Why Appraisals Should Not Be Considered Home Inspections
“I got a loan to buy a home and since the closing day, there have been major problems and code violations. I did not have a home inspection and was told the FHA does its own inspection. Can you explain why the FHA inspection did not find these problems before my loan closed?”
There are several issues here. The first one? FHA officials do NOT inspect homes. And FHA appraisals are handled by third parties, not the government. Do not expect the FHA appraisal process to be anything more than what it is designed to be. And what is that exactly?
Appraisals are a tool for the lender. Your financial institution relies on the appraisal process to ensure a home meets MINIMUM requirements. The appraisal also helps the lender to establish the fair market value of the home.
Is the appraisal ever meant to be a consumer tool for the buyer? No. Should you as a buyer use the results of an appraisal to evaluate the true condition of the home? Never.
The FHA and HUD warn borrowers about skipping the inspection in a downloadable pamphlet on the HUD official site. It’s called For Your Protection: Get a Home Inspection which states in part:
“An appraisal is different from a home inspection and does not replace a home inspection. Appraisals estimate the value of the property for lenders. An appraisal is required to ensure the property is marketable. Home inspections evaluate the condition of the home for buyers."
If you don’t have the home you want to purchase inspected, you cannot rely on the appraisal as an FHA seal of approval on a home. The FHA does not “approve” the home with an appraisal and the appraisal carries no guarantee that the house is free from problems.
The “inspection versus appraisal” issue in the planning stages of your home loan CAN be confusing/ That’s because some in the mortgage industry use the term “inspection” interchangeably with the term “appraisal.”
These mortgage professionals are likely not deliberately trying to confuse the issue, but confusion is often the result when there is a lack of accuracy in the terms. If you are preparing to apply for a home loan, make sure you fully understand the difference between a home inspection.
It is a very good idea to invest some time looking into professional home inspectors in your area. Look for inspectors who get good reviews and have reputations for good work.
Learn About the Path to Homeownership
Take the guesswork out of buying and owning a home. Once you know where you want to go, we'll get you there in 9 steps.
Step 1: How Much Can You Afford?
Step 2: Know Your Homebuyer Rights
Step 3: Basic Mortgage Terminology
Step 4: Shopping for a Mortgage
Step 5: Shopping for Your Home
Step 6: Making an Offer to the Seller
Step 7: Getting a Home Inspection
Step 8: Homeowner's Insurance
Step 9: What to Expect at Closing
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