Recently I have been asked questions about the current FHA inspection and repair requirements.  The following statements were copied from the FHA website.

• Required Repairs: Required repairs are limited to those repairs necessary to preserve the continued marketability of the property and to protect the health and safety of the occupants, A.K.A. the three S’s:
  • Safety: protect the health and safety of the occupants
  • Security: protect the security of the property (security for the FHA insured mortgage.)
  • Soundness: correct physical deficiencies or conditions affecting structural integrity

• Properties in Poor Condition: If the subject property is in such poor condition that it may be cost prohibitive or impractical to bring it up to FHA’s minimum property requirements, the appraiser should recommend rejecting the property and contact the Lender before continuing with the assignment. If continuing:
  • Complete the appraisal on an “AS IS” basis, clearly marking the report as recommended for rejection for Section 203(b) and provide reasons for the rejection;
  • Provide a list of all major deficiencies and state that the list should not be considered all-inclusive. Additional items may be required before acceptable for FHA Insurance; and
  • Provide photographs of deficiencies to support recommended action.

[ If the property has some general maintenance problems, like torn up or missing carpet exposing the floor underlayment, or a large hole in the garage door (these things would likely affect marketability) then the appraiser inventories these problems and presents a list of repairs to put the house in generally acceptable condition.(These are my notes.)] 

Clearing Conditions on Existing Homes

• All repair items required by the appraiser or underwriter must be inspected and the clearance documented.

  A professionally licensed, bonded, registered engineer, licensed home inspector or appropriately registered/licensed trades person, as applicable, must provide documentation that all deficiencies have been acceptably corrected upon completion of repairs. “As applicable” has been determined to mean any individual who the lender deems to be qualified, which might be the appraiser.

  Professionals as defined above may use their company’s forms and letterhead to make the certifications. Appraisers and Compliance Inspectors are to use the Compliance Inspection Report, form HUD-92051. The individual signing Section II must be the person who actually performed the inspection. Section III or IV, as appropriate, is to be signed by the Direct Endorsement Underwriter.

 If you are familiar with how the FHA managed the appraisals of the properties it insured prior to the mid 1990’s you can see that the requirements are much more general now and much less specific.

There will be more in this blog about FHA in the near future.  The FHA is rapidly growing in its support of the current residential real estate market.

Ralph Olsen, IFA   appraiser

Pacific West Appraisal Services Inc.

pwas.net

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