When I attended a HUD seminar, I was told that the primary concern is health and safety and of course marketability. If the house functions as a residence should, if someone's health and safety are not an issue, then I would simply describe it and let the underwriter determine if they want it finished or closed up, taken off, etc.
The following is from the new appendix of 4150.2:
The appraiser is to note those repairs necessary to make the property
comply with FHA's Minimum Property Requirements (MPR) or Minimum
Property Standards (MPS) together with the estimated cost to cure. The
lender will determine which repairs for existing properties must be made for
the property to be eligible for FHA-insured financing.
Cosmetic repairs are not required; however, they are to be considered in the
overall condition rating and valuation of the property. Examples of cosmetic
repairs would include surface treatments, beautification or adornment not
required for the preservation of the property. For example, generally, worn
floor finishes or carpeting, holes in window screens, or a small crack in a
windowpane are examples of deferred maintenance that do not rise to the
level of a required repair but must be reported by the appraiser.
The physical condition of existing building improvements is examined at the
time of the appraisal to determine whether repairs, alterations or inspections
are necessary - essential to eliminate conditions threatening the continued
physical security of the property.
Required repairs will be limited to necessary requirements to:
* protect the health and safety of the occupants (Safety)
* protect the security of the property (Security)
* correct physical deficiencies or conditions affecting structural integrity
(Soundness)
A property with defective conditions is unacceptable until the defects or
conditions have been remedied and the probability of further damage
eliminated. Defective conditions include:
* defective construction
* other readily observable conditions that impair the safety, sanitation or
structural soundness of the dwelling
Typical conditions that would require further inspection or testing by qualified
individuals or entities:
* infestation - evidence of termites
* inoperative or inadequate plumbing, heating or electrical systems
* structural failure in framing members
* leaking or worn-out roofs
* cracked masonry or foundation damage
* drainage problems
Appraisers are reminded not to recommend inspections only as a means of
limiting liability. The reason or indication of a particular problem must be
given when requiring an inspection of any mechanical system, structural
system, etc.
I downloaded the appendix from HUD and keep it on my desktop as an icon so that I can refer to it. You can find it on the HUD website under Appendix D.
