Amy Parker - Appraise it Today Blog

The Appraise it Today website has been updated today and there is a link at the top titled -  HVCC Client Info.    This link has important information regarding recent comments from Fannie Mae and Freddie Mac about -

• What realtor's can say to appraisers under HVCC
• Comments regarding complaints about out of area appraisers
• Comments regarding the use of AMC's.

This is a must read for any one wanting to stay informed on this important topic.

I was included today in a SAR presentation regarding REOs and the FHA buyer.  A copy of todays presentation is available under the FHA Source on my website and the file is attached to todays blog for blog subscribers.

Amy

SAR - REOs and the FHA buyer April 23 2009.ppt

January 16, 2009

Showing FHA Buyers Homes that Need Repairs

I just showed a client a less than perfect home and they are an FHA buyer, what will the FHA guidelines require to be fixed?

Over the last year many realtors have asked me this important question. In many cases, this is a specific question regarding a specific problem and the realtor wants general answers. The answer is not always simple and I am more then happy to provide consultation on the phone. But this month  the question has been more prevalent so a BLOG discussion is definately warranted.

Realtors need to understand that the FHA loan program is dependent on the HUD guidelines that are published for buyers, lenders, and appraisers. A link to these guidelines is found FHA Repair Information from HUD.doc and there is also a direct link to the HUD webster under the FHA Source at appraiseittoday.com website. Please note that these are guidelines and their interpretation is left to underwriters and lenders. I share with you some fairly black and white items from the underwriting world today.

HUD is concerned with safety, security, and livability of the property being insured under the FHA loan program. For the most part, they want the items to be fixed that make the home below average. Homes that are considered below average for the neighborhood will have the appraisal written “subject to repair”. 

The appraiser will be asked to describe items that are non cosmetic that make the home below average and in some cases they will have to provide a cost to cure the repair item.   In most cases the appraiser will be asked to reinspect the home prior to the close of escrow to confirm the repairs have been made.

What are some obvious things that could make a home below average?

• No heater
• No flooring
• No hot water
• Large holes in walls
• And much more

Photographs of recent home inspections are found below. These photographs show items that had to be repaired to meet HUD guidelines.

peeling paint.JPG

ceiling.JPG

exposed wood.JPG

water staining.JPG

Other items that I’m frequently asked about:

• Old roofs that are not certifiable for 2 years will typically require repair or replacement.
• Section 1 pest work will need to be fixed and certified as completed. New wood will need to be painted with primer at a minimum and not left exposed.
• Homes built prior to 1978 with peeling paint on any structure on the site will have to have this issue repaired and repainted.
• Un - permitted additions (this is a case by case scenario requiring consultation)
• Pools need to be safe and operational.  That means the pool needs to be filled with water and have an operational pool equipment.  Clean water is preferred.
• Appliances -  HUD prefers that homes have them.  Built in appliances that have been removed must always be replaced.

This is just a small list of items I’m frequently asked about.

I would recommend printing the Appraise it Today FHA Checklist of inspection items typically checked by FHA appraisers.   FHA INSPECTION CHECKLIST.pdf

January 15, 2009

Are the utilities on at the home?

Why do appraisers as this question?

An appraiser is hired to perform valuation services competently and in a manner that is independent, impartial, and objective. For purchases and refinance transactions and appraiser is further required to comply with Fannie Mae/Freddie Mac guidelines. These entities require appraiser to confirm home is livable. If the appraiser is completing a FHA appraisal inspection then the appraiser will be required to do additional inspections and make comments to meet HUD guidelines. Guidelines are of course left to lending interpretation and many lenders are now asking appraisers to specifically indicate on their reports whether all utilities were functional during the inspection.

So the appraiser has to check the utilities, don’t view this as an obstacle to a smooth escrow but think of it as additional protection for your buyer. New and old homes sometimes have issues that we are unaware of. That’s why it is always a good idea for buyers to get a home inspection. Unfortunately I cannot tell you how many buyers I find that do no want to pay the extra for this service.

If the utilities are not on, what will the appraiser do?

The appraiser will most likely make the report “subject to repair or reinspection” with the assumption that no additional repairs are needed. Typically the lender receiving this report will ask for some proof that the utilities are operational (a copy of a home inspection report) or have the appraiser revisit the property to retest the utilities. This can delay an escrow so a little bit of investigative work by a realtor can help ensure a smooth escrow.

So here are a few realtor tips:

Water

The water main should be on and water should be running from the faucets in the house. Appraisers will find homes with the water main off, the foot valves under sinks off, or the water utilities off at time of inspection. Most appraisers will not take on the liability to turn these items on because not all plumbing systems are the same. I did this one time and flooded a kitchen. Another time I turned on a sink and much to my surprise water starting running out the bottom of the cabinet because someone had removed the piping below the drain. There is nothing like moping up a floor in a REO home that has not been cleaned in months.

Recommendation: If your buyer is interested in a home, check the water on a faucet before you leave or have a home inspector check out the house.

Natural Gas Utilities

The main reason lenders want to know if the gas utilities are on is because they want to be sure there is no safety hazards related to this utility. They also want to be sure there is hot water. It’s not unusual for gas bills to not be paid or gas utilities to be turned off when not used for extended periods of time. Gas leaks and explosions have been in the news papers recently, heightening the awareness of this potential hazard. When natural gas utilities are turned off the public utility companies will put a plug inside the gas meter to turn off the utility which requires the utility company (PG &E) to visit the property. The good news is PG & E will also turn on heater and water heater pilot lights on and confirm the gas stove is working also. They will also tell you if there are safety problems.

An appraiser will turn on the water to check for gas utilities, check the pilot light on a water heater, or turn on a gas stove top. Buyers want hot water when they buy a home and many of the vacant properties out there have faulty water heaters.

Recommendation: Check for hot water, confirm with listing agent that gas bill is being paid, or have home inspector check.

Electricity

Appraiser will turn on a random sample of lights or try electric outlets with a night light to make sure the electricity is.

Recommendation: Turn on a few lights in the house, check to see if the digital display on the microwave is working, or have home inspector check home.