Getting ready to put your home on the market? You might want to check out the requirements an appraiser will need to OK your home for an FHA loan. Why is this important? A large portion of homes are sold with the buyers getting some sort of FHA financing, or requires the home to pass FHA appraisals. If your home doesn’t pass that test, your limited to conventional or insured conventional loans, or cash buyers. That shrinks your buyers market, considerably…..!
From the FHA (HUD) web site:
Required Repairs: Required repairs are limited to those repairs necessary to preserve the continued marketability of the property and to protect the health and safety of the occupants, A.K.A. the three S’s:
Safety: protect the health and safety of the occupants
Security: protect the security of the property (security for the FHA insured mortgage.)
Soundness: correct physical deficiencies or conditions affecting structural integrity
In general this all sounds good as any buyer wants their property to be a good investment as it’s a rather substantial one for most buyers. But as a seller you can easily get tripped up on the sale process after a buyer has made an offer. You’ve negotiated a sale price that you feel comfortable with, and then the appraiser calls out many defective items that will need to be addressed in order for the FHA loan to be given to the buyer. Now your stuck with paying for the repairs, or letting the buyer walk away. And you’ll have to make those repairs before the next FHA buyer comes along. We’ve seen this happen more than once….
Some of the more common things to consider that often get called out are:
- Peeling paint, especially on older homes (pre 1978) that might contain lead based paint.
- Roofs that have outlived their life (a judgment call sometimes, others more obvious).
- Exposed wiring or dangerous electrical issues.
- Broken or missing windows.
- Loose or missing handrails and balusters.
- Holes in walls and flooring, especially as pertains to firewalls (between garage and home, or other units in multi unit buildings).
This is a very short list but it covers some of the items we’ve seen called out, more than once.
Appraisers are required to go by the FHA guidelines or they can be fined and lose their license. Some will be more strict than others and sometimes you can request a second one at your own expense. But that doesn’t guarantee anything, so the best approach is to address obvious items up front, and be prepared for some surprises, even on newer homes.
If you so desire you can review the entire FHA list here: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4150.2/41502c3HSGH.pdf
Or just give The Derrick Team a call. We’ll be glad to come do a walk through and help point out the obvious items we’ve seen called out. Some items can only be determined by a professional (electrician, HVAC tech, etc). But we can at least give you a heads up. Call us at 317-563-1110 today!