Is Peeling Paint Killing Your FHA Loan?

Reblogger Ronald A. Giannamore
Mortgage and Lending with Mortgage Services, Inc.

This is some very helpful information to all Realtors and home-buyers throughout the country. It is being provided by a seasoned professional appraiser Mr. Tom Horn.

Mortgage Services, Inc. recognizes the importance of providing helpful information to all real estate, mortgage professionals and home-buyers throughout the country. We hope you find this valuable and pass it along to anyone you think it might benefit. Thanks Tom!

Original content by Tom Horn

I recently did an inspection for an appraisal on an FHA refinance loan. It was an older home that had been undergoing some updates and renovations. One of the biggest problems I see on older homes, and one which this home had, is peeling and chipping paint. This is not an issue with conventional loans (unless it is a specific investor requirement), however it can be a deal breaker with FHA loans. If it doesn’t kill the deal it can at least delay the closing.peeling paint and fha loan

Peeling and chipping paint is a health risk and falls under the “Safety, Security, and Soundness” realm, which is why it is an FHA requirement for this condition to be corrected. According to the U.S. Department of Housing and Urban Department (HUD) the general requirements are as follows:

“For all properties built before January 1, 1978, the appraiser must inspect ALL interior and exterior surfaces, such as walls, stairs, deck, porch, railing, eaves, windows, doors, fences, detached garages and other outbuildings and appurtenant structures for defective paint surfaces (i.e. chipping, peeling or flaking paint) and report defective conditions in the appraisal report.”

The appraisal would have to be done “subject to” the peeling paint being corrected. It is important to know why the January 1, 1978 date is crucial. Prior to this time paint was made with lead in it; and lead is toxic if it is ingested. Because of this it must be removed per FHA guidelines. To find out the exact procedure to use you can go to the HUD website at HUD.gov, but the short version is this: The paint must be properly removed from the surface AND totally cleaned up with no signs of it left on the ground. The bare surface must then be repainted with a non lead based paint. If this can be done before the appraisal inspection, it can save a lot of time and cost since the appraiser will not have to go back to the property to verify it has been done. You can save yourself from a big headache by doing a little bit of pre appraisal inspection homework.

 

Mr. Horn provides real estate appraisal services in the Birmingham, Alabama metro area where he concentrates on residential properties, which includes single family homes, 2-4 family homes, lake homes, condos, vacant land, and manufactured homes. You can learn more about him by visiting his website at www.Appraisal-source.com, or his blog at www.BirminghamAppraisalBlog.com.

 

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Rainmaker
64,698
Michael Ford
Coldwell Banker Heritage Homes - Marion, AR
Matching Families with Homes

Hi
Ronald I try and have my sellers do the repairs before putting the property up for sale!

Oct 09, 2010 05:44 AM #1
Rainmaker
49,295
Ronald A. Giannamore
Mortgage Services, Inc. - Westport, CT

Thanks Tom.. this was very helpful and useful information...

Oct 09, 2010 05:45 AM #2
Rainmaker
49,295
Ronald A. Giannamore
Mortgage Services, Inc. - Westport, CT

Yes, I would agree and hopefully more Realtors will do the same. One thing we've found over the years is that most of these guidelines have been in place for many years, however it is only until recently have the underwriters been following through and enforcing them. The more we learn and can share with others it will better help us set up a better expectation for our prospects and clients.

Good luck through the end of this year and through 2011.. Ron G

Oct 09, 2010 05:49 AM #3
Rainmaker
196,273
Leigh Ann Holman
Leigh Ann Holman - Century 21 Glover Town & Country - Clarksville, AR
REALTOR - Century 21, River Valley, Arkansas (479)774-5166

I've had the peeling paint issue come up on a few deals.  Of course, it was picked up on the appraisal and we were told we had to correct it in order to close.  In one case, the seller was out of state and it was two window seals, so I went and scraped the chipping paint myself and slapped a fresh coat on there.  The appraiser re-inspected the next day and we closed the deal!  Had I caught it in the beginning, I could have had the sellers correct it before-hand, so thank you for pointing this out as a necessity. 

Oct 09, 2010 05:57 AM #4
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Rainmaker
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Ronald A. Giannamore

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