The Home Buyer's Korner

Information presented should be used for educational purposes only.

June 12th, 2015

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GREATER LAIE/HALEIWA HAWAII

The Home Buyer’s Korner

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Things Sellers Should Know About The FHA Appraisal Process

Home InspectionAre you open to accepting a purchase offer with FHA financing? Selling your home and accepting FHA terms can greatly improve your real estate agent’s ability to sell your home quicker and at your listing price. One of the major concerns for both sellers and home buyers using FHA financing is the appraisal. As the seller it’s helpful to know the process? Doing so not only helps you close on time it can help bring in the value you and the home buyer agreed upon.

Yep, there are some things as the seller you can do. Let’s look at some of the basic appraisal requirements for an FHA mortgage. An FHA mortgage is a mortgage backed by the Department of Housing and Urban Development. This means the government insures the loan and the mortgage lender is risk free in case a mortgage goes into defaulted. FHA loans were created in response to all of the foreclosures in the 1930’s and a very popular financing tool, especially for first-time home buyers. FHA mortgages are easier for you home buyer to qualify for because they don’t require a high credit score or a large down payment – usually just 3.5% of your sales price, which greatly increases the home buying pool interest in your residence.

If you accept an offer to purchase with FHA financing, your home buyer will have to get the home appraised by a special FHA approved appraiser who looks at all the same things a regular appraiser does, but takes a more in depth look at health and safety aspects of your home.

The FHA appraiser looks at things that are in need of repair like loose porch railing, broken windows, missing screens, pest infestation, the roof and other issues that aren’t necessarily as important for regular appraisals. One of the big things an FHA appraiser checks out is the age and condition of the paint on both the interior and exterior of the home to look for possible lead contamination and water damage. For homes built before January 1, 1978, you have to protect against poisoning from lead-based paint and even with homes built after 1978 the exterior paint has to be touched up if the finish is unprotected.

Is Your Home In Need of a Paint Job or Touch Up?

If there are any areas around your home, inside or out, where you have cracked, peeling or loose paint be sure to carefully wash, sand and scrape away the loose paint before the appraiser comes to inspect your home. If your home doesn’t meet any basic health and safety requirements, you’re going to have to make the necessary repairs/upgrades before your home buyer can secure final approval and close on your home.

If you’re going to be painting in cold weather, you still need to keep an eye on the weather and plan ahead. Also, whatever other products you’re using, primer, stain, caulk etc. need to be designed for use in cold weather as well.

With FHA appraisals, you may be under the gun to get mandatory improvements done to close on time, but if you paint when it’s too cold or wet and the paint doesn’t last, then you’ve wasted your time and money. Keep in mind, you work has to be re-inspected if you didn’t make the repairs before the FHA appraiser completed their initial home inspection. If you’ve got any damaged paint on your home, you’ll want to take care of that right away.

You can use either water or oil-based paint on exterior surfaces, but certain paints are better for particular materials. Oil-based primers can be used with either type of paint, but water-based primers should only be used with water-based paint. Home Depot has a great list of what kind of paint you should use based on what kind of surface you’re going to be painting.

You can use either oil or latex for floors and porches, but 100% acrylic latex usually works best because it’s weather-resistant. Both oil and latex paints are available for gutters, but oil is better this time, especially for tin gutters. Oil-based paint also adheres well to galvanized steel and aluminum, but be sure to use a galvanized metal primer. You can get both oil and latex paints for house/siding paint jobs – they’ll endure severe weather conditions.

Masonry paint is usually latex and works on stucco, concrete, cement and shingles. Often, you have to use some kind of bonding primer first.

For painting a pool or marine area, you’ll want a polymerized cement-based paint for concrete and granite surfaces. Make sure to look for paints that are stain and abrasion-resistant and double check the compatibility with your surface.

If you’re looking to paint the roof, you’ll need an acrylic-latex blend and it should be mildew/algae proof, but paint is never a substitute for waterproofing your roof.

If you want to close quickly, walk around your house and make a list of repairs and get them fixed. Repair those wall plugs that aren’t working or the light fixture that have shorted out or the back burner on the stove that stopped working.

Hot water heaters are another appliance FHA appraiser look at. Many homes have then inside the living area and maybe missing a catch pan for any water that escapes from the safety value. If your don’t have one, don’t be surprised if the FHA appraiser requires one to be installed. It’s also going to need a PVC pipe for the water to exit to the exterior as well. All this make sense if you think about it. A hot water heater without this feature would create water damage if it fails and possible mold issues.

Will Your Home Meet FHA Guidelines for the Roof and Basement?

For starters, the roof must do what it’s designed to do–FHA regulations say it must not leak or allow moisture to enter the home. In order to pass the appraisal process, the roof must also “provide reasonable future utility, durability and economy of maintenance” according to the FHA official site.

The roof should have a remaining physical life of at least two years and most FHA lenders require a life expectancy of at least three years. If the roof has less than two years remaining life, the FHA appraiser must call for re-roofing or repair. The FHA appraiser must clearly state whether the subject is to be repaired or re-roofed.

Any leaks or moisture due to a problem with the roof will be noted on the appraisal report, as well as any noticeable holes, water damage or other problems. 

It’s important to note that FHA appraisers are not necessarily trained experts on roofing issues, nor is the FHA appraiser required to step onto the roof to inspect it. The home buyer is responsible to take it upon themselves to have a home inspector look over the roof and other critical areas of the property-there may be issues not immediately noticeable that an inspection would catch that do not appear on the FHA appraisal report.

FHA appraisers are not required to be specialists in any one particular area-an appraisal is a multi-faceted, more general process than a home inspection. The FHA fee appraiser is not required to enter crawlspaces, walk on roofs or perform other duties for which they have no specialized equipment or safety gear.

If you have a concern about the state of the roof or wondering about the remaining years left, hire a roof inspector [your real estate agent can refer you to one] and ask specifically about these issues prior to your home being appraised. It’s not expensive and could mean the difference between closing on time and not closing at all.

It’s also a good thing to keep in mind, if your home is in need of major repairs you can afford to complete them offering your home with FHA 203K financing and setting a reasonable listing price is another great option. Ask your real estate agent how the FHA 203K works and if it’s the right sells option to consider when listing your home.

This discovery process is similar to the appraiser’s job in the basement-the appraiser inspects the condition of the area and makes the appropriate observations. 

Basements and foundations with “any noticeable crack” must be addressed. Cracks may indicate the presence of problems with the foundation or other equally important issues that may require further attention before the home can be purchased.

FHA also requires appraisers to note deficiencies such as standing water or “deteriorating asbestos wrapping on hot water pipes.”

Some deficiencies can be repaired prior to the loan’s closing date, which means your home buyer can proceed with the purchase of your home as long as the problems are corrected. But others are more serious and could render the property ineligible for an FHA loan altogether. If that’s the case and you don’t have the funds to make these repairs consider marketing your home as an FHA 203K eligible property. 

The rules for such situations also includes, “…some may require inspection by an expert in the field.” FHA appraisers are not trained to diagnose major structural problems with a foundation or basement–a professional opinion may be needed to identify the specific problem related to a basement or foundation issue.

The FHA adds that in an appraisal, a basement does not count as a habitable space; however there are special guidelines for appraisers when it’s necessary to evaluate a basement apartment or bedroom as part of an FHA loan appraisal.

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HAWAII HOME OWNERSHIP TOOLS

Your Home Purchasing or Refinancing & Renovation Tools,

Home Improvements, Home Renovations,

Mortgage Loan Officers, Real Estate Agents & General Contractors

are ready to assist you with your home purchase.

Here are just a few of the home improvements

you might consider with any Home Renovation loan

Repair or replace a roof

Install, replace or repair gutters and downspouts

Replace, repair or upgrade your HVAC system

Repair or replace plumbing

Install, repair or replace electrical systems

Kitchen remodeling (including the purchase and installation of appliances)

Bathroom remodeling, Full interior painting, Total exterior painting

Repair or replace a septic system and/or well

Disability access (wheelchair ramp, elevator, widen doorways)

Build, repair or replace deck, patio or porch

Basement waterproofing and finishing

Abatement/Stabilization of lead-based paint hazards

Replace old windows, Room additions, Finish an attic

Add a second story to your home

Replace a termite damaged sill plate (a water-damaged sill plate also)

Possible landscaping items such as correction of grading & drainage problems,

tree removal, repair a driveway and sidewalks

FHA 203K

Your Home Purchasing or Refinancing & Renovation Tool

Mortgage Loan Officers, Real Estate Agents & General Contractors

are ready to assist you with your home purchase

FANNIE MAE HOMESTYLE

The Conventional Alternative to FHA 203K

Great for Real Estate Investors and Second Home Renovations

Mortgage Loan Officers, Real Estate Agents & General Contractors

are ready to assist you with your home purchase

USDA RURAL DEVELOPMENT

Up to $10K for Home Improvements, Renovations or a Simple Remodel

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A SIMPLE HOME SHOPPING INSPECTION TOOL

Organizing your home shopping experience affords a wise decision-making process.

This simple home inspection tool makes your ultimate buying decision a smart one.

To print this document click on “Open in New Window” located at the lower right corner;

click on “File”; then click on “Print”. In the center of the screen you will

have the option to “Create A Printable PDF of the Presentation”.

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