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FHA

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Will43

Senior Member
Joined
Aug 13, 2003
Professional Status
Licensed Appraiser
State
Ohio
:unsure: I talked with several appraisers that advise against doing any FHA work. They told me the liability is too great. They all mentioned that they paid thousands for repairs. If the roof leaks six months after the appraisal,you are stuck paying. All the appraisers that I have talked with had horror stories. Also, how much more do you charge?
 

Ed Woodruff SRA

Junior Member
Joined
Mar 12, 2003
Professional Status
Certified Residential Appraiser
State
Texas
Will,

I've done FHA appraisals for approx. 10 years now, and have never had a problem such as you described. The closest I have ever come is one time I was testing a garage door to see if it would lift back up - I held out my arm to block it, and the garage door just split up into pieces. The owner was standing right next to me, and flipped out - he wanted me to replace his garage door. It had broken before, and he hade made some sort or repair of which he was very proud. I told him no - I would just require a new door. He flipped out and called the Lender, and told them that they should remove me from their list, etc... The lender backed me up, and he had to buy a garage door in order to sell his house - think about it - if a garage door would smash apart by the mere holding out of an arm (I'm not superman), it needs replacement. This guy called me at my office and at my house, yelling at the top of his lungs - I told him I was not allowed to discuss the appraisal with anyone except for the underwriter.

Other than that, I have never had any problems. I don't really think you have any more problem doing an FHA than a conventional, if you're doing your job on both. A lot of appraisers will probably balk at that statement, but I stand by it. Just do your job, and do it right. I've never heard of an appraiser paying for repairs.
 
Joined
Jan 13, 2002
Professional Status
Retired Appraiser
State
Florida
I'm with Ed on this issue.

Here is what I use for some of the VC items:

8 / h: Subject slab not visible through the floor covering. No readily obvious problems noted.

9 / b: This Appraiser is not a roofing contractor and cannot determine the remaining age of the roof. No readily obvious deterioration or damage noted.

10 / a - e: As it is not safe to turn on the heat during summer months, the heat was not turned on and these VC questions could not be answered. HVAC contractor would be necessary.

10 / j: Air conditioning appears to be functional. HVAC contractor necessary if further condition determination is wanted.

---------------------------

AN APPRAISAL IS NOT A HOME INSPECTION. ONLY READILY OBVIOUS ITEMS THAT MIGHT BE IN NEED OF REPAIRS ARE NOTED. THE APPRAISER IS NOT RESPONSIBLE FOR ANY REPAIR ITEMS. IF A MORE COMPLETE CONDITION ASSESSMENT IS WANTED, A PROFESSIONAL HOME INSPECTOR OR LICENSED CONTRACTOR WOULD BE NECESSARY.

----------------------------

I will write up anything that I notice that might be a problem. Such as:

"Subject roof appears to be original which would make it 17 years old."

"The exterior heat pump unit is rusted, including holes rusted through around the bottom of the unit."

7 / f: Water damaged exterior wood siding noted along rear of structure. See attached photographs.

PLEASE NOTE: The drop stairs in the garage was not accessible at the time the appraiser was there and the attic in that area was not accessed or observed. The attic area from the hallway scuttle was accessed and observed.

---------------------------------

Just CYA and do the job correctly. I usually charge at least $50 more for FHAs.
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
Will:

I suspect that most of the folk who have lost to such issues either did NOT use some of the tools available to cover their A$$ets (phrases such as Pam and others here on this forum reccomend), OR some antagonistic braodspreader of BS got 'lucky' and got a judgment against them through an ill-informed court (hey, that can happen to anyone in our profession, not just FHA appraisers), OR they got crosswise of a judge who did not understand and was unwilling to be educated on what an appriaser's role really IS!

Diligence and persistence in disclaiming expert status, beign aware of industry concerns AND participation in continueing education such as is provided by palces like this are about all we CAN do to protect ourselves.

Fortuantely or sadly (depends on your perspective) the market for 'honest fairly dilligent FHA appraisers is pretty limited. Most of us get blackballed by the selling agents, so it becomes less of an issue as time goes on. We DO get to see the deals on the back side though as REO property appraisals!

If you are not comfortable doing a more through inspection then don't.

Since they let every licensed/certified appraiser in the competition is pretty stiff anyway.

And you are right, there IS some increased liablity.
But not as much as some folks would like to tell you.

Have you asked the critical questions of the folks telling you this iss too rough a game?:

1. Did you PERSONALLY ever get sued, or is this one of those I have a friend stories?
2. IF you were sued, for what?
3. Are you still doing FHA appraising?
4. In hindsight what could you who got sued have done to protect yourself?

I suspect you are going to get few folks who are going to get to #4.
 

Don Clark

Elite Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Virginia
B) FHA work can be very rewarding. But..................make sure you know what you are doing. Several years before lender select I was working as a staff appraiser for a local mortgage company. In those days you were either on the FHA Fee Panel or worked directly for a lender doing FHA Staff Appraisal work. I was requested by the lender to attend training at the Regional Office(we used to have regional offices, not HOC's), for the purpose of becoming qualified to do FHA 203k appraisals. I made an appointment with the training department for a specific date and time, planned the trip of about 100 miles, arranged to be gone all day. My appointment for training was at 8:30 AM At 10:00AM the "instructor", a regional staff member finally showed up. I was then led to her office, given a brochure(4 pages long) on the 203k program. The "instructor" then talked to me for about 10 minutes about the program and then proclaimed "Thou art qualified". I full expected a ceremony with holy water, a few geneflections, and a "bless you my son". Boy!!! Did I ever feel qualified....not :huh:

As a matter of protecting myself I obtained copies of several 203k appraisals that were in file, copies of work write ups, and a conversation with a 203k consultant. It took several very carefuly done assignments before I felt "qualified" and could see through the garbage and call for changes based on cost estimates, and work write ups, some of which were overstated by as much as 50% in terms of repair cost.

Last week I received a call from an appraiser out of state who is faced with sanctions by FHA. Seems he was hired by a contractor to do FHA REO appraisals. he proceeded to do them like all other appraisals. He was taken to task, changed his way to conform to 4150.2 but has one of the original appraisals he did coming back to haunt him. What the sanctions might be is any ones quess. Remember, if you do work that does not conform to 4150.2 you are in violation with the clients supplemental guidelines which are also a violation of USPAP.

In 1999 I traveled from coast to coast teaching how to do FHA appraisals. However, I would be willing to bet that not even 10% of appraisers now doing FHA appraisals have ever attended such training, and many do not even have a copy of 4150.2

I suggest anyone taking on an assignment from VA, FHA, Fannie Mae or Freddie Mac or a host of other clients and their lenders read and then re-read the "Competency Rule" in USPAP.

Liability is the snake in the grass just waiting to bite you.

Don
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
I look at it differently....it isn't any bad thing that has happened to me...but what could happen. For that reason, my fee for an FHA is so high I rarely, if ever, get those assignments. Interestly, in my market, a very large number of appraisers doing FHAs have minimal experience and usually do them for a reduced fee. It is not uncommon to see an appraiser charging $250 for an FHA appraisal.

Last year we had Liability Administrators speak to our local appraiser's group (four hours of CE) and they had nothing good to say about FHA appraisals and the liability involved. Since there is, at least, an implied liability on the part of the appraiser, I choose to pass on those assignments. Weasel words may or may not protect you...only an attorney should advise you on this issue.

FHA does not require the appraiser to have E & O insurance. I think the whole program is a "time bomb" waiting to explode. If you like thrills...hop on the ride!
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
Like I said before:

If you do them correctly it is a self-curing problem...

Pretty soon the word gets out and the only FHA appraisals you do wind up doing are the super-rush ones where everyone else has given it a pass because it has some severe problems or *only you* know how to resolve the issue because you actually bothered to READ the 4150.2, OR you get the REO properties where you get to see what the 'other appraiser' let get by the system.

Yup there is liability.

I figure there is also a certain profesional pride: HUD is one of the few cleint/users that really DO want to know what I REALLY think about the subject and neighborhood.
 

Pam Wyant

Senior Member
Joined
Feb 12, 2003
Professional Status
Certified Residential Appraiser
State
West Virginia
I have been doing FHA appraisals for 4 years now, other appraisal work for 8 years. So far I have been sued once (last summer), which was from an appraisal for an individual (no loan) and was on a foundation. Supposedly there was a crack, which was obscured by items stored in the basement. The case against me was dismissed last month, mainly due to CYA language in my report.

"PLEASE NOTE THE APPRAISER IS NOT AN EXPERT IN MECHANICAL OR STRUCTURAL COMPONENTS. A
VISUAL INSPECTION IS PERFORMED DURING THE SITE VISIT, HOWEVER THIS IS LIMITED IN NATURE
AND MAY NOT REVEAL DEFECTS IN MECHANICAL OR STRUCTURAL COMPONENTS. BASED UPON THIS
LIMITED VISUAL INSPECTION AND AN INTERVIEW WITH THE OWNER OR OWNER'S REPRESENTATIVE,
ALL ARE BELIEVED TO BE IN PROPER WORKING CONDITION UNLESS OTHERWISE SPECIFIED. THE
APPRAISER IS NOT A HOME OR ENVIRONMENTAL INSPECTOR. THE APPRAISER DOES NOT WARRANT
OR GUARANTEE THE ADEQUACY OR CONDITION OF ANY ITEMS. ANY ADDITIONAL INFORMATION
REQUIRED BY THE CLIENT SHOULD BE OBTAINED FROM A PROFESSIONAL IN THAT RESPECTIVE
FIELD. THE RESULTS OF ANY SUCH INSPECTION THAT REVEAL HIDDEN OR UNKNOWN DETRIMENTAL
CONDITIONS MAY OR MAY NOT HAVE AN ADVERSE IMPACT UPON THE VALUE/MARKETABILITY
OPINIONS EXPRESSED WITHIN THIS ANALYSIS."

I charge $50 extra for FHA, which is really not enough considering all the extra work. There are very few FHA appraiser's in our area, so I do quite a few.
 
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