Things to Remember About FHA Appraisals
Why? Because if there is no appraisal, your lender cannot be certain the property meets minimum basic standards. It is impossible to get a realistic idea about the fair market value of the home without an appraisal.
What do you need to know as a new borrower or one who has not purchased a home in a long time?
FHA Appraisal Results Are Intended to Help the Lender
The appraisal is not a tool for the borrower. It is not meant to tell the borrower the true condition of the property and it is not intended to help the borrower decide whether or not to purchase the home based on the results of the appraisal.
What is needed for the borrower? An optional, but critically important borrower-arranged home inspection. This process is what some mistakenly believe the FHA appraisal is; a top-to-bottom review of the home specifically meant to assess the condition of the property.
The home inspection provides this service so the borrower can make an informed decision about purchasing the property or not. The appraisal DOES NOT provide this comprehensive review.
Who Arranges the Appraisal?
FHA appraisals are arranged by the lender. That means the appraiser delivers the completed report to the lender, who then reviews the appraisal report. Any corrections or repairs that may be required are noted.
In cases where the appraisal requires repairs or corrections, these are typically required to be done by closing day unless other arrangements are agreed to between borrower and lender.
In cases where a repair is needed, you may need to pay an additional fee for a compliance inspection. This is often required to prove the fixes have been made and that they comply with applicable state or local building code requirements.
Some Issues Cannot be Fixed
There are appraisal issues that cannot be corrected, and these generally result in the home being declared ineligible for an FHA mortgage. For example, a dwelling too close to a high-pressure gas pipeline easement would not qualify for an FHA mortgage. Nor would a home with high voltage power lines across the property.
The Results of the Appraisal
When the results of the appraisal come in, you may decide you do not agree with the valuation. This is not uncommon but in general, a re-appraisal is not possible just because there is a difference of opinion on the value of the property. When can a new appraisal be considered?
In cases where there are problems with the appraisal with what the FHA calls “material deficiencies” a new appraisal may be possible. You will need to speak to the lender about the possibility of a new appraisal but keep in mind that proof of such deficiencies would be required to move forward.
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