Some of the most common Pittsburgh FHA appraisal repairs many homeowners are not aware of nor that these common Pittsburgh FHA appraisal repair items will be needed to be addressed with an FHA appraisal for an FHA loan.
The FHA has three main concerns, for FHA appraisers, they are called the three S’s. The three S’s are Safety, Soundness and Security. A property must meet these three main criteria to qualify for a FHA loan. The most common repair items encountered in the Pittsburgh and surrounding area appraisals will be pointed out later. For many of these issues, corrections can be made with both little time and money. Knowing most of these issues up front will save you time from the beginning to the end of the loan process.
- Chipped and Peeling Paint – This is an issue on all homes built prior to 1978. The ever nagging lead paint problem still lingers and unfortunately most of the homes in the area still face this issue. Any areas of chipped or peeling paint found along the interior or exterior of homes built prior to 1978 must have those areas corrected including scraping and repainting the affected areas. In addition, all paint chips lying along the ground or otherwise must also be collected and completely removed from the premises. Considering the age of the Pittsburgh and surrounding areas, this is one of the largest issue’s we run across. The majority of homes are built prior to 1978 and contain Lead-Based Paint somewhere within. For more information we supplied a link to the EPA website for more information on Lead-Based Paint.
- Roof Condition – Regulations state the roof must not leak or allow for any moisture to enter the home. In addition, the roof should be able to physically function properly for a minimum of two remaining years. In circumstances where this is not the case, the appraiser must note whether the roof needs repair or requires re-roofing.
- Broken Windows – Many times small cracks in the windows are not big issue with FHA. However, if the crack could easily lead to the window glass falling out or if the window is broken with exposed shards of glass, it is a safety concern and FHA requires this to be fixed.
- Lack of hand rails – The concern at hand here is with ‘Safety’. The rule of thumb is if you have an area with 3 or more steps, a hand rail is required. Additionally, a railing is required around an elevated porch or deck generally 1 step or higher. Which leads me to, ‘The Door To Nowhere’! If there is an interior door that can open to a drop, this door will need to be permanently secured to prevent accidental opening or stairs installed.
- Utilities are to be on and operational at the time of the inspection – The appraiser has to check all the utilities and mechanicals to insure they are on and operational. That includes those homes that are vacant and were previously winterized. The utilities need to be turned on to avoid having a re-inspection and a possible delay in the closing with the added expense of the re-inspection fee. Utilities include heating and cooling systems, dishwashers, stove, lighting and plumbing items such as faucets and toilets.
- Frayed, Exposed or otherwise hazardous Electrical Wiring — This might seem obvious, but you may be surprised by how many homes have an area with this issue. Older homes and often homes from ‘Do It Yourselfers’ have frayed or exposed electrical wiring which are items that must be corrected. In addition, missing light switch and missing outlet covers must be replaced, open junction boxes must be covered and most exterior outlets require weatherproof covers. Also, many bathrooms and kitchens are missing GFCI receptacles within 4′ of an open water supply, sink or faucet a GFCI receptacle will need installed.
- Airport Contour Maps: FHA is asking appraisers to review airport contour maps and comment on the marketability of the subject being near an airport. You may be wondering what the heck an airport contour map is (like many appraisers). Well, it’s a map that basically shows noise levels surrounding an airport. The old FHA manual actually stated the appraiser must review contour maps, but the new manual takes it a step further to ask the appraiser to do reporting on the map or any issues. Old Handbook: “Appraisers must identify affected properties, review airport contour maps and condition the appraisal accordingly.” New Handbook: “The Appraiser must review airport contour maps and analyze accordingly. The Appraiser must determine and report the marketability of the property based on this analysis.”
- Additional Attic and Crawlspace inspection requirements. – While some may have issue or disagree with this next statement that it is new, the FHA NOW wants the appraiser to fully inspect the attic and crawlspace and take photos of all 4 corners. Essentially, the new FHA requirements say that ALL areas of the attic and crawl must be observed. If this cannot be done from the initial observation, then the appraiser must climb up into the attic or crawlspace and walk and or crawl around to see past any obstruction and take a photo. In many of the local older homes, the scuttle or little hatch to the attic or crawlspace is barely large enough for a child to enter let alone an adult. So what do you do? This is a grey area and there are many, does the homeowner have to enlarge the scuttle? Generally no, it must be commented about the lack of access and then it is in the lenders hands. Below is the excerpt from the HUD Handbook in regard to both Attic and Crawlspace observations. HUD HANDBOOK 4000.1, page 489-491
- Crawl Space Observation Requirements
The Appraiser must visually observe all areas of the crawl space and notify the Mortgagee of the deficiency of MPR and MPS when the crawl space does not satisfy any of the following criteria:
- The floor joists must be sufficiently above ground level to provide access for maintaining and repairing ductwork and plumbing.
- If the crawl space contains any system components, the minimum required vertical clearance is 18 inches between grade and the bottom of the floor joists.
- The crawl space must be properly vented unless the area is mechanically conditioned.
- The crawl space must be free of trash, debris, and vermin.
- The crawl space must not be excessively damp and must not have any water pooling. If moisture problems are evident, a vapor barrier and/or prevention of water infiltration must be required.
The Appraiser must report any evidence that may indicate issues with structural support, dampness, damage, or vermin that may affect the safety, soundness and security of the Property.
In cases where access through a scuttle is limited, and the Appraiser cannot fully enter the crawl space, the insertion of at least the head and shoulders of the Appraiser will suffice. If there is no access to the crawl space but there is evidence of a deficient condition (such as water-stained subflooring or smell of mold), the Appraiser must report this condition and the Mortgagee must have a qualified third party perform an inspection.
If there is no access, the Appraiser must report the lack of accessibility to the area in the appraisal report. There is no requirement to cut open walls, ceilings or floors.
Not all houses (especially historic houses) with a vacant area beneath the flooring are considered to have a crawl space; it may be an intentional void, with no mechanical systems and no intention or reason for access.
HUD HANDBOOK 4000.1, page 489-491
- Attic Observation Requirements
The Appraiser must observe the interiors of all attic spaces. The Appraiser is not required to disturb insulation, move personal items, furniture, equipment or debris that obstructs access or visibility. If unable to view the area safely in their entirety, the Appraiser must contact the Mortgagee and reschedule a time when a complete visual observation can be performed, or complete the appraisal subject to inspection by a qualified third party. In cases where access through a scuttle is limited and the Appraiser cannot fully enter the attic, the insertion of at least the head and shoulders of the Appraiser will suffice. If there is evidence of a deficient condition (such as a water-stained ceiling, insufficient ventilation, or smell of mold), the Appraiser must report this condition, and render the appraisal subject to inspection and repairs if necessary. If there is no access or scuttle, the Appraiser must report the lack of accessibility to the area in the appraisal report. There is no requirement to cut open walls, ceilings or floors. An observation performed in accordance with these guidelines is visual and is not technically exhaustive. HUD HANDBOOK 4000.1, page 489-491
- Crawl Space Observation Requirements
- Inspection of all transferred appliances – Another new FHA requirement states that all appliances that transfer in a FHA sale need to be tested along with a refinance of a loan. Another grey area and more on that in a moment. So now, if there is a FHA sale or refi, the appraiser has to turn on the exhaust fan over the stove and test all the setting & light, the appraiser must test a disposal if installed, the dishwasher if installed and a trash compactor if installed along with any additional installed appliances. However, the FHA says ALL transferred appliances in a sale. Locally, many of the older appraisers do NOT include personal property or chattel in their appraisal reports. We only appraise real estate which is a permanent fixture attached to the dwelling. So now, if the washer and dryer, refrigerator or any freestanding appliance is transferred, it too must be tested which now leads us to these questions. When testing the dishwasher do you have to run a full cycle? The stove, test all heating elements? The washing machine, do you wash a load of laundry & then dry it to also test the dryer? Let’s not forget a sump pump! Just how in the world does this get tested during a dry spell?
- Where have all the FHA appraisers gone – The last two new FHA requirements #8 & 9 when talking to the FHA will say, there is nothing new and this should have been done all along. When talking to an appraiser, they will tell you horse feathers! I will tell you, as of the time of this update, there are some appraisers out there doing FHA appraisals. Whether or not they are following all the guidelines is an answer only that individual appraiser can answer. However, what I can say is, many of the FHA appraisers are sitting on the sidelines turning down FHA work due to the added liability. Is an appraiser supposed to turn on these appliances and wait around for them to run complete cycles? What if one is turned on and the appraiser leaves and a water line breaks or there is a leak? Apparently HUD doesn’t even have the answer to these questions. So until there is more clarity, many FHA appraisers will continue to stay on the sidelines. Appraisers are not home inspectors. When HUD figures this out, there may be additional documentation required for the loan process that will include a home inspection by a certified home inspector.
Although trying to complete all potential FHA repair items prior to the appraiser’s inspection may not be possible, at least now you’re aware of several of the most common repairs that tend to delay the FHA loan process.
Also, remember that FHA appraisals are no guarantee a property is free from defects as the appraisal ‘primarily’ establishes value of a property for mortgage insurance purposes and is NOT a thorough home inspection as would be done by a home inspector. Buyers should always secure their own home inspections through qualified professionals to satisfy themselves about the overall condition of a property.
Update – As of September 14, 2015 HUD updated the FHA 4000.1 Handbook. While #8 and #9 are the most glaring, there are additional updates that Real Estate agents should be aware of when talking to clients about FHA financing. I would like to talk to your office personally to go over many of these requirements if you would desire. Just call my office to set up an appointment and I will come out and explain many of the FHA regulations that both sellers and buyers should be made aware of.
I hope you found this information helpful and if you have any additional questions please don’t hesitate to call.
Bostedo Appraisal Services – ‘the Pittsburgh Appraisers’ specializes in divorce appraisals, bankruptcy appraisals, date of death appraisals, estate appraisals, pre-listing appraisals and more throughout the Pittsburgh and 7 County region.
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