A Comparison of FHA and Conventional Appraisal Inspections
Over the past few years, the differentiation between FHA appraisal requirements and conventional appraisal requirements has become increasingly blurred.
HUD requires a minimum standard to be met by all FHA approved appraisers, which includes additional education and training, state certification. All homes must meet HUD minimum Property Standards.
FHA emphasizes that an appraisal is not a home inspection and it does not guarantee that a home is without flaws. However, FHA does takes steps to try to see that the home is in a safe, sound and sanitary condition. For that reason, the FHA appraiser is expected to require repair or replacement of anything that may affect the safe, sound and sanitary habitation of the house.
With increasingly stringent guidelines by conventional lenders, some items that were only verified on a FHA/HUD appraisal, are now required for conventional, as well.
Check out the comparison below of FHA loan inspections and what Appraisers look for, vs. Appraisers for a conventional loan.
1. Only FHA appraisals require a case number.
2. FHA requires a certified level Appraiser. Some conventional lenders will allow licensed Appraisers.
3. Both FHA and Conventional appraisals are completed in UAD (Uniform Appraisal Dataset) format.
4. FHA appraisals address safety issues. Common ones include staircases without railings, exposed electrical, broken windows, holes in the fire door between the house and garage (doggy doors, missing dead bolts, etc.). Increasingly, conventional underwriters are asking Appraisers to identify potential health and safety issues.
5. FHA appraisals always reflect that all utilities were tested and indicate if they were functioning properly. Increasingly, Conventional lenders are asking for this as well, especially on vacant homes.
6. An FHA appraisal will always include a “Head and Shoulders” attic inspection.
7. If a property has one, an FHA appraisal will always include a “Head and Shoulders” a crawlspace inspection.
8. For homes built prior to 1978, FHA requires peeling paint to be remediated. This includes proper disposal of all paint chips from the remediation.
9. Lack of a CO detector is considered a health hazard. As such, FHA requires they be installed. Many conventional lenders require them to be installed for purchases. CO detectors must be installed outside of sleeping areas and on each floor.
10. Smoke detectors are required, as a safety issue, for FHA loans.
11. FHA requires that the furnace be working correctly and that the Appraiser test it.
12. For FHA loans, the water heater must be double strapped, have a pressure release valve and be installed so that a car cannot strike it, if it is located in a garage. Increasingly, conventional lenders are requiring water heaters to be double strapped.
13. Neither FHA, nor conventional appraisals, require repair of cosmetic deficiencies. (Soiled paint and carpets, torn floor coverings, chipped tiles, etc.)
14. FHA requires a home to have adequate water pressure and flow.
15. The above notwithstanding, FHA and conventional appraisals, in their basic valuation methodology, are generally the same.
Apple Appraisal, Inc. is a licensed California Appraisal Management Company, serving all areas of California.