isn’t holding pressure.
    i send in the plumber to check with air test, and we find a small leak , which he estimate $210.00 to fix it.
    2- the basement has moisture (about 1.5 foot) in one corner where the drain spout was draining straight to the house from outside.
    my question is:
    1-should i setup repair escrow for fha loan. or should i go with 203K?
    2- since it is Hud home (foreclosure) , i assume i can’t make any repair before i close .
    what is your suggestion
    please help…
    Thanks

    • says

      Hi Dre. Thanks for reaching out. I appreciate it. It can be tricky with HUD homes because they seem to take a hard-lined stance by not turning on the water or not making repairs. Ultimately if there are issues that cannot be repaired, something is going to have to give. Either they will have to budge and let you make the repairs or you’ll have to find a different house. It’s ironic to me that HUD homes are not more accommodating for FHA buyers, but I don’t make the rules. I would suggest you have your agent feel things out and try to find a way to get the repairs done. That’s probably as good as it will get for you. Otherwise if they allow a 203K, that could also be a good option so the repairs are handled by you after escrow closes. Best wishes.

      • dre says

        thank you for response, the house is IE and is allowed for 203K, but couldn’t go for 203k cause it is expensive for me especially for minor repair.
        i did reach out to a different bank that they said they will allow repair escrow after the closing. so cross finger hope everything will go well.

  22. Fawn says

    Hello! First and foremost, thank you for all the insight you have provided others that answers our own questions!
    We have an accepted offer on a home and awaiting fha appraisal now. We did see minor paint flakes around the home that we have touched up (scraped and painted over). There are spots where the paint is not chipping, flaking or peeling, but rather “cracked” a little. Should that also be painted over and will it pass fha? And if it is noticeable that the paint was chipping before but painted over will that pass? It was clearly scraped but not down to bare wood. We are unsure of how well covered this all has to be.
    Thank you!

    • says

      Hi Fawn. Thanks for reaching out. I appreciate your thanks too. It’s hard to say exactly without seeing the paint. I’m happy to give you my opinion if you’d like to email me a couple photos (my email is listed in the contact tab). Generally speaking any chipping, pealing, flaking, or cracking paint is deemed defective.

  23. Jessica says

    Hello! I just had a home that I really want inspected by a home inspector. Everything came back pretty good except moisture was found in the basement & some
    Mold. The inspector thinks it’s because the home has been vacant for several months. I also had A contractor with me during the inspection and assured me It’s an easy fix so I’m not worried. However, will FHA deny me even if I wanna do the work after closing? Is there anyway I can get a repair escrow? Or do I have to find a new lender & re-apply? The lender (PennyMac) has made it clear I cannot do any work on the home before closing. Trying to see if I should just back out the total deal before my contingency period is over.

    • says

      Hi Jessica. Thanks so much for reaching out. Great question. If the appraiser sees anything or comes into contact with information that would suggest there are health and safety issues, the appraiser will call for correction. If the appraiser does see a substance growing on a wall, for instance, the appraiser is likely to call that out. If the moisture is excessive, count on the appraiser calling it out, but if not, the appraiser might not call for repairs. For reference, here is an older post on “mold” from an appraiser’s perspective: http://sacramentoappraisalblog.com/2012/07/12/how-do-appraisers-deal-with-mold-situations/

      You are allowed to pad some repairs into the loan. They may have to happen before the close of escrow, though depending on the loan you can do them after escrow closes. I find in many typical situations lenders want repairs done prior to escrow closing. This is where working with an experienced loan office becomes invaluable because an LO can coach you and help navigate some options for you.

  24. Ted Bergner says

    Hi,
    My daughter is selling her home under FHA loan. The inspector report stated the garage door opener must be brought to fully functional presumably because of the door reversing feature FHA requirement. However, the garage door opener is complete inoperable so a reversing function is not applicable. Is an acceptable alternative to remove the opener motor assembly completely? I don’t read that there is a FHA requirement for an opener

    • says

      Hi Ted. Thanks for reaching out. You are right that there is no requirement for a garage door opener, though the rule of thumb is if it’s there it needs to work (and be safe of course). In this case it should be repaired or replaced if it is to remain. However, there are instances where something can be removed and that’s okay. I would lean toward saying it is okay for this to be removed. This is how I treat faulty ceiling fans as the remedy would be to replace, repair, or remove. I can see some appraisers thinking differently though because there is an element of interpretation here, but this seems reasonable since we are only talking about a garage door opener and not an HVAC or a major / expensive component of the home. Keep in mind there are two people asking for repairs in an appraisal though. On the front side of things an appraiser might call for repairs for the property to meet FHA minimum standards, but an underwriter on the back end could support those repairs or call for more (or less). Before making any repairs I would encourage your daughter to be sure she has the green light from the lender on what to do.

  25. Irritated buyer says

    We are in the process of buying a HUD REO using a 203b with repair escrow. The HVAC is 24 yrs old and does not work. Our inspector recommended having the HVAC inspected by a qualified contractor. We had it inspected and it does not work and can’t be repaired. The duct work under the house is also in need of repair (torn apart in places). The appraisal from the lender only noted to repair the duct work and the appraiser did not test the HVAC. How do we proceed to get the HVAC added to the needed repairs? This loan type allows the repairs to be financed in with the loan. I thought FHA required a working HVAC. Thanks for your advice.

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