New Construction & Certified Plans/Specs.

[Dan/Fla]

The only thing I know is when I took a course on FHA guidelines the instructor stated that when we do final inspection on plans and specs, it is very strongly advised that you measure a sampling of walls to confirm that the plans you had at time of report were followed.

 

[Ben Vukicevich SRA]

Dan,

Just to keep your FHA instructor and his students out of trouble with HUD, the FHA appraiser is not allowed to complete a final inspection on new construction. That is a job for the FHA fee inspector. HUD did issue a new mortgagee letter which states they will accept the Certificate of Occupancy in lieu of a final inspection by a fee inspector which is dumb. If HUD thought "flips" were bad with appraisers, wait until they get burned by accepting CO's as evidence of completion.

If you guys want to get really FHA technical, the plans submitted to the appraiser must be "marked-up" by the builder to reflect the exact home being built. How many times have you gotten plans from a builder that show every possible option for the home: bay windows, master baths, optional family rooms, sun rooms, fireplaces, finished lower levels, whatever. If they are not circled and initialed by the builder, you can't give them any value for it. Options should be either shown on the plans or listed on the Description of Materials form.

Stuff/Options shown on the agreement of sale doesn't mean anything to FHA. It must be on the plans or the DOM's.

Nice thought but it never happens in reality.

Ben

 

[bradellis]

Pam,

The requirement for keeping the plans/specs is found in USPAP Standard 1. The handbook merely requires compliance with USPAP, so this requirement is essentially incorporated by reference.

Hope this saves you some time.

Brad Ellis, IFA, RAA

 

[Pamela Crowley (Florida)]

Thanks Brad,

Knew I'd seen it just couldn't remember where. I don't do enough new construction to have that memorized. Seems the only ones in this biz that like what I do are the experienced underwriters. It certainly isn't the LOs and the builders are included.

 

[Doug Walters]

Ron in Alabama:

I think this may cover all the possible scenarios involving FHA new construction appaisals. At least I hope it does.

For new appraisals involving new construction, the lender should provide the appraiser with a complete set of Plans & Specs prior to the appraiser visiting the site. The following documentation is needed when appraising proposed, under construction or new construction less than 1 year old:

1. Completed Builder's Certification (Form HUD-92541)
2. Description of Materials, HUD form 92005
3. Complete Set of Plans and Specifications that includes:
a. Exterior elevations, front, rear and side
b. Exterior wall section showing all materials from foundation to
roof
c. Stair section
d. Roof truss details
e. Fireplace section and elevation (if applicable)
f. Heat loss calculations
g. Heat layout
h. Water supply system and specifications
i. Electrical layout
j. Kitchen cabinet details
k. Individual water supply and sewage disposal systems (if
applicable)
4. Plot plan
5. 10-Year Warranty Plan ** (see note below at last sentence)
6. Builder's Warranty (Form HUD-92544) provided to lender at completion
of construction
7. As with any FHA appraisal involving a purchase, a complete copy of a
ratified contract of sale with all options selections and addendums.
(HOC Reference Guide contains listing of required exhibits)

If the appraisal is for new, proposed or under construction properties, the
appraiser is not to not visit the site until he/she has received the above documentation.

Properties that are new less than one year old are not eligible for maximum financing unless this documentation accompanies the request.

The appraiser should state that appraisal was done from Plans and Specs, cite the percentage of completion as of the date of the visit to the property, and state the estimated completion date.

Assuming that the borrower needs to obtain maximum financing, the builder would have to submit a complete set of plans and specs, a builder's
certification, description of materials and a 10 year warranty; otherwise,
the borrower is not eligible for maximum financing or 518A benefits.

Also, new construction processing is required for a resale of an existing home less than one year old if the borrower wishes to secure maximum financing.

A property one year old or less must be "Pre-approved" OR be covered by a warranty plan acceptable to the Secretary to be eligible for a high-ratio insured mortgage, defined as exceeding 90% loan to value (LTV).

If there is no 10 year warranty plan then the property is not eligible for
full-ratio loans and 518(a) benefits (reimbursement for correction of
repairs caused by structural defects). The maximum loan amount would be 90%. This would mean the buyer would have to come up with the 10%, or if the loan had closed without the required documentation the lender.

** Refer to MORTGAGEE LETTER 2001-27 for pre-approval requirements for new construction and an alternative to the inspection requirements.

Doug Walters

 

[rtubbs]

Doug,

I understand and have read all that. My initial question was: Do the plans and specs have to be certified? Certified by an individual authorized to do so; the certification states:

"I DO HEREBY CERTIFY THAT THIS DRAWING OR PLAN AND RELATED SPECIFICATIONS MEET ALL LOCAL CODE REQUIREMENTS AND ARE IN SUBSTANTIAL CONFORMITY WITH VA MINIMUM PROPERTY REQUIREMENTS INCLUDING THE ENERGY CONSERVATION STANDARDS OF THE 1992 COUNCIL OF AMERICAN BUILDING OFFICIALS (CABO) MODEL ENERGY CODE (MEC).

This is the certification that the lender is requiring for the FHA property under construction. I've now received the "Certified" plans and specs. Where in the handbook or other HUD documents is the requirement for this certification?

Ron

 

[Ben Vukicevich SRA]

Ron,

The only person who certifies the plans is the builder. If you have the Builder's Certification of Plans, Specifications and Site (92541) form, look at Items 2 through 8. All of your answers are there. If you're still confused, read the second page of the form, it has instructions on how to fill it out and who is to fill out what-it's not the appraiser's job to mess with this form. The builder should have checked off Items 2 through 6 for a typical stick built home. Under Item 4 look for Alabama to be in the box for Local/State code. This is one of the forms Doug has in his list which you must have to do the appraisal. You must review this form for accuracy, especially under Item 1 and inform the DEU if the builder has misrepresented anything on the form. They never do that, do they???? What ?? There's a four lane major highway behind the home???-the builder never checks that box :lol: So it's your job to keep the builder on the straight and narrow path.

Once again, watch out for generic plans that show all options for a model home. The builder should have marked-up the plans so you can see exactly what he is building on the site.

I always loved all those things we were supposed to get with the plans and specs-heat loss calculations, truss details, stair details, electrical and plumbing layouts. I actually have one lender that supplies all that junk. When you do it properly, it's about a ream of paper. Unfortunately, 95% of the appraisers don't know what they're looking at and neither do the DEU's. HUD just insists on cutting down more trees to supply paper for useless stuff than anybody else I know. Hey HUD, save a tree-lose the junk.

Ben

 

[Doug Walters]

Ron:

Ben is correct. It is the builder who is certifying the plans submitted for mortgage insurance purposes.

The handbook containing the specific requirement is HB4145.1 REV2 - Architectural Processing and Inspections for Home Mortgage Insurance. Appendix 2 addresses the Builder's Certification.

Doug