FHA Appraisals

If you purchase a home with an FHA loan, the property must be appraised and inspected by a HUD-approved home appraiser. The appraiser will determine the property’s current market value, and will inspect the property to make sure it meets HUD’s minimum property standards. The appraiser will look at recently sold comparable properties in the same neighborhood as the home being purchased. Then the appraiser writes a detailed report about the house and the area. The report includes the estimated value of the home and what repairs are needed. This report is given to the mortgage lender for review and further action.

Take note that HUD requires an appraisal that includes a health and safety inspection. HUD does not require a typical home inspection, however, they strongly encourage the borrower to use a standard inspector. This issue is often misunderstood among buyers and sellers.

An FHA appraiser will visually inspect the property, take photos inside and outside and get a copy of the street map with comparable properties. The main areas of inspection are the mechanical systems, heating/air conditioning, ventilation, electrical, the foundation, lot grade, roof, and crawl spaces. According to HUD Handbook 4150.2, the home “must be free of all known hazards and adverse conditions that may affect the health and safety of the occupants.”

If the appraiser finds anything that poses a threat to the health and safety of the occupant, or to the structure itself, it will be labeled as “subject to repair.” This is the primary theme in all the appraisal guidelines.