Seriously Stupid FHA Appraiser's And The Three S's

Real Estate Appraiser with Michael S. Bolton,Inc.

FHA and the Three S'sFHA guidelines state that a house has to meet MPR (minimum property standards) for existing houses, and MPS (minimum property requirements) for new construction. FHA is very concerned with the three S’s: Safety, Security, and Soundness.

When a Realtor was asked what the three FHA S's were, he replied, "Stupid, more stupid, and seriously stupid FHA appraisers," which I thought was pretty funny, however, a little off the mark. The three FHA S's have to do with the following:


Per FHA, "Safety refers to the health, habitability and sanitary condition of the property." When determining what is safe and what is not, does involve some subjectivity on the appraiser's part, while other issues are pretty straight forward. Here is a list of the some of the most common safety issues that require correcting:

  • Any peeling or chipped paint on homes built prior to 1978
  • Holes in the fire door between the house and garage (doggy doors, missing dead bolts, etc.)
  • Missing or damaged handrails for full set of stairs.
  • Improper spacing of balusters for decks and balconies (would allow a child to climb in between the balusters).
  • 2nd level sliding door not secured when there is no deck.
  • Exposed wiring and/or missing outlet covers.
  • Missing fire and carbon monoxide detectors.
  • Missing carpet over a wood sub floor (If carpet is missing over a concrete floor not an issue-FHA considers concrete to be a permanent floor; however, most lenders may want this addressed).
  • Broken or missing windows.

Some of the more challenging issues is what is considered to be minor deferred maintenance, that which doesn't need to be corrected. The appraiser is still required to note within the appraisal all the deficiencies with the property, thus giving the underwriter the final say. Here are some of the most common deferred maintenance issues that don't require an automatic repair:

  • Worn, dated, or sagging carpet.
  • Cracked windows (see detailed explanation).
  • Minor damaged interior walls or doors.
  • Minor plumbing leaks.
  • Shoddy workmanship.


This relates to the structure and structural components of the dwelling. These types of issues will have to be addressed, which they will either have to be repaired or certified by a professional that they're not a problem. Some of the most common structural issues that I've run across are the following:

  • Foundation problems (shifted and bowed walls, large cracks from settling).
  • Water damage to walls.
  • Roof beyond expected life of two years; more than 3 layers of roofing.
  • Decks not properly built to code.
  • Additions or basement finishing that wasn't properly built.


This is the most misunderstood of the three S's. Most assume that if refers to securing the property from the weather, and/or intruders. However, it actually refers to the properties ability to serve as collateral for the FHA insurance fund. The main point here is the marketability of the property to serve as collateral. Here's a list of some of the most common things that I've run into that can affect the marketability of a property is when it's:

  • Located near HV (high voltage) power lines (see detailed explanation).
  • Located near a municple sewage treatment plant.
  • Located near a major freeway or county road.
  • Located near a hazardous site or landfill.
  • Located near railroad tracks.

Just because the property is located near any of the above, doesn't automatically make it ineligible for FHA financing; however, the appraiser is going to have to be able to address the marketability of the property. The best way to do this is to find similar sales that were subject to the same type of issue(s). The appraiser would then have to be able to use those comparable sales within the appraisal report to help bracket the property, and at the same time meeting all of the lender's other guidelines and/or overlays.

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Comments (116)

Marshall Brown
Mid America Inspection Services, LLC - Fargo, ND

Stuff I didn't know. Thanks

Feb 15, 2012 12:10 PM
Reuben Saltzman
Structure Tech Home Inspections - Minneapolis, MN
Delivering the Unbiased Truth.

Great list!  I get people asking about this stuff all the time.  I'll send 'em here the next time I get questons about the FHA appraisal.

Feb 15, 2012 01:45 PM
Bob Miller
Keller Williams Cornerstone Realty - Ocala, FL
The Ocala Dream Team

Hi Michael, thanks for the education.  I knew the gist of what FHA wants, but you were much more specific.

Feb 15, 2012 09:41 PM
Michael S. Bolton
Michael S. Bolton,Inc. - Zimmerman, MN
MN Appraiser

Lehel~Never I hope. Home inspectors, in my opinion, are way more qualified than appraisers in regards to inspecting homes. I've renovated four homes, and still had my son get a home inspection when he bought. They offer a great value for the money.

Thanks Lloyd!

Liane~In never hurts to be proactive that's for sure.

Lisa~FHA makes a very big deal about lead based paint, it's always best to error on the side of taking care of everything.

Thanks Jamie for the comment!

You're welcome Marshall.

Marte~I myself am constantly striving to educate myself on all aspects of my business. I just like to share what I've learned hoping that'll help others.

Rueben~Very much appreciated, glad you found it useful.

Good morning Bob, Thanks for the comment and stopping by.

5 Reasons why it's an AWESOME day!

Feb 15, 2012 10:55 PM
Micki OToole
PropertyADVANTAGE - Carlsbad, CA
General Manager

Michael, thank you for a great list. I work with a lot of FHA buyers and do my best to keep updated on what FHA appraisers are looking for. However, my frustration lies in the inconsistencies between FHA appraisers at least in my market. I had one appraiser not call out or even check that the wall heater was operational ( we knew it wasn't due to a home inspection) so the bank wouldn't pay for the repair. I have asked several different appraisers about the inconsistencies and I don't feel like even they know why. Do you think it is due to all the subjectivity afforded the appraiser or merely CYA and/or indifference?

I appreciate this post greatly and will bookmark it for future reference!



Feb 16, 2012 04:27 AM
Jan Green - Scottsdale, AZ
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Thanks for this information.  I'm going to Google+ it as everyone should see this!!

Feb 16, 2012 09:16 AM
Michael S. Bolton
Michael S. Bolton,Inc. - Zimmerman, MN
MN Appraiser

Micki~Thanks for the stopping by. In regards to the inconsistencies I think it's a little of both. Although in your case if the wall heater is the main source of heat, then that should of been checked. I believe the ambiguity regarding what does and doesn't classify as safety issues contributes to most of the inconsistencies, and frankly some CYA.

I always recommend that real estate agents become familiar with FHA guidelines (see comments above for mortgagee letter link) so they can question some of the goofy stuff that's being called for work orders. If you have further questions please feel free to contact me.

Jan~I appreciate at you sharing my post, Thanks!

Have an AWESOME day!

Feb 16, 2012 10:35 AM
Melissa McKinney
Everything Pines Partners Fayetteville - Fayetteville, NC

Michael~ Joni sent me over and I am glad she did! Great information and I missed it!! Look forward to reading more from you...

Feb 16, 2012 02:54 PM
Dana Cottingame
Coldwell Banker Residential Brokerage - Dallas, TX

This was very helpful. Thank you for sharing. I especially needed to learn about "security".  Like several people here I thought of locks and windows rather than neighborhood features.

Feb 17, 2012 12:00 AM
Dr. Paula McDonald
Beam & Branch Realty - Granbury, TX
Granbury, TX 936-203-0279

Very good information.  A great post to have on hand for our clients.  Thank you.

Feb 17, 2012 04:30 AM
Natalie Myslinski
La Grange Park, IL
Great post currently working with an FHA buyer and didn't know about the final s. Like most thought it was the condition not the marketability
Feb 19, 2012 01:06 PM
Michael S. Bolton
Michael S. Bolton,Inc. - Zimmerman, MN
MN Appraiser

Melissa~Thanks for stopping by!

Dana~The security issue is the most misunderstood, hopefully as time goes on real estate professionals will learn the true meaning.

Thanks Paula, I'm glad you found it useful.

Have an AWESOME day!

Feb 29, 2012 12:03 AM
Charity W.

I have a question. Please forgive me if this isn't the right place for this. My husband and I are selling our house in Texas so we can relocate to Washington state. We have buyers, a contract, has had inspection and now we are in the appraisal stage. The appraiser came out and found only ONE issue. The 3rd bedroom in the house does not have a window. That bedroom used to be the kitchen but it was converted into a bedroom when they added the den behind it. There are shelves where the window used to be. The appraiser does not want to approve the appraisal because there is no emergency excape from that bedroom. He will not let us call it anything but a bedroom because it does have a closet, and he will not call it a bedroom because it does not have a window. Anyone have advice? One thought was to put a "pass through" where the old window was. This would open up to the den, which would make our house a 2 bedroom and not a three bedroom, lowering the value. What can be done? Any advice?

May 15, 2012 06:25 AM
Michael S. Bolton
Michael S. Bolton,Inc. - Zimmerman, MN
MN Appraiser

Hi Charity~To be considered a bedroom it does need a window of the proper dimensions, however, going from a 3 to 2 bedrooms doesn't necessarily lower the value automatically. There may be similar comparable 2 bedroom sales. I wouldn't do anything until the appraiser finishes the appraisal, and then see if it's worth adding a window.

Hope this helps, just let me know if you need further clarification.


May 16, 2012 12:37 AM
Wayne B. Pruner
Oregon First - Tigard, OR
Tigard Oregon Homes for Sale, Realtor, GRI

FHA appraisals are tougher. I try to get items corrected before they show up. That helps alot.

Oct 23, 2012 07:30 AM
Dave Sullivan
Real Estate One - Birmingham, MI
Michigan Realtor with an investor viewpoint

Excellent information I will forward it if that is ok? thank you!!!

Nov 23, 2012 12:11 AM
Ann Hayden 636-399-7544
Berkshire Hathaway HomeServices Select Properties-St. Louis Missouri - Des Peres, MO


Thank you for the informative list of items...   I might add, all appraisers are different some more focused than others.

Have a great day.

Ann Hayden in Wildwood, MO

Oct 16, 2013 11:38 PM

I know I'm very late to this conversation but feel the need to contribute what I can. I'm an appraiser of 30+ years in the business. I can't for the life of me understand why a Real Estate Agent who has a Home Inspection in-hand doesn't just hand it over to the appraiser? Or at a minimum, tell the appraiser what was in the inspection report as faulty equipment? It seems to me that the fiduciary relationship to look out for the best interest of their client requires the agents to give up all relevant information. Knowing that a wall heater is bad; having a documented report by a professional stating that the wall heater is bad; witholding that a wall heater is bad from the FHA appraiser is contrary to that fiduciary responsibility. It sounds to me like some Real Estate Agents are trying to get away with something because while it's legitimate that an appraiser miss a faulty wall heater unit, it's not legitimate for a Real Estate Agent who knows the heater is broken to not do everything in their power to get the heater fixed. You know it's kinda funny that agents call us appraisers "stupid" but we generally feel that they are on the same level as a used car salesman when it comes to honesty & integrity. They're just trying to get their 6% asap and we're just a speed bump to that end...

Aug 29, 2015 01:28 AM

We are buying a house in a very "hot" area of Tx, and recently went through the FHA appraisal process.Even though a VA appraiser valued the home at 195,000 a month aog, our lender's FHAappraiser only valued it at 174,000. Once we obtained his report, we found multiple mistakes in the descriptions of rooms, such as a wood floor that doesn't exist, kitchen update notes (never happened), and even 2 pictures in the report that are someone else's homes. There were also other descriptions and inconsistencies to the point that our lender felt they needed to look into it. Now, 10 days later, we received word back that the appraiser will not change his appraisal value and we are scrambling to get closed and come up with the additional $3800 that we will have to pay down on the property. We would back out but landlord has already rented our house to someone else, and as I said, it is a very hot market with only 3 houses in our price range, and no rentals available. Even though we paid $575 for the appraisal, we are told we may not speak with the appraiser and his word is final. Is there any way to report this guy to FHA so that SOMEONE will hold him responsible for his sloppy inaccurate work?? Thanks!

Oct 20, 2015 10:00 AM
Michael S. Bolton
Michael S. Bolton,Inc. - Zimmerman, MN
MN Appraiser

Hi Dani,

You could always try reporting the appraiser to the state licensing board, if indeed the appraisal is full of inaccuracies, and more importantly is a misleading appraisal.

Oct 20, 2015 10:22 PM