FHA Appraisals

Increasingly one of the more common types of appraisal services we provide are FHA Appraisals. In order for an appraisal company to perform FHA/HUD backed appraisals, they need to be active on the FHA approved appraisers list, which is maintained by and at the official hud.gov website. The list can be accessed and searched by clicking on the following link.

https://entp.hud.gov/idapp/html/apprlook.cfm

It is recommended to search by last name of appraiser and appraiser's home state. To verify our active status simply click on the link and search by entering nappi into the last name field.

Changes to FHA/HUD Appraisal Guidlines

In September 2005, HUD announced the adoption of four of the Fannie Mae revised appraisal reporting forms and the release of the revised Appendix D of Handbook 4150.2 CHG-1. As you may be aware FHA has adopted and as of January 1, 2006 requires usage of the following four forms when completing applicable FHA assignments.

• Fannie Mae form 1004, Uniform Residential Appraisal Report (URAR) (March 2005)
• Fannie Mae form 1025, Small Residential Income Property Appraisal Report (March 2005)
• Fannie Mae form 1073, Individual Condominium Appraisal Report (March 2005)
• Fannie Mae form 1004C, Manufactured Home Appraisal Report (March 2005)

With the adoption of these new forms the Notice to Lender (Valuation Conditions/VC Form) and Notice to the Homebuyer (Homebuyer Summary) have been retired by FHA.

Also of importance, on December 19, 2005, HUD issued Mortgagee Letter 2005-48 addressing revisions to FHA’s repair and inspection requirements for existing properties. The Mortgagee Letter is available at www.HUD.gov.

Requirements for new construction remain unchanged with the exception that an appraiser may appraise a home that is “under construction” without requiring plans and specifications as long as the subject property is 90% or more complete at the time of inspection.

The revisions instruct appraisers that it is no longer necessary to require repair for minor deficiencies; however, still requires repairs for items that potentially affect the soundness or structural integrity of the property, the safety or health of the occupants, and the security or marketability of property. These required repairs would include issues that “rise above the level of cosmetic defects, minor defects or normal wear and tear.”

The revisions specifically address items that no longer require automatic repair for existing properties and includes:

• Missing handrails
• Cracked or damaged exit doors that are otherwise operable
• Cracked window glass
• Defective paint surfaces in homes constructed post 1978
• Minor plumbing leaks (such as leaky faucets)
• Defective floor finish or covering (worn through the finish, badly soiled carpeting)
• Evidence of previous (non-active) Wood Destroying Insect/Organism damage where there is no evidence of unrepaired structural damage
• Rotten or worn out counter tops
• Damaged plaster, sheetrock or other wall and ceiling materials in homes constructed post 1978
• Poor workmanship
• Trip hazards (cracked or partially heaving sidewalks, poorly installed carpet)
• Crawl space with debris or trash
• Lack of an all weather driveway surface

When making the determination if a work repair is required appraisers are instructed to consider the list above and whether the issue affects the safety, soundness or marketability of the property. For example, FHA no longer requires work repairs for missing handrails. If you are presented with a situation where there are a few stairs and no handrail, you would report that in your appraisal and not call for a work repair. However, if you are presented with a situation where there are numerous stairs leading to a basement or second story and no handrail, you would report this in your appraisal and since this may be considered a safety issue a work repair would be prudent.

FHA no longer mandates automatic inspections for the following items and/or conditions when appraising existing properties:

• Wood Destroying Insects/Organisms: inspection is required only if evidence of active infestation, mandated by the state or local jurisdiction, if customary to the area, or at the lender’s discretion.
• Well (individual water system): test or inspection is required if mandated by the state or local jurisdiction, if there is knowledge that the well may be contaminated, when the water supply relies upon a water purification system due to presence of contaminants, or when there is evidence of:
• Corrosion of pipes (plumbing)
• Areas of intensive agriculture with ¼ mile
• Coal mining or gas drilling operations within ¼ mile, dump, junkyard, landfill, factory, gas station, or dry cleaning operation within ¼ mile,
• Unusually objectionable taste, smell or appearance of the well water
• Septic: test or inspection is required only if evidence of system failure, if mandated by the state or local jurisdiction, if customary in the area, or at the lender’s discretion
• Flat and/or unobservable roof