You’re gearing up to sell your home. Do you get a home appraisal or a home inspection (or both)? That’s the question many agents are asking based on the Federal Housing Administration’s overhaul of its Single-Family Housing Policy Handbook which was supposed to offer loan originators more clarity on lending policies and loan underwriting standards. As is often the case, some changes made to the property valuation policies are causing confusion and delays.
So what are they really trying to say?
There is growing confusion among consumers about whether they also need a home inspection. An appraisal makes sure a home meets FHA minimum standard requirements; it is different from a home inspection and does not replace it. Buyers should still get an inspection, and it’s often required by the lender.
Consider: All properties bought or refinanced with an FHA loan have to be appraised by a HUD-approved home appraiser.
When purchasing a property with a conventional loan product, the appraiser focuses on determining the market value of the home; however, with an FHA-insured loan, the appraiser not only determines market value but also inspects the home to ensure it meets certain minimum property standards.
It appears that requiring appraisers to take on home inspection-type duties to ensure standards are met appears to blur the line between appraisals and home inspections.
The chicken or the egg?
A statement from the National Association of Realtors (NAR) points out that “Buyers, sellers and Realtors are free to ask appraisers or lenders to consider additional property information, documentation and comparisons.” They may also discuss the unique conditions of a home and its neighborhood with appraisers.
Once an appraisal has been completed, explains NAR, “Any communications about errors or offers of additional information must be with the client who ordered the appraisal, generally the lender.”
NAR President Tom Salamone, in an effort to help ensure the FHA home buying process functions smoothly and without delay, recently sent a letter to the Department of Housing and Urban Development concerning FHA’s handbook. NAR asked the agency to reconsider some of the language, especially that which requires appraisers take on additional home inspection-type duties that were not previously mandatory.
Additional resources for agents about appraisals can be found at realtor.org/appraisal.