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:
Do you have any additional questions about FHA appraisals and home inspections? Ask Tom Horn go here : http://birminghamappraisalblog.com/contact-tom-horn/
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