What Does an FHA Appraiser Look For?

When securing a mortgage backed by the Federal Housing Administration (FHA), the property undergoes a specialized appraisal process. Unlike a conventional appraisal, which primarily assesses the home’s market value, an FHA appraisal serves a dual purpose. It determines the property’s value and evaluates whether it meets specific health, safety, and structural soundness standards. This process benefits the lender by ensuring the property is a sound investment, rather than acting as a traditional home inspection for the buyer.

Key FHA Appraisal Standards

FHA appraisers operate under specific guidelines known as Minimum Property Requirements (MPRs) and Minimum Property Standards (MPS). These standards are set forth by the U.S. Department of Housing and Urban Development (HUD) to ensure that homes financed with FHA loans are safe, sound, and secure. The MPRs and MPS aim to protect the borrower by ensuring habitability and marketability, while also safeguarding the FHA insurance fund. They address major structural defects, health hazards, and inadequate utilities, preventing issues that compromise well-being or long-term viability.

Specific Property Elements Examined

An FHA appraiser scrutinizes various physical components of a property to ensure compliance with MPRs and MPS. Structural integrity is primary; the appraiser examines the foundation for cracks, settlement, or water damage, and the roof for missing shingles, leaks, or deterioration. Walls, ceilings, and floors are also checked for cracks, water damage, or significant defects.

Safety hazards receive close attention, including exposed electrical wiring, uncovered junction boxes, and the absence of handrails on staircases. For homes built before 1978, any peeling, chipping, or cracking paint must be addressed due to the potential presence of lead-based paint. Appraisers also verify the presence and functionality of smoke and carbon monoxide detectors.

Health hazards are thoroughly investigated, such as evidence of pest infestations like termites or rodents, and visible mold growth or excessive dampness. Proper drainage around the foundation is checked to prevent water intrusion and moisture-related issues. Adequate ventilation in attics and crawl spaces is also assessed to prevent moisture buildup.

The functionality of utilities and systems is another area of focus. This includes ensuring heating, cooling, plumbing, and electrical systems are in proper working order. The property must have access to potable water and functional sewage disposal. Appraisers also confirm safe access to the property and all rooms, including emergency exits.

Addressing Appraisal Findings

Upon completion of the FHA appraisal, the appraiser submits a detailed report to the lender, outlining both the property’s market value and any conditions that do not meet FHA standards. If the property has deficiencies violating the Minimum Property Requirements or Standards, the report will specify these as “required repairs” or “conditions.” These repairs must be completed before the FHA loan can close.

A re-inspection is required after repairs are made, by the FHA-approved appraiser, to confirm all noted items have been corrected. If the property does not meet FHA standards, it cannot be sold “as-is” under an FHA loan. The findings can introduce delays, potentially requiring negotiation between the buyer and seller regarding repair costs. If repairs are not completed or an agreement cannot be reached, the loan may not proceed, impacting the purchase.