FHA Septic & Well Appraiser Lawsuit

[Meandering]

I am pleased to see your profession is NOT an appraiser, because you should be aware that the appraiser does not receive a copy of the borrower's home inspection.
However, they as well as the lender do have access to public information and it is their duty to verify any property specific characteristics.
Let me save you from continuing to appear as incompetent as the appraiser that performed this appraisal.
In chronological order,
Myself, the home inspector nor the seller knew the location of the septic at the time of inspection.
I requested the tanks be pumped in order for the seller to locate it prior to appraisal.
It was located and left uncovered less than 10ft from the front door in the front flower bed that the appraiser had to physically walk by to enter the home.
The lid can be seen in the required picture of the front view of the home in the appraisal report as well as a picture of the water well storage tank located in the garage. (which differs from a water heater because it has a pump on it.)
The lender/AMC requested all repair receipts to justify the difference in price in the sales history including the receipt for the SEPTIC tank being pumped.

The only one that knew there was a requirement on that item and did not perform it was the lender and appraiser.

The only thing you are correct on is this is a very significant case, because it shows the loophole the lenders are using to close loans without meeting FHA minimum property requirements which by definition,

FHA minimum property standards protect both lenders and buyers from the struggles that come with properties that have significant physical damage or pose a health and safety hazard of some sort.

https://www.gocanvas.com/content/blog/post/complete-guide-to-FHA-home-inspection-checklists/

You, as the buyer still had the obligation to have the septic inspected, not just pumped out, oh, and to have the well water tested.

so, if the seller had no clue where the septic was, how long has the main drain line been dislocated from the septic tank???

Oh, and if nobody knew anything about the septic, how did you or any realtor know it was not just a holding tank without a drain field that needed to be pumped regularly.

As the "market buyer" you failed in your own due diligence in the middle of a pandemic. Sorry, you just can not blame the appraiser for this.

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[Huds_Harm]

https://www.gocanvas.com/content/blog/post/complete-guide-to-FHA-home-inspection-checklists/

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Did you even read this link?

While the FHA does not require home inspections, they do require an appraisal. This appraisal has an inspection component. An FHA-approved appraiser will visit the property and perform the inspection, checking to see that the home meets the FHA's Minimum Property Standards.

 

[Zoe]

Here is what FHA Handbook 4000.1 says.

"The Mortgagee must confirm that a connection is made to a public or CommunityWater System whenever feasible and available at a reasonable cost. If connectioncosts to the public or community system are not reasonable, the existing onsitesystems are acceptable, provided they are functioning properly and meet therequirements of the local health department."

Page 186.

"The Mortgagee must" Must is the keyword there.

So the lender messed that one up. Probably wanted to close fast so everyone got paid.

But some jurisdictions won't let it transfer if sewer is available on the street. That has nothing to do with FHA or lender or whoever. They require it. It has nothing to do with feasibility. H&B use as improved and as if vacant? Possibly. Nothing to do with feasibility. The property can't transfer until it is hooked to the public sewer.

 

[Dublin ohio]

Did you even read this link?

While the FHA does not require home inspections, they do require an appraisal. This appraisal has an inspection component. An FHA-approved appraiser will visit the property and perform the inspection, checking to see that the home meets the FHA's Minimum Property Standards.

That link means nothing. It is an advertisement for a "inspection" checklist that is based on the old FHA VC form that hasn't been around for years. An FHA appraisal "inspection" is not the same thing that the link infers. Even FHA acknowledges and states that an appraisal is not the same as a home inspection.

 

[Overimprovement]

I’m not able to read through all 12 pages but I don’t understand how a buyer, seller, two real estate agents, a home inspector and an appraiser can all miss a property is on a septic. Often that’s a primary search criteria. Some buyers would never buy a septic, and some buyers would never buy public.

As far as whether a septic is operating properly, that seems more of an inspection issue. Even then I’m sure there’s disclaimers to have it serviced immediately.

My friends who have bought homes with septic tanks, get them service immediately after purchasing I’m surprised an agent would not have recommended that

Good luck, sewage back ups do happen. Not sure if homeowners insurance would cover it or not.

Ahhh...but they all did KNOW it was septic. Including HO. The HO is claiming reliance upon the appraisal report stating public utilities, when everyone knew it was on septic. Read my summary a few posts ago.

 

[Zoe]

I did house not too long ago that was probably built in the 1950's or 1960's and was on septic. They were on city water but not city sewer that was right on the street. This particular City is very strict on code enforcement. They said it has to be connected before this property sales. The subject was under contract. Seller (investor) was not happy with me. They were flipping it. City even told me cheapest route they could take but it had to be hooked up.

They were not in City limits when the house was built. They got annexed. The City was and is still growing fast on their corporate limits.

 

[chad hampton]

Ahhh...but they all did KNOW it was septic. Including HO. The HO is claiming reliance upon the appraisal report stating public utilities, when everyone knew it was on septic. Read my summary a few posts ago.

So the homeowner and agents all knew the home was on a septic? Then I’m not sure what the issue is, homes need to be maintained.

 

[Zoe]

From FHA standpoint and others etc, it relates more to H&B use issues as improved and as if vacant related to MV definition.

 

[TerryRohrer]

I’m not able to read through all 12 pages but I don’t understand how a buyer, seller, two real estate agents, a home inspector and an appraiser can all miss a property is on a septic. Often that’s a primary search criteria. Some buyers would never buy a septic, and some buyers would never buy public.

As far as whether a septic is operating properly, that seems more of an inspection issue. Even then I’m sure there’s disclaimers to have it serviced immediately.

My friends who have bought homes with septic tanks, get them service immediately after purchasing I’m surprised an agent would not have recommended that

Good luck, sewage back ups do happen. Not sure if homeowners insurance would cover it or not.

All that being said, do you think an appraiser who accepted an appraisal to be used in underwriting an FHA insured loan has a duty to accurately comply with FHA appraisal requirements? And it seems there might be a highest and best use issue or zoning/legality of use issue if the property is too small to have a legal septic system.

 

[Zoe]

So the homeowner and agents all knew the home was on a septic? Then I’m not sure what the issue is, homes need to be maintained.

Good point. Did you have an agent homeower?

Did lender or seller pay for a home inspection for you?

If you have any of the above, you need to be careful where you throw the stone.