FHA Appraisal Guidelines for Single Family and Condos- Effective 12/14/2012.
In May 2012, I wrote an article about appraisals entitled What Happens if my House Doesn’t Appraise for the Full Price?. The rules are constantly changing so here is some updated information effective 12/14/2012. The appraisal process is one of the most important parts of the loan process and generates a lot of questions. I specifically addressed FHA guidelines since 97% of most loans are FHA. Conventional and VA loans have different rules and your Realtor or lender can discuss these differences with you.
Appraisal must include a minimum of two active or pending sales on the form.
Appraisal must include 3 settled cases.
Appraiser must have all prices of home; original list price, revised list price and total days on the market.
Appraiser must reconcile the adjusted values of active and/or pending sales with the adjusted values of the settled sales provided.
Appraisers must abide by the FHA guidelines and are updated periodically during the year.
The Lender’s UW (underwriter) is the only one who can order an Appraisal Review and it is clearly at his discretion.
One of the positive new changes by FHA on appraisals is that the appraisal will stand for 120 days. The old rules were 180 days so this is a big improvement if the seller decides to cancel the current contract and hope for a better price and or appraisal.
If the 120 days lapse, the old case number must be cancelled on the HUD site and a new a number issued. This is a site that only other appraisers and lenders can review.
Only Appraisers on the FHA roster can do an appraisal for a FHA loan.
Q’s & A’s:
One frequently asked question about the FHA loan process is related to FHA appraisals and the minimum requirements for the roof of the home. It’s the appraiser’s job to look over the home, make sure it meets FHA standards, and assign it a fair market value. The appraiser notes any visible defects, conditions or issues from the basement to the roof, and recommends fixes or changes. Roofs must not leak and must have some future wear on them or the appraiser will call them out for an inspection, repairs and a certification.
Buyers should have had their own ‘Home Inspection Report’ done so usually anything an appraiser calls out is not a real surprise to the buyer. On the other hand, appraisers are usually not licensed contractors and not required to walk on roofs or go into crawl spaces. This is why a professional home inspection is usually done and discussed between the buyers and their Realtor during the first 10-17 days of escrow.
Who pays for the appraisal? The buyer does and the fee has to be paid to the lender before the appraiser goes out.
Who orders the appraisal? The buyer’s lender pays for the appraisal on a FHA loan.
Does the lender get to choose the appraiser? Absolutely not; this was part of the problem back just before the market fell 2005. There is a panel of qualified and certified appraisers and a third party selects the appraiser to be sent to the property.
Does the buyer and seller receive a copy of the appraisal? Sometimes it is given to the parties and other times a HUD form is sent. If repairs are required, that particular page will be included to be dispersed to all.
Can the appraisal be extended? Yes for 30 days if time is needed to close.
If the appraisal comes in low, what can be done? Usually the buyer and seller negotiate the price down to the new appraised value. Then the contract is amended if there is an agreement between the parties. If the seller refuses to negotiate, the buyer can ask the lender to do an appraiser review. Only the UW can order this and there is a fee for this. Sometimes the lender pays the additional fee and other times the buyer or seller must pay it depending on the circumstances. If the seller refuses to negotiate, the buyer can walk away due to the appraisal contingency in the contract. The full deposit (EMD) the buyer put down will then be returned to the buyer by escrow. Also if the buyer really wants the property, a cash amount can be paid outside of escrow from the buyer to the seller. This is something that many lenders will not approve so it is a case by case solution.
Negative issues that arise:
Appraisal price coming in low.
Ordering numerous repairs to be completed before appraisal is signed off and certified.
Appraisers from other counties that are not familiar with the area and sometimes use comps that are not appropriate.
Appraiser Trainees are sent to the job or fairly new appraisers who do not have as much experience. See if there are credentials after the appraiser’s name or if two names are on the report which would indicate a trainee was involved.
For all the Realtors or buyers/sellers reading this article, what problems have you had? Did you get them resolved?
California is a dream come true state no matter what your needs or wants are. We have year round warm weather, beautiful beaches, rustic mountains and desert communities. If you are looking for a home in southern California, please contact me. I am a local California Realtor, live in the Inland Empire community and aware of the local market. I am here to help you find a home or to sell the home you currently own. California has great opportunities to view Nature and Bird Watching. Whatever your needs are, you will find it here in California! From the Inland Empire you are 45 minutes to the beaches, mountains or desert. Housing is affordable in the Inland Empire area. Call me!
I sell real estate in Riverside and San Bernardino Counties. I am a trained and experienced Short Sale agent. If you are looking for a professional and experienced agent, I am just a click away. Google me at Kristin Hamilton-Real Estate Agent. Homeowners and Buyers both will find my services top notch and successful. Call me to sell your home; both traditional and short sales.
If you want to sell your home, call Kristin @909-557-6966 or email me at kristinhamilton@kw.com.
Comments(2)