Appraising Our Future

Appraising Homes for FHA Financing

I used to know a loan officer who jokingly referred to appraisers as Dream Crushers.? And when it comes to FHA appraisals there are many in the industry who would agree.?

Site visits for FHA appraisals are conducted in a similar fashion as appraisals for conventional loans.? The appraiser visits the home, taking notes and photos.? The appraiser researches market data for comparable homes by reviewing closed sales.? And finally, the appraiser reconciles findings to estimate the market value of the home.

FHA Loans (Federal Housing Authority), a division of HUD (Housing & Urban Development), are insured by the federal government and as such must meet certain criteria as set forth in the HUD Handbook 4000.1.? When it comes to the appraisal, if an item effects the health or safety of the occupants or the overall marketability of the property the appraiser needs to note this in the report and may need to mark the report subject to correction of said item.?

Some deferred maintenance items requiring correction to meet approval for a FHA loan may include:

Structural Damage (Foundation, siding, windows, roof, etc)

The appraiser will look for readily observable signs of structural issues such as leakage, ponding of water, decay, damage, termite damage, multiple or defective layers on roof, missing items.

MOLD/Mildew/Water Damage

I have been to a handful of homes over the years where the mold was so extensive, I had to boil and breathe in some oil of oregano after returning home just to be on the safe side.

Nonfunctioning or inadequate utilities/systems

If there is a septic system, the appraiser looks for any surface signs of failure.? Utilities must meet distance requirements as set forth in the Handbook.? If municipal water/sewer is available FHA requires the property to be connected when costs are feasible.? Feasible is defined as under 3% of fair market value.?

Loose or Exposed Wiring

I was at a house in Deerfield some time ago for an REO appraisal.? I walked midway down the basement stairs before turning around.? The foundation had caved in on one side, there was about a foot of water on the floor and draped over above was the ripped out but still somewhat connected electrical box.??

Lead Based Paint

No chipping, cracking, scaling, loose or peeling lead-paint on any surface.? This includes interior and exterior of livable structures, any outbuildings, stairs, deck, porch, railing, windows, doors (so basically anywhere).?

According to the Handbook: “If 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 to the elements.”? For homes built before 1978 the appraiser must “note the condition and location of all defective paint and require repair in compliance with 24 CFR § 200.810(c) and any applicable EPA requirements.”?

According to the?HUD website, peeling, chipping or flaking paint must be removed by the approved method of scraping the defective surface(s) and then reapplying new paint. It is very important to pay close attention to flakes of paint which might fall during the removal process as they could still present health and safety concerns. ? If you remediate the defective paint but forget to remove any old paint chips you just scraped off, the property will not meet FHA criteria. Often times, leaving loose paint chips on the ground is more of a health concern than when they were on the house, because now, the chips are easier for little fingers to grab.

FHA is a great option for buyers/homeowners with lower credit scores.? However, when it comes to the home itself; HUD Handbook 4000.1 is rather explicit on expectations of how the home should be maintained.? If you are listing a home, take a look at the property and ask yourself: is there anything which may affect the health or safety of the occupants or the overall marketability of the real estate.? If you answer yes, then that item may need to be cured in order for the property to meet FHA criteria.? If you are uncertain, it may be in your best interest to have a home inspection completed by a licensed professional or even contact an FHA approved appraiser for recommendations based on a surface observation prior to listing the property.

Speaking of UW Milwaukee

I find myself at present searching for a reasonably priced two-family or condominium within ? to 1 mile of UW Milwaukee (East of Parkway & West of Downer).? Of course, like anywhere else in southeastern Wisconsin, supply is limited.? Reviewing present listings I noted only 4 single family listings, 2 of which had offers.? I like the idea of a condo; they are lower maintenance and most have locked lobbies.? There are at present only 2 – two bedroom listings at $220/each and 4 two family homes with medium price of 410K (2 had offers).?

For today, Tuesday, January 09, 2024, the current average interest rate for a 30-year fixed mortgage is 7.04%.? Average rates have increased slightly from the same period last week.? Hopefully we get more supply in the upcoming months particularly as Powell signaled possible further reductions in rates this year.

Coffee Corner

Trying to find a breakfast place on a Saturday morning in Milwaukee when you are under a time constraint is virtually impossible.? After the third location informing us it would be at least 45 min to an hour, we located a quaint café in the lower east side. ?What Interval, 1600 N Jackson, Milwaukee lacks in space it more than makes up for in flavor.? We sampled a few items and everyone agreed those were the best homemade breakfast biscuits we have ever had.

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Contact Asap Appraisals for all your valuation needs.

262-442-2323 ?[email protected] * wiasapappraials.com