Appraisal Guidelines for 2019 for FHA, Rural Development and Conventional Home mortgage loans.

When you are applying for a loan to purchase a home the lender will require you to pay for a home appraisal, with current Government guidelines you can’t choose your particular appraiser, this Is done in a pool of appraisers and the lender or you can’t know in advance who it might be; this protects the buyer so he/she knows the appraisal was done with a third party and no influence from any parties had anything to do with the value of the property.

A State of Michigan licensed appraiser is an expert that has taken up to 80 hours of courses to obtain and over 2,500 hours of supervised inspections with a licensed appraiser to get fully licensed, as a home buyer you are making a small investment with the appraisal process to ensure that the home you are buying is worth what you are paying.

All appraisers have the ability to use their own judgment while doing an appraisal regardless of it is a Conventional home loan or a FHA, Rural Development or a VA loan.

With Conventional Home Loans through Fannie Mae and Freddie Mac most appraisers are only concerned with the market value of the property in question; meaning when an appraiser goes to a property that is a Conventional loan they are only concerned with the condition of the property as it relates to the value.  But if the appraiser deems safety deficiencies on the property they can require repairs to be made before he or she will sign off.

With FHA home mortgage loans HUD or (Housing and Urban Development) authority requires appraisers to not only determine the current market value but they also require the appraiser to inspect the property to make sure the home meets HUD’s minimum standards for health and safety. The primary difference between Conventional loans and the FHA 3.5% down home loan or the Rural Development 0% down is that the appraiser  can and many times will call out deficiencies on Conventional loans at their discretion; but with FHA and RD ( Rural Development) loans there is a more concise list that you can refer to.

Overview on Appraisal Guidelines:

At a minimum, the appraiser must complete the following steps:

  • Visually inspect the subject property both inside and out, and take pictures.
  • Visually inspect the property to be included with the loan, must show any out barns, detached garages or improvements; including pools or patios.
  • Inspect crawl spaces or basement and inspect all mechanicals, if there are any health or safety issues, these must be notated on the appraisal and corrected by the buyer or seller.
  • If mechanicals that are integral to the homes safety or salability and or livability are found to be not operating correctly then the seller must correct those issues. If there are safety components on any issues on any of the mechanicals like a home heating/cooling unit that are not properly installed this can also be an issue that the home appraiser can write up as a deficiently that needs to be addressed before the loan can be funded.
  • If the home you are buying or selling is on a well for water you may be asked to have a professional company test that water to ensure it is safe for drinking, which if it is not would constitute a health hazard, especially if the home you are buying or selling is close to a farm that uses chemicals for crops or a dairy farm that has large amounts of sewage from animals.
  • Health and safety issues can encompass a large amount of topics but the most common issues fall in the following points depending on what financing you are applying for.
  • Regarding health and safety the appraiser will look at if there is adequate hand railing going up to second story levels of the home as well as going down to the basement and also entrance ways into the home.  The appraiser will also make sure there are covers on the home’s breaker panel and possibly GFCI outlets installed when they are near a water source, once again this is a case by case situation that the appraiser can call out as a deficiently if they determine it is a health or safety concern.
  • If the home you are buying or selling was built before the year 1978 then lead based paint can also be an issue if the paint is peeling on the inside of the home or the exterior, in this case the peeling paint will need to be scraped and removed from the property and painted over the removed peeling paint to ensure the surface is protected from the elements and possible rotting of the wood.
  • If the home appraiser visually sees any type of possible mold in the home then they might require a third party to determine if this is also a health hazard, also signs of water damage in the basement might constitute a home appraiser to ask further third party verification that this will not be an issue in the future.
  • Other things to consider when selling your home or buying a home regarding what a home appraiser may call out is having up to code coverings on all electric outlets in your home and making sure there are no bare wires exposed regardless if they are old telephone lines or outlets that are not being used.  Windows that are not able to be opened because they are painted shut can be deemed a safety issue as well as cracked/broken exterior windows for example.  Recently I have had appraisers call out improper drainage on a property because the grade of the property allowed water to pool at the base of the basement, so this is not a topic that really has clear cut rules.

If you are buying or selling a home then I would suggest that you first contact me, Matt Keway at Icon Mortgage 810-223-2122; I will help you with the initial loan approval but also give you my extensive knowledge regarding possible appraisal/inspection problems that you might run into regardless if you are buying or selling.  Also after getting approved for your home purchase and/or sale you can talk to a full time professional realtor; who can work with me and also give you advice on any issues that they may see to make your transaction easier.

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