FHA Handbook Inspection Requirements And Fee

[David S. Roberson]

Local mortgage broker here informed real estate agents this week at a seminar that FHA appraisals are now $700 to $800.

 

[Meandering]

$800

 

[Joe23]

The only question I have with the new handbook is where it states : The Appraiser must notify the Mortgagee of the deficiency of MPR or MPS if mechanical systems are not safe to operate; not protected from destructive elements; do not have reasonable future utility, durability and economy; or do not have adequate capacity.

If we state that the home meets the MPRs of the new handbook aren't we stating that the mechanical systems meet all the above requirements?

How am I supposed to determine if they are safe to operate, have future utility, and adequate capacity? I don't have any expertise in heating/cooling systems, electrical capacity, or appliance repair? How do we handle that without stating we're incompetent to complete an FHA appraisal?

 

[KeyWhiz]

The only question I have with the new handbook is where it states : The Appraiser must notify the Mortgagee of the deficiency of MPR or MPS if mechanical systems are not safe to operate; not protected from destructive elements; do not have reasonable future utility, durability and economy; or do not have adequate capacity.

If we state that the home meets the MPRs of the new handbook aren't we stating that the mechanical systems meet all the above requirements?

How am I supposed to determine if they are safe to operate, have future utility, and adequate capacity? I don't have any expertise in heating/cooling systems, electrical capacity, or appliance repair? How do we handle that without stating we're incompetent to complete an FHA appraisal?

We ARE competent to recommend an inspection of these systems by trained professionals, however. I say recommend an inspection in all cases and put it back on FHA whether they want to either pay for such an inspection or re-evaluate their requirements for an appraisal.

But the common sense answer is this: "safe to operate" and "protected from destructive elements" are pretty easy calls to make. If it's questionable at ALL, recommend an inspection. "Adequate capacity"? Well, if it's got a really tiny oven in a cabinet with a hole for a normal sized one, or a dorm-room fridge, then I'd say that's "inadequate", wouldn't you?

As far as "reasonable future utility, durability and economy", what's "reasonable"? If the dishwasher is 20 years old and even though it still runs looks like its on its last legs, then it's probably doesn't have much future utility, durability and economy left, does it? If it's only a couple of years old and looks to be in good shape, then say so. If you're not sure---recommend an inspection.

Seriously, all this stuff sounds to me like they just want to make sure the appliances aren't broken down pieces of junk and that the appraisers aren't giving them full value as if they are nearly brand new.

I don't see why we really need to make more out of this than need be. I think some people are just looking for stuff to get their panties in a wad over, and maybe just have too much time on their hands, if you ask me.

 

[KeyWhiz]

If it's a vacant home--especially if it's an REO property---I always provide a cost-to-cure for old, worn out looking appliances anyway. I state that, in my opinion, the appliances should be replaced in order to bring the property to competitive market condition. And then it's on the seller whether they want to replace them or sell it as-is. I do the same thing with carpet and paint---giving my professional opinion as to what they will need to do to sell the property in a reasonable market/exposure period for the neighborhood/market the subject is located. If they don't want to do those things? Not my concern.

If it's occupied, then I ask the owners about the age and condition of the appliances and report it as such. "The appliances appear to be nearing the end of their effective life, but homeowners state they remain in functional and operational condition at this time".

I really don't see where the new FHA requirements are much, if any, beyond doing that basic stuff anyway.

 

[Joe23]

So you guys are okay with stating the the furnace is safe to operate, has adequate capacity, as well as the electrical system?

I'm fine with stating that the furnace was working the day I was there, but it's the future aspect that I don't think I'm ok with. If I get sued over this, they are going to go word for word from the handbook. I hear a lot of talk about just state what you observed, but that is not what the handbook says now.

 

[Mile High Trout]

Local mortgage broker here informed real estate agents this week at a seminar that FHA appraisals are now $700 to $800.

http://img.photobucket.com/albums/v202/MassMark/full-of-win-41.jpg

 

[CANative]

What were you doing before Joe?

 

[Tejus]

The only question I have with the new handbook is where it states : The Appraiser must notify the Mortgagee of the deficiency of MPR or MPS if mechanical systems are not safe to operate; not protected from destructive elements; do not have reasonable future utility, durability and economy; or do not have adequate capacity.

If we state that the home meets the MPRs of the new handbook aren't we stating that the mechanical systems meet all the above requirements?

How am I supposed to determine if they are safe to operate, have future utility, and adequate capacity? I don't have any expertise in heating/cooling systems, electrical capacity, or appliance repair? How do we handle that without stating we're incompetent to complete an FHA appraisal?

Highly recommend you read the following article, especially the Prosecutor/Appraiser dialog:

http://www.aareaonline.org/p449.html

This dialog may apply to all the FHA inspection items. If you signed off on these items, you are responsible.

FHA has already stated they do not want the Appraiser to recommend additional inspections unless there is an issue. To determine if there is an issue, you need to have expertise for all the FHA inspection items. See the article above.

As identified in the original post, the best solution I've seen is to sub contract a home inspection by a licensed home inspector and add that to your fee.

 

[Joe23]

I would state what I observed the day I was there. In the case of the furnace that is was operational and held temperature. I did not make any sort of claim that it would be so in the future.