FHA/VA -- approved appraisers are not inspectors

FHA/VA -- approved appraisers are not inspectors

Some prospective buyers may think that the services of a home inspector are not necessary if the buyer is seeking FHA or VA financing on a property, because it must be inspected by an appraiser who is FHA or VA approved. However, real estate appraisals and home inspections are two entirely different services, and neither one of them suffices for the other.

The federal government requires that properties be inspected by an FHA or VA - approved appraiser when the buyer's loan is to be guaranteed by the Federal Housing Administration or Veterans Administration. (That guarantee is provided as an incentive for lenders to offer loans to prospective home buyers who are not qualified for conventional financing.)

An FHA or VA appraiser's role in a real estate transaction is to provide a documented opinion of a property's value, marketability, usefulness, and suitability for a particular purpose. The appraisal process involves steps that include a brief inspection of the interior and exterior of the subject property, during which the appraiser looks for conditions that can be readily seen when walking through and/or around it. The FHA or VA appraiser does not perform a complete mechanical or structural inspection of the property, but rather, simply looks for more obvious defects. In determining his or her "opinion of value," the appraiser assumes that there are no hidden defects or other unapparent conditions that might affect the property's value.

If an appraiser considers a visible condition significant enough to affect the property's value, the appraiser will adjust the opinion of value accordingly or will present an opinion contingent upon the completion of certain repairs. In most cases, the lender involved in the transaction will require that the repair be made prior to closing.

While the appraiser offers an opinion of value, the home inspector determines the property's actual condition. The inspector makes his determination after performing a very thorough examination of the property, in contrast to the appraiser's more cursory visual inspection. Unlike an appraiser, the inspector often uses a variety of equipment to test the operation of various systems. The inspector's examination includes, but is not limited to, the structural components (foundation, flooring, walls, roof), mechanical components (heating/cooling system, built - in appliances), electrical system, plumbing, environmental conditions which affect moisture drainage, gutters, fireplaces, chimneys, and possibly the well and septic systems.

This inspection is designed to detect the hidden and unapparent conditions that an appraiser and a prospective buyer would not normally notice as well as more obvious ones.

A Word to the Wise...

Real estate agents should therefore help to dispel the myth that buyers who seek FHA or VA - financing do not need the services of home inspectors. Explain to your clients that FHA/VA approved appraisers - and all other appraisers - are hired to provide an opinion of value and for that reason will not perform the comprehensive inspection that is necessary to determine a property's actual condition.