Understanding FHA and VA Loan Appraisal Requirements: For Home Sellers and Listing Agents

Demystifying FHA and VA Loans and Appraisals

Navigating the complex world of real estate can be challenging, especially when it comes to Federal Housing Administration (FHA) and Veterans Administration (VA) appraisals. To shed light on this topic, we've gathered insights from our discussions with appraisers and mortgage underwriters, and we've addressed key questions about these loan types and the appraisal processes. This information is particularly valuable for listing agents and property sellers, looking to ensure their home is "appraisal ready".

To maximize your chances of a successful home sale, your home needs to meet FHA and VA appraisal unique requirements. The main point is to ensure the home is habitable, safe, and structurally sound. Rather than viewing these requirements as hurdles, they should be seen as benchmarks for meeting appraisal requirements.

Key “Issues” in FHA and VA Home Appraisals

Window Integrity

FHA and VA loans and appraisals do not permit broken windows or glass. This requirement goes beyond aesthetics; it's a matter of safety and energy efficiency.

Decks

Desks must be securely anchored to the home and have structural stability. For example, a cracked board isn't an issue but missing boards, rotten wood, missing or not secured railings might be an issue. Peeling paint on the deck can also be an issue. The appraiser is looking for deck to provide safety and soundness.

Concrete or Bricks

Small cracks (1/8" or less) typically aren't an issue. However, if the crack is a result of foundation shifting or if it's crack, or showing signs of moisture, that may be an issue and if deemed an issue, would require a structural certification or engineering report by a Structural Engineer. Missing or broken bricks could be an issue, depending upon the severity. Cracks in bricks or mortar will be look at similarly to cracks in concrete.

Handrails

While it may seem minor, handrails are crucial safety feature. They're especially important for older and younger residents or those with mobility issues, helping prevent falls and accidents on stairs. Any interior stairwell or set of stairs needs to have an handrail and it needs to be securely attached to the wall. These can be, at times, required for exterior stairs depending upon the appraisers assessment of the risk.

Paint

Peeling paint may seem minor but can signal larger issues such as neglect or potential structural damage. Not to mention, flaking paint can be a health hazard in homes with lead based paint. The appraiser will look for flaking or missing paint, rotting wood, or signs of moisture.

Drywall & Doors

Drywall should be complete (taped, mudded, and painted) and shouldn't have any major holes. A small hole, say doorknob size, isn't usually an issue. Doors should all be hung, are able to open and close, and should all have hardware (knobs and locks, as necessary). An exterior door should also be weather resistant (not cracked, missing a window, bowed, or falling apart). A slight draft in a door shouldn't be an issue but a major one (e.g. major gaps or missing seal) might be.

Roof, Gutters, Down Spouts

The inspector's job is to inspect the roof. An appraisers job is to ensure the roof is adequate for the safety and soundness of the property. Meaning there are no street level visible missing tiles, the tiles are tacked down, and there are no signs of a roof leak on the inside. The roof also should have attached gutters and down spouts, moving the water away from the foundation.

Up Keep or Debris

Albeit a little bit general, the up keep of the property grounds can be an issue. Over grown weeds, rubbish piles stacked against the house, sidewalks or paths that are blocked by debris or with unsafe footing, could be an issue, depending upon the appraiser.

Water Fixtures... And Water Flow

Leaky water fixtures can lead to moisture problems and structural issues, potentially disqualifying a property for FHA and VA loans. In addition, water must also be turned on (not winterized) so the appraiser can check all fixtures and toilets for proper function. All sinks should have faucets and all toilets have lids.

Carpet

The condition of carpeting can reflect overall home maintenance and contribute to a move-in ready appearance. For the appriser however, the carpet represents a possible trip hazard if there are holes, waves, tears, or if not properly secured. Missing carpeting also is an issue in the safety and soundness of the appraisal inspection.

Flooring

A property is generally considered not safe and sound, if there is missing flooring (of any type) or if flooring is moving or coming up.

Cabinets

All cabinets must have doors and be secured to the wall.

Electrical, Water Heater, HVAC

All light fixtures should be in and there can't be an exposed wiring, or missing outlet covers. Electrical doesn't have to be to the current code but it does need to be safe and there need to be enough outlets to make it habitable. The water heater should be working and not leaking. The HVAC systems should be in working order.

Appliances

If the home has appliances, they should be operational. However, appliances are not required by FHA or VA. The home must typically have spaces for the appliances.

Attic or Crawl Space

Attics must be accessible and allow the appraiser to visually inspect the structure, rafters, decking, and insulation for moisture, mildew, and leaks. Crawl spaces must be free of debris, properly vented (unless mechanically conditioned), and free of excessive moisture and pooling water

Smoke and Carbon Monoxide Alarms

Every floor needs to have a smoke detector and every bedroom. The lower most floor (typically) must contain a carbon monoxide alarm. All alarms should be in operational working order.

Comprehensive Property Checks: A Win-Win Approach

Thorough property inspections are not just a requirement for appraisals; they're essential for ensuring habitability, safety, and overall condition. This practice benefits all parties involved.

Dispelling FHA and VA Loan Myths

Despite misconceptions about FHA and VA loans being troublesome due to rigorous appraisal processes, these standards should be embraced. Understanding and meeting these requirements can lead to positive outcomes for all stakeholders.

Universal Appeal

Properties that meet FHA and VA standards are attractive to all buyers, regardless of loan type. This approach enhances the properties marketability, maximizes your profit, and helps ensure a loan approval for the buyer. Also by adhering to these standards, real estate professionals can expand their property's potential buyer pool and increase chances of successful transactions.

Any other questions, let us know, we're happy to help you navigate any unfamiliar issues.

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