Portland Area Real Estate Appraisal Discussion

Portland Appraiser Opines on FHA Guidelines
November 20th, 2015 4:33 PM

Fifty Shades of FHA

I belong to many online real estate appraiser forums.  One discussion topic that never seems to get old is whether or not a particular issue should be “called out” for repair in an FHA appraisal.  When I speak at real estate offices, I’m often asked similar questions, like “will this situation result in an FHA necessary repair?”

In answering such questions, I can only refer to what is said in the newest HUD Handbook 4000.1, but in doing so, I always try to explain that although it would be nice if everything was clear cut, there is room for judgement from both the appraiser and the loan underwriter.  One appraiser might view something very differently from another.  What follows is just one example of many that may help real estate professionals understand how there can be fifty shades of FHA guidelines.

An appraiser recently posted a photo of a weathered gray-looking deck on a house built in 1972.  The deck appeared to have no finish and the appraiser asked others if they would call for repair.  The HUD Handbook says,

“If the dwelling or related improvements were built after 1978, the Appraiser must report all defective paint surfaces on the exterior and require repair of any defective paint that exposes the subsurface elements.  If the dwelling or related improvements were built on or before December 31, 1978, refer to the section on Lead-Based Paint.”

The online answers from other appraisers are numerous and varied. 

  • Some appraisers indicated that any unprotected wood on any structure should always be treated and recommend calling for the repair.

  • Some appraisers indicated that it looks like faded wood that has been treated or sealed in the past and therefore it should not be painted, stained, or ultimately repaired arguing that additional treatment would reduce its life.

  • Some appraisers indicated that it is just an old bare wood deck that has not been cleaned in a while and is just a part of the overall condition of the home. 

  • Some appraisers indicated that the subject having been built prior to 1972 was important because there might be some traces of lead based defective finish.

  • Some appraisers indicated that if there was no paint, there is no defective paint to repair.

  • Some appraisers indicated that the condition should be noted and let the Underwriter make the call.

The appraiser who originally asked the question came back to the online forum and explained that he just disclosed the condition, implying that no repair was called for.  Although the HUD Handbook guidelines seem clear, in practice the rules are interpreted individually by many appraisers and loan professionals which, right or wrong, can produce a wide range of results. 

If you are faced with a structural condition that you’re not sure about, consult the HUD Handbook first and then contact the FHA Resource Center by calling (800) CALL FHA.  Ultimately HUD is the final judge in determining if properties meet their requirements.  The challenge for appraisers is to report conditions found in the field accurately.

Did I leave anything out or do you want to join in the conversation?  Let me know in the comments below. (Sorry that my comments are still not working as of posting.  My website maker a la mode is still working on a fix.)

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Thanks for reading,

Gary F. Kristensen, SRA, IFA, AGA

Posted by Gary Kristensen on November 20th, 2015 4:33 PMPost a Comment

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Yes I have run into this, but it is not a cut and dry issue. In the ones I was involved in there was the unknown if planning would approve the division. The development costs were excessive. VS buying a vacant lot. On the other hand I have seen 1 or 2 acre parcels with a residence sell and the new owner develops the excess land into a subdivision and then re-sell the original residence and build new homes on the excess land.

Posted by Dennis Tellez Sr on December 19th, 2015 9:46 PM


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