Various real estate professionals speaking at the 2016 REALTORS® Legislative Meetings & Trade Expo. said yesterday that the Federal Housing Administration’s (FHA) overhaul of its Single-Family Housing Policy Handbook last year has made to the property valuation policies are causing confusion and delays, according to the National Association of Realtors®.
FHA requires that all appraisers must be HUD certified and according to HUD Handbook 4150.2, the home “must be free of all known hazards and adverse conditions that may affect the health and safety of the occupants.” Appraisers are now also required to inspect the primary areas of property such as the roof, the foundation, lot grade, ventilation, mechanical systems, heating, electricity, and crawl spaces (when present) to identify any defects and or safety issues.
This requirement makes appraisers become somewhat like home inspectors which may place undue liability on appraisers and underwriters.
Birtmingham, Alabama appraiser Tome Horn had said this about the new FHA appraisal requirements, “The list of items an appraiser is asked to check for during an FHA appraisal observation is extensive. In the olden days appraisers were asked to fill out what is known as “VC sheets”, which is short for valuation condition. These sheets covered all sorts of things that can influence the condition and value of a property.
The VC sheets included items that can affect the “soundness, safety, and security” of the property. Several years ago the rules changed such that these sheets no longer have to be filled out and included with the appraisal report, however the appraiser is still responsible for checking the property to note if they exist.
The responsibility on appraisers to call for certain repairs to be made has been taken away now and placed on the underwriter’s shoulders. Appraisers must report certain items within the appraisal report and then it is up to the underwriter to call for the repair or inspection to be made.”
“FHA appraisal guidelines are stricter; the standards set the benchmark for appraisals in the industry,” said Gary Eisenbraun, appraisal/technical support branch chief of the Federal Housing Administration. “The guidelines are strict though to protect consumers and safeguard FHA’s mortgage insurance fund and taxpayer dollars.”
Martin Wagar of Wagar & Associates Inc., of Kalamazoo, Michigan had said, “The appraiser’s job is to observe, analyze and report to the underwriter that the property meets HUD’s minimum property requirements. The danger is that consumers can mistake the role of the appraisal for that of an inspection.”
John Anderson, a Realtor® and appraiser with Twin Oaks Realty Inc., Minneapolis, Minnesota, agreed there is confusion about whether and how appraisals are different from home inspections. “There is growing confusion among consumers about whether they also need a home inspection,” he said. “An appraisal makes sure a home meets FHA minimum standard requirements; it is different from a home inspection and does not replace it. Buyers should still get an inspection, and it’s often required by the lender.”