FHA Appraisal vs. Home Inspection
An FHA appraisal serves two purposes: determining the fair market value of the property and verifying that it meets HUD's Minimum Property Requirements (MPR). This differs from a standard home inspection, which is a more detailed examination of the home's systems and components. The FHA appraisal is required by the lender, while a home inspection is optional (though strongly recommended for buyers).
HUD Minimum Property Requirements
HUD's Minimum Property Requirements, outlined in Handbook 4000.1, focus on three categories: safety, security, and structural soundness. The FHA appraiser will evaluate:
- Roof: Must have at least two years of remaining useful life with no active leaks.
- Foundation and structure: No significant cracks, settling, or structural damage.
- Electrical: All systems must be functional and safe. Exposed wiring, missing outlets, and double-tapped breakers are common issues.
- Plumbing: Must be in working order with adequate water pressure and no active leaks.
- HVAC: Heating and cooling systems must be operational and able to maintain a comfortable temperature.
- Lead-based paint: Homes built before 1978 are subject to additional scrutiny for chipping, peeling, or flaking paint, which must be remediated.
- Access: The property must have safe access from a public or private road.
- Water and sewer: Must have a functioning water supply and sewage disposal system.
Common FHA Appraisal Issues
Sellers can proactively address the most common issues that cause FHA appraisals to flag problems:
- Peeling or chipping paint on pre-1978 homes (requires scraping and repainting)
- Broken windows or missing window panes
- Missing handrails on stairs or elevated surfaces
- Standing water in the basement or crawl space
- Non-functional appliances included in the sale
- Trip hazards such as broken steps or uneven walkways
What Happens If the Property Fails
If the FHA appraiser identifies issues, the seller typically has the option to make the required repairs before closing. The appraiser may require a re-inspection after repairs are completed, which involves an additional fee (usually $100-$200). If the seller refuses to make repairs, the buyer may need to walk away or negotiate a different solution. Note that FHA appraisals are attached to the property for 180 days, meaning if one buyer's deal falls through, the next FHA buyer will receive the same appraisal.