This Week Our Friend Veteran Appraiser Tom Horn Talks about FHA loan criteria & how to save time & money. We liked his article so much we are sharing with you today.
Tom is a great resource.
Do You Want To Save Your FHA Buyers Money and Time?
By Appraiser Tom Horn - http://birminghamappraisalblog.com/about-tom-horn/


This week I had a situation with an FHA appraisal assignment that I wanted to share with you. The thing that makes this one different from the others is that if it had been handled differently it would have saved the buyers money on a final inspection and they probably could have closed their loan faster.

Appraisals done for FHA financing are typically more strict than for conventional loans. Issues that arise usually fall into 3 categories which are safety, soundness, and security. Safety refers to the health, habitability, and sanitary conditions of the property. Any item that would threaten the occupant’s health is included here, such as peeling paint, frayed wiring, or missing handrails.
The second ‘S’ is for soundness, which relates to the structure and structural components of the home. Examples of these include items such as foundation problems or roof leaks. The last ‘S’ is for security. We’re not talking about whether the house is locked up and secure but whether the property will be good collateral for the loan. Is it worth at least what the buyer is borrowing?
Things that can affect whether it will be good collateral usually have to do with its marketability. Some of the things that can affect marketability include whether the home is near high voltage power lines, near railroad tracks, or some other negative influence. If it is then this may keep people from wanting to buy it from the bank if it went into foreclosure.
In my 28+ years as an appraiser I’ve seen all kinds of issues with homes but today I’ll share with you the top 4 things agents can do to save their FHA buyers money and time.

4 Key Areas To Focus On
1) Windows– The biggest issue I see with windows is whether they can be easily opened if it is necessary to exit to the outside. This is the perfect example of a safety issue. If there was a fire in the home and the only way to get outside was through a window could it be opened?
Windows in older homes are usually the ones that are hardest to open because most of the time they are painted shut. I did, however, see something this week I had never seen and that was windows that were nailed shut.
They were impossible to open up and I made it a requirement for the nails to be removed so the windows could open and close. For safety’s sake, they should be able to be opened by a small child in case of an emergency.
2) Paint– I’ve written previous posts on the proper way to address peeling paint in FHA loans so I won’t cover that here except to emphasize that if a house has peeling paint it should be removed and repainted. Over the years I have slowly seen conventional loan requirements also require this, so its a good bet that no matter what loan type a borrower chooses the peeling paint will need to be corrected so why not do it before the home goes on the market? Putting it off until the last minute will only result in the borrower paying more and delaying the loan.
3) Appliances– I get questions from agents about appliances frequently. They are concerned that the home may not pass the FHA appraisal guidelines if an appliance is missing.
One of the main things to keep in mind is that an appliance does not have to be present to pass FHA guidelines. If an appliance is missing, however, there cannot be any exposed wiring or uncapped gas pipes.
If an appliance is present it must work properly. A stove that has burners that do not work or a microwave that will not turn on will either have to be removed or replaced.
4) Utilities– As you might expect, all utilities must be turned on for the appraisal observation. Electricity must be on for the appraiser to check the operation of all of the appliances as well as the heating and cooling system.
If the home has gas it must also be turned on to check things such as the heater, water heater, and the stove if it is gas. The water must be on so that the faucets can be turned on and the toilet can be checked as well.
So to recap, agents can save their clients both time and money by making sure that windows open and close, no peeling paint is present, appliances work if they are present, and that all utilities are on. This will ensure that the appraiser does not have to revisit the property, which extends closing time and increases cost for the additional inspection.
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Related posts from Tom Horn:

1. Are these FHA required repairs?
2. Photos from the field- FHA repair item or not?
3. FHA Repair Item…or Not?
4. How NOT to dispose of peeling paint for an FHA appraisal
5. FHA loans and messy homes

Tom Horn is an experienced appraiser & a wealth of information on real estate.
In the article below he goes into detail about the Difference Between an FHA Appraisal & A Home Inspection. (Thanks Tom for sharing so freely, we really like all the great info.)
By Tom Horn (re-published by permission)
FHA appraisal is not a home inspection
I received an interesting question from a reader recently that I thought I would share with you today. This particular situation involved an FHA appraisal and the condition of the property. The buyer did not want to spend money on a home inspection and wanted to know if the appraisal would include the same information. The short answer is that an FHA appraisal is not a home inspection, but today I will attempt to explain in more detail how this all works. If you have further questions feel free to leave a comment below.
Don’t confuse the appraisal with the home inspection The down and dirty difference between an appraisal and a home inspection are that the appraisal is mainly concerned with the value of the home and the home inspection is concerned with the condition of the home. While an FHA appraisal does include some information about the condition of the mechanical and structural systems of the house it is generally not considered as comprehensive as the home inspection because it is limited to what is readily observable.

The policy of FHA/HUD is to encourage buyers to obtain a home inspection because it is much more thorough than an appraisal. Because the appraisal is more concerned with the value of the property it may not detect all of the problems a property may have.
The appraisal is not meant to detect all of the problems that a home may have. It is not a guarantee that a property is free from defects. The appraisal report is meant for the lender and not buyer or borrower.
The FHA/HUD handbook that the appraiser uses outlines the appraiser’s role as the following:
“One who observes, analyzes, and reports the physical and economic characteristics of a property and provides an opinion of value to FHA. An Appraiser’s observation is limited to readily observable conditions and is not as comprehensive an inspection as one performed by a licensed home inspector.”
The main purpose of the FHA appraisal is to determine the fair market value of the house and to make sure that it meets HUD’s Minimum Property Requirement’s (MPR’s). These MPR’s are mainly concerned with whether the property is safe, sound, and secure but they do not include many of the items that a home inspector would look for.

FHA/HUD recommends a home inspection An appraisal was never meant to give a comprehensive and detailed analysis of all of the systems of the house. Because of this HUD/FHA provides information to educate the buyer/borrower about the differences between the two. The “For Your Protection, Get A Home Inspection” is provided to home buyers by lenders during the initial stages of getting a loan.

During the appraisal observation, there are items that the appraiser can and will comment on based on what they are and what level of expertise is needed to determine the necessary course of action. Conditions that require an inspection by a qualified professional include the following:

• standing water against the foundation and/or excessively damp basements;
• hazardous materials on the site or within the improvements;
• faulty or defective mechanical systems (electrical, plumbing, and/or
  heating/cooling);
• evidence of possible structural failure (e.g., settlement or bulging foundation wall, unsupported floor joists, cracked masonry walls or foundation);
• evidence of possible pest infestation;
• leaking or worn-out roofs; or
• any other condition that in the professional judgment of the Appraiser warrants inspection.

As you can see from the list, there are numerous items that an appraiser must rely on the expertise of other professionals. Because of this, the appraisal should never be confused with a home inspection. There are many potential condition problems that could exist with a property that an appraiser is not qualified to comment on and a home inspector or other professional should be used to help determine the cause and possible course of action to correct.
Do you have any additional questions about FHA appraisals and home inspections? Ask Tom Horn go here : http://birminghamappraisalblog.com/contact-tom-horn/

Home Sellers should be aware that a buyer's home inspection can easily become a whole new round of negotiations, especially if the house was not pre-inspected before it hit the market. 
No one likes being surprised by serious defects.
The buyer may ask you to fix a long list of problems that are discovered, provide them with a credit or price discount in order to deal with the issues, or in a worse case  they may just walk away the deal altogether.
Having a Pre-listing Home Inspection is the best way to prevent this.

It can be very discouraging to lose your first interested buyers because you were blind-sided by the number of things they wanted you to fix .
All this hassle can be avoided by getting a Seller's Pre-listing Inspection.

A Seller's Inspection will greatly reduce the chances of running into surprise defects and will give you time to budget for repairs & talk with contractors. You may even be able to use the inspection report as your disclosure & speed things along.
It is far more difficult for a buyer to try to renegotiate after their home inspection if the defect has already been documented and presented to them up front &  prior to their offer.
Home preparation is one of the keys to selling Real Estate in a timely manner, getting your home ready for the inspection creates a cleaner looking inspection report & opens up possibilities quicker financing & a faster sale.
The better shape your house is in the easier it will be for buyers to get financing & the faster your house will sell.

Having an overview of the guidelines used by organizations like VA, FHA & Rural Development can help you prepare your house for the market.   WE CAN PROVIDE YOU WITH THOSE, Just Look For The Free Downloads.

 HOW TO GET READY FOR THE INSPECTOR
Before the Inspection a seller can prepare by eliminating any defects that they are already aware of. By eliminating small problems ahead of time you will get a much cleaner report & your house is likely to sell much faster.
Get Our Comprehensive Fix It Check List For Seller Preparation 

If you are a buyer you can ask your Realtor to provide this check list to the seller a week before the inspection.
Get The PDF Of This List

These are easy and simple things that can be done to prepare for a home inspection :

• 1. ) Don’t Hide Problems: If something isn’t working, tell the inspector and let them know if you’re getting it fixed. Don’t try to conceal defects.

 

• 2. ) Provide Repair & Service Documentation: If you have had anything fixed or serviced in the last year leave copies of receipts for the inspector.

               It will be included as a positive note on your inspection report.

• 3. ) Identify Access Points: Make sure the location of attic and crawlspace hatches are identified and are easily accessible, as home inspectors will not move your belongings to access them. Clean out your closets so the inspector can see inside them or set your items temporarily on the bed. If there is access to the attic or crawlspace in a closet make sure it is accessible. If water, power or gas shut offs are hard to find leave a note.

• 4. ) Provide Easy Access: In a basement, crawlspace & attic you will want to make room for the inspector to see & move around near all the accessible walls & the mechanical items, including the furnace, water heater, and electrical panel etc… Move your items away from basement walls so they can be inspected for cracks and water penetration areas. Provide access to systems by moving obstructions &, opening any locked, screwed, nailed, or painted shut covers or hatches such as : attic, crawlspace & sump pump covers, well houses & out buildings .

 

• 5. ) Note Septic & Well systems: If you have a septic system and/or a well on your property, be sure to leave a copy of the plans or a sketch that includes the location/s. This saves inspectors, buyers, and real estate professionals time & hassle & allows for a more complete report.

 

• 6. ) Keep floors Clear: Roll up large area rugs, remove throw rugs & unnecessary belongings because the inspector will need to examine the floors.

 

• 7. ) If your Home is Vacant: make sure the power and water are on and if it runs on a fuel tank make sure there is fuel. 

 

• 8. ) Take Care of Quick fixes – If there are easy quick fixes you can take care of get them done before the inspection. Examples: Replace burnt out light bulbs & broken or missing downspout extensions, fix loose handrails on stairs, replace rotted boards on wood stairways, clean gutters & remove debris from roof, trim back any vegetation that touches the structure, install new batteries & test smoke & CO alarms, make sure all egress windows are clear of obstructions & easy to open.

The better shape your house is in the easier it will be for buyers to get financing & the faster your house will sell.
** To get a comprehensive List of Common Defects you might want to fix in advance see the PDF Library.
Get The PDF Of This List

Copyright 2016 -Bob Ruby, Dianne Keast,  Home Inspection Solutions Missoula MT, 59808