Sacramento Appraisal Blog

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FHA Appraisal Articles

Do you need working appliances for an FHA loan?

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As an FHA Certified Real Estate Appraiser, I get this question quite a bit from home owners and sometimes real estate agents (well, most agents know the basics here already, but the difference between a slide-in and drop-in stove in the eyes of FHA/HUD is sometimes not known). Watch the video below (or HERE) and let me know what you think. Any questions or insight?

This was shot on a myTouch 4G mobile phone in a cold vacant house with laminate and tile flooring throughout (hence the lower quality on sound).

If you have any real estate appraisal, valuation consulting, or property tax appeal needs, contact me at 916.595.3735, www.LundquistCompany.com or via Facebook.

FHA’s “Anti-Flipping Waiver” extension will help move properties in Sacramento

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The “Anti-Flipping Waiver” from HUD/FHA will be extended in 2011 for the Sacramento real estate market (and everywhere else too). To help bring stability to the market, FHA has announced an extension of the anti-flip rule. Formally FHA had required 90 days between initial acquisition to when the property could enter contract again.

What do you think of this news? Overall I think it’s a good move because we need properties in our market to move. I’m not a fan of rules that slow down the selling process if investors are doing legitimate rehabs. We still need to watch out for shoddy workmanship and classic examples for why there was a 90-day rule in the first place. It’s not good for anyone but the seller when the “remodel” is simply “lipstick on the pig” so to speak, meaning new paint, cheesy low-quality “upgrades”, and hiding all sorts of negative issues about the house through minor cosmetic “remodeling”.

You can read more about the extension of the Anti-Flipping Waiver at the following link (PDF press release from HUD). In essence, just know that HUD will extend the waiver from January 31, 2011 through the end of the year. If you have any questions, insight to share, or opinions, please comment below.

If you have any real estate appraisal, valuation consulting, or property tax appeal needs, contact me at 916.595.3735, www.LundquistCompany.com or via Facebook.

Does the garbage disposal really have to work for an FHA loan?

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Are appraisers being too picky about calling out for repairs on FHA loans? I cannot speak for all appraisers by any means, but from an appraiser’s standpoint I’ll say that FHA has strict guidelines they expect their appraisers to follow. As a Certified Real Estate Appraiser in the Sacramento area, I have a HUD checklist that I go through while at a property, and if there are items HUD won’t accept, I have to call them out. Things like chipping paint, an inoperable heat system, a shattered window, or even a broken garbage disposal, can all hold up an FHA loan if not properly cured. 

It can be frustrating to think such a minor repair can be a deal killer for a loan, but at the same time, a good loan officer, solid lender, and superstar real estate agent will be able to cooperatively deal with issues like this. FHA repairs are normative in the course of business, and when you work with knowledgeable professionals, these things can be anticipated, maybe negotiated with the seller, and hopefully remedied (of course this might be difficult if the property is bank-owned, and the bank is unwilling to put even one cent back into the foreclosed property). See a video below that I shot during an FHA appraisal inspection (recorded with myTouch 4G cell phone):

Let me know if you have questions, insight, or any real estate appraisal or valuation consulting needs. If you are a local real estate or loan office in the Sacramento area, I’m happy to come and give my FHA presentation. Contact me at 916.595.3735, on my company website, or on Facebook.

Does FHA require permits on an addition?

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Permit or no permit? That is the question. Does FHA require permits for an addition? I have local real estate agents ask me this question quite a bit. The answer in short is “no”, but there is really more to understand about this issue other than just a simple “no”.

Straight from FHA/HUD:

HUD feels that any addition or modification should comply with applicable building codes of the local jurisdiction; however we do not require proof. Pursuant to HUD Handbook 4150.2, the Department has neither the authority nor responsibility for enforcing laws of the municipality; therefore, permits are not required. The property must however be in compliance with local land use regulations (zoning) of the subject site, i.e. a legal use.

The appraiser is not expected to have the expertise or knowledge to determine if an addition or modification is properly designed and constructed, however, the appraiser should; describe the addition/modification, indicate differences, if any, in the actual gross living area compared to public records, and note if the addition/ modification appears to be completed in a workmanlike manner.

The appraiser should value the addition/modification appropriately according to its contributory value in the market. It is not acceptable to exclude the addition or modification from value solely for the lack of permits issued by the local jurisdiction.

Basically, if there is an addition, it must be built in a professional workmanlike manner as well as serve a use. This addition, whether permitted or not, can contribute to market value according to HUD (if it does legitimately contribute to market value). However, keep in mind that the lender doing the FHA loan may have a big problem with a lack of permits. Some lenders require permits and will not fund a loan with an illegal addition. Moreover, if there is an illegal addition, how does the city or county view such an add-on?

Let me know if you have any questions. Call 916.595.3735, email me, or contact me through my website.

NOTE on 04/02/2013: I cannot find the original document where I quoted HUD in this post. I believe it was from an email from HUD. Please read this post and the comment thread for more information. It is important to realize that appraisers have to rely on the HUD Handbook as well as information provided by HUD for issues that are not readily addressed in the Handbook. Call 800-CALL-FHA to get in touch with FHA, who can then put you in touch with your local HUD Home Ownership Center if need be.

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