FHA Carpet

[Terrel L. Shields]

Just did a final on a condo - I suggested the carpet was at the end of its life. It had big dark spots on a beige carpet...and it is pushing 20 yr ago probably...15 at a minimum. The buyer is a local remodeler. He said, "I've got a gal that can clean that carpet and make it look like new..." I thought, "Yeah, I'll bet.".... He was right. The carpet looks like a new one.

 

[Scott R Marshall]

I guess my question would be was the report completed "as is" or "subject to" the carpet repair? I am assuming you did an "as is" report with either a cost to cure and/or utilization of similar condition homes.

Next question would be if you gave the subject a C4 or C5 rating?

 

[Kim Whiting]

What? FHA turn down an appraisal when the buyers have 3% invested? Unheard of! Heck, have em go rural development where ZERO is required from the buyer.....yeah, that's the ticket.

 

[General D]

There may be a secondary reason for the loan denial and the appraisal report is always a good source for rejection by others in command. You were correct in disclosing the condition in the report. Their is a difference between badly soiled carpeting and end of life. The revised FHA report requirements can be confusing in this.

 

[NC Appraising]

FHA Spotlight – Primary Elements of Minimum​

Property Requirements (MPR)

Over the years, the
meaning and importance
of the three primary
elements of MPR have
become confused by the
reference to safe, sound
and secure. However, the
primary elements of
minimum property
requirements for FHA
eligible properties are
correctly referred to as,​

safety, soundness

​

​

and

security. ​

​

​

The three S’s of​

property eligibility, as they

are often referred, are
important for appraisers to
keep in mind when
performing property
inspections.​

​

​

​

​

).​

three elements relate to

and impact one another.
​

​

Safety ​

​

​

refers to the health,​

habitability and sanitary

condition of a property.
Systems within the
dwelling contribute to the
safety of the home.
Deficiencies or a lack of
functioning components of
plumbing, electrical or
heating and cooling
systems may create
hazards that could be
considered health and
safety issues. Safety
hazards can also be the
result of issues having to
do with the soundness of
a property or simply a
missing handrail or other
hazards affecting the
health and well-being of
the occupants.
​

​

Soundness ​

​

​

relates to the​

structure and structural

components of the
dwelling. They include not
only the foundation but
also other elements such
as floor, wall and roof
framing systems. Decks,
porches and patios may​

​

​

also pose structural issues​

due to improper

construction or
deteriorated condition.
Site conditions may also
impact soundness.
​

​

Security ​

​

​

​

​

is the MPR​

element that creates the

most confusion among
appraisers. The misused
mantra, safe, sound and
secure has contributed to
the notion that secure
means that the property is
sheltered from weather​

​

​

and/or protected from​

intrusion, etc. However,

security refers to risk to
the Insurance Fund in
terms of a property’s
ability to serve as
collateral for the FHAinsured
loan.
Marketability is one of the
things to be considered
under the element of
security. Marketability
issues can include
deficiencies related to the
other two MPR elements
having an impact on value
or marketability. External
influences may also
impact the ability of the
property to serve as
collateral for FHA-insured
financing.
Appraisers must be
diligent in considering
these three important
elements of FHA’s MPRs
during the inspection and
appraisal process and be
sure to condition the
appraisal appropriately​

​

​

​

​

when deficiencies exist​

Then you have :​

4150.2 ​

o Cleaning or removing carpets is required only when​

they are so badly soiled that they affect the ​

livability and/or marketability of the property. ​

Repair Requirements​

As stated in Revised Appendix D, FHA now permits an “as-is” appraisal for existing properties that serve as security for FHA-insured mortgages when minor property deficiencies, which generally result from deferred maintenance and normal wear and tear, do not affect the safety of the occupants or the security and soundness of the property. FHA no longer requires repairs for these types of minor cosmetic deficiencies to bring a property into compliance with FHA Minimum Property Requirements. Specifically, the guidance provided in Handbook 4150.2, CHG-1, Chapter 3, Paragraph 3-6, A-7 referencing all-weather road surfaces; Paragraph 3-6, A-8 referencing poor workmanship; Paragraph 3-6, A-11 referencing debris and trash in crawl space; Paragraph 3-6, A-16 referencing steps without a handrail; Paragraph 3-6, C referencing bare floors, badly soiled carpeting and cracked plaster and sheetrock is no longer applicable. Additionally, the guidance provided in Handbook 4905.1, REV-1, Chapter 2, Paragraph 2-7, A-2 referencing all weather road surfaces; Paragraph 2-8 referencing poor workmanship and Paragraph 2-14, C referencing crawl spaces with debris and trash is no longer applicable. Any reference to the Valuation Condition form (form HUD-92564-VC) and protocol for its completion contained in Handbook 4150.2 is no longer applicable as well. Examples of minor property conditions that no longer require automatic repair for existing properties include, but are not limited to:​

· Missing handrails
· Cracked or damaged exit doors that are otherwise operable
· Cracked window glass
· Defective paint surfaces in homes constructed post 1978
· Minor plumbing leaks (such as leaky faucets)
· Defective floor finish or covering (worn through the finish, badly soiled carpeting)
· Evidence of previous (non-active) Wood Destroying Insect/Organism damage where there is no evidence of unrepaired structural damage
· Rotten or worn out counter tops
· Damaged plaster, sheetrock or other wall and ceiling materials in homes constructed post- 1978
· Poor workmanship
· Trip hazards (cracked or partially heaving sidewalks, poorly installed carpeting)
· Crawl space with debris and trash
· Lack of an all weather driveway surface​

Plenty of evidence that HUD does not consider badly soiled carpeting to be any of the three S's.​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

 

[NC Appraising]

Not unless it effects the security of the subject property. does it make the subject a C5 or C6? Most lenders want at least a C4.

FHA insures on C5 homes. Therefore, a C5 condition property or for example a roof that is rated as being in Fair Condition, but has >2 years of life left meets HUD/FHA guidelines.


Now if the investor or lender requires everything to be in average or C4 condition, that is another issue. Has nothing to due with HUD/FHA. If the lender has such a requirement, I guess you could make it subject to and have them to repair it, but with or without the repairs the subject meets HUD minimal requirements.

 

[ZZGAMAZZ]

I thought that issues that affect any of the 3S's resulted in a "subject to" report in a FHA assignment, but that all issues of deferred maintenance need to be described.

 

[NC Appraising]

I thought that issues that affect any of the 3S's resulted in a "subject to" report in a FHA assignment, but that all issues of deferred maintenance need to be described.

You are dead on.



Some of the issues that I can think of where carpet would affect the the S's are:

mold in carpet from a flooded home or from a high moisture level in the crawl space.
wet carpet from a flooded home, could affect the floor structure
heavy urine/feces from pets or the owner...never know
bloody carpet (yep, I have been there)




MCG,

Call up your HOC and report back. My money is that if the carpet is badley torn, soiled or trashed it will need to be replaced. Marketability issue....I disagree, but will probably say that.

 

[RSW]

FHA insures on C5 homes. Therefore, a C5 condition property or for example a roof that is rated as being in Fair Condition, but has >2 years of life left meets HUD/FHA guidelines.


Now if the investor or lender requires everything to be in average or C4 condition, that is another issue. Has nothing to due with HUD/FHA. If the lender has such a requirement, I guess you could make it subject to and have them to repair it, but with or without the repairs the subject meets HUD minimal requirements.

And I believe it could fall under "Secure" of the 3S's depending on how bad the carpeting is.

 

[J Grant]

FHA is now leaving more of the conditioning of appraisal up to the judgment of the appraisers. In the old days of VC sheets it was the other way around!

Imo, if carpeting had holes where people could trip, or exposed nail beds to floor, it would fail the security issue, or mold, or other dangerous substances into it such as chemicals, it would fail safety.

Other than that it is a cosmetic item and not part of MPR. As far as marketability, any buyer even the least informed one knows that carpet is an easy and relatively inexpensive replacement item. Strip it up and buy remnant carpet or even carpet tiles or vinyl tile flooring.