FHA Appraisals Are Not Home Inspections
Home buyers are often under the misunderstanding that since an FHA appraiser may ask for repairs and the appraiser is required to comment on various aspects of the home’s conditions amounts to a home inspection. Unfortunately, it’s as far from the truth as many urban legends you hear.
Many requirements imposed when performing an appraisal help furthers the misnomer, like the appraiser is in fact required to provide specific language on the life expectancy of a roof. Home buyers will see verbiage on their appraisal report that states the life expectancy of a roof has at least two years and assumes with good reason that the appraiser has made an on roof inspection. The fact is the appraiser is only required to view the roof from ground level and makes a general statement regarding its life expectancy. Furthermore, the appraiser isn’t required to inspect the attic, nor do they crawl underneath the house or check the wiring, unless something inspired them to do so. Even then, it’s only an observation and carries no warranty.
To be clear, the appraiser only makes general observations. If they see a broker window pane or an issue that many have a health or safety issue they are required note the issue. They may check to see all the burners on the stove are working and they may flip on light switches to insure they are working, but you should never consider these actions to be a home inspection.
Over time I’ve gotten feedback from homebuyers who questioned an appraisers work. Often times it was due to issues like finding out the roof leaked in numerous places within days, weeks or months after closing and questioned if the appraiser was responsible for cover the cost of repairs, or if FHA would fix or purchase back the home and the answer is always no.
FHA specifically addresses these issues of a home inspection in the initial disclosures home buyer receive from their lenders, but it’s often overlooked.
One of the disclosures a home buyer receives from the lender when getting an FHA home loan is one title: “For Your Protection, Get A Home Inspection“. It says in part:
An appraisal is different from a home inspection. Appraisals are for lenders; home inspections are for buyers. An appraisal is required to:
- Estimate the market value of a house;
- Make sure that the house meets FHA minimum property standards/requirements; and
- Make sure that the property is marketable.
Home buyers in their distress, who had property issues and didn’t get a home inspection have argued the point that the property did not meet “minimum property standards”, and although your lender, real estate agent and even the appraiser has sympathy for their situation the wording that FHA provides isn’t a cover-all for anything that’s defective in the home.
FHA encourages home buyers to get a home inspection (again, not the same as an FHA appraisal) stating the following in the same document:
FHA Does Not Guarantee the Value or Condition of Your Potential New Home
If a home buyer finds problems with their home after closing, FHA cannot give or lend them money for repairs and FHA will not take ownership of the home. Furthermore, the home buyer cannot stop making their mortgage payments, without the threat of foreclosure and foreclosure is a poor way to solve any problem.
It’s extremely important that homebuyers always get an independent home inspection, whether they are financing with FHA, VA, USDA, other conventional financing and even when paying cash.
Insuring you hire a licensed/bonded qualified home inspector gives you the protection you want and the information you need to make a wise decision. Some homebuyers may be concerned that the cost for a home inspection is expensive and although it may not be cheap, a new roof isn’t either. One way to address the cost might be to ask the seller to credit you at closing for the cost of a home inspection, as part of your offer to purchase and that’s what a real estate agent is for. A homebuyer’s real estate agent work in your interest and yours alone. They will help you to overcome almost any concerns you might have and why you should always employ one when purchasing a home.
The bottom line is to minimize your risk when purchasing an older home and to do that you need to secure a home inspection and never relying on an appraisal of any kind in the hopes important issues were caught.
