I belong to many online real estate appraiser forums. One discussion topic that never seems to get
old is whether or not a particular issue should be “called out” for repair in an
FHA appraisal. When I speak at real
estate offices, I’m often asked similar questions, like “will this situation
result in an FHA necessary repair?”
In answering such questions, I can only refer to what is
said in the newest HUD
Handbook 4000.1, but in
doing so, I always try to explain that although it would be nice if everything
was clear cut, there is room for judgement from both the appraiser and the loan
underwriter. One appraiser might view something
very differently from another. What
follows is just one example of many that may help real estate professionals
understand how there can be fifty shades of FHA guidelines.
An appraiser recently posted a photo of a weathered gray-looking
deck on a house built in 1972. The deck
appeared to have no finish and the appraiser asked others if they would call
for repair. The HUD Handbook says,
the dwelling or related improvements were built after 1978, the Appraiser must
report all defective paint surfaces on the exterior and require repair of any
defective paint that exposes the subsurface elements. If the dwelling or related improvements were
built on or before December 31, 1978, refer to the section on Lead-Based Paint.”
The online answers from other appraisers are numerous and
appraisers indicated that any unprotected wood on any structure should always
be treated and recommend calling for the repair.
appraisers indicated that it looks like faded wood that has been treated or
sealed in the past and therefore it should not be painted, stained, or
ultimately repaired arguing that additional treatment would reduce its life.
appraisers indicated that it is just an old bare wood deck that has not been
cleaned in a while and is just a part of the overall condition of the home.
appraisers indicated that the subject having been built prior to 1972 was
important because there might be some traces of lead based defective finish.
appraisers indicated that if there was no paint, there is no defective paint to
appraisers indicated that the condition should be noted and let the Underwriter
make the call.
The appraiser who originally asked the question came back
to the online forum and explained that he just disclosed the condition,
implying that no repair was called for. Although
the HUD Handbook guidelines seem clear, in practice the rules are interpreted
individually by many appraisers and loan professionals which, right or wrong, can
produce a wide range of results.
If you are faced with a structural condition that you’re
not sure about, consult the HUD Handbook first and then contact the FHA
Resource Center by calling (800) CALL FHA.
Ultimately HUD is the final judge in determining if properties meet
their requirements. The challenge for appraisers
is to report conditions found in the field accurately.
Did I leave anything out or do you want to join in the
conversation? Let me know in the
comments below. (Sorry that my comments
are still not working as of posting. My
website maker a la mode is still working on a fix.)
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