Chapter
1 Appraisal & Property Requirements Page
1-22 1:
Home Inspections: Borrowers
are encouraged to obtain a detailed home inspection of the property. Borrowers
should research home inspector's qualifications and designations to ascertain
that they feel comfortable with the individual they hire. HUD does not maintain
lists of approved Home Inspectors. 2:
Repairs
and Alterations: Deficiencies, required repairs, alterations and/or
required inspections must be reported within the appropriate section of the applicable
appraisal reporting form. (See Mortgagee Letter 2005-48
and 2005-34)
- Required
Repairs: Required repairs are limited to those repairs necessary to preserve
the continued marketability of the property and to protect the health and safety
of the occupants, A.K.A. the three S's:
- Safety: protect
the health and safety of the occupants
- Security: protect the security
of the property (security for the FHA insured mortgage.)
- Soundness:
correct physical deficiencies or conditions affecting structural integrity
- Properties in Poor Condition: If the subject property is in such
poor condition that it may be cost prohibitive or impractical to bring it up to
FHA's minimum property requirements, the appraiser should recommend rejecting
the property and contact the Lender before continuing with the assignment. If
continuing:
- Complete the appraisal on an "AS IS" basis,
clearly marking the report as recommended for rejection for Section 203(b) and
provide reasons for the rejection;
- Provide a list of all major deficiencies
and state that the list should not be considered all-inclusive. Additional items
may be required before acceptable for FHA Insurance; and
- Provide photographs
of deficiencies to support recommended action.
3.
Code Enforcement for Existing Properties: As
stated in HUD Handbook
4150.2 HUD has neither the authority nor responsibility for enforcing code.
This rests with the local municipalities. 4.
Clearing Conditions on Existing Homes
- All repair items required by the appraiser or underwriter must
be inspected and the clearance documented.
A professionally licensed,
bonded, registered engineer, licensed home inspector or appropriately registered/licensed
trades person, as applicable, must provide documentation that all deficiencies
have been acceptably corrected upon completion of repairs. "As applicable" has
been determined to mean any individual who the lender deems to be qualified, which
might be the appraiser. Professionals
as defined above may use their company's forms and letterhead to make the certifications.
Appraisers and Compliance Inspectors are to use the Compliance Inspection Report,
form HUD-92051. The
individual signing Section II must be the person who actually performed the inspection.
Section III or IV, as appropriate, is to be signed by the Direct Endorsement Underwriter.
- Mortgagee Certification: When a Mortgagee Certification
is used to clear minor conditions the HUD-92051 is not
required.
5.
Refinances: Standard
refinances require a complete appraisal with deficiencies and repair conditions
reported. Although HUD does not require completion of the repairs on a streamline
refinance, except lead-based paint repairs, the lender may require completion
of repairs. A streamline refinance may be insured with or without an appraisal.
Please see:Handbook 4155.1,
Rev. 4 Chapter 1
6.
Appliances:
The Valuation
Protocol (page D-26 of Appendix D, Handbook
4150.2) requires the appraiser to note the appliances that are present in
the home at the time of inspection and whether the appliance is considered personal
property or part of the real estate. The protocol further directs the appraiser
to treat non-functioning appliances/equipment as deferred maintenance in the valuation
process.
The manner in which an appliance is attached to the dwelling
would determine whether or not an appliance should be considered part of the real
estate. In some real estate markets, it may be typical and customary for certain
appliances to convey with the real estate. In these situations, those appliances
should be considered real estate and treated as such in the valuation of the property.
In some cases, such as that of REO properties, all or some of the appliances
may be missing and there may be damage to the floor, wall or ceiling finish as
a result of the removal. Depending upon the magnitude of the damage, the appraiser
is expected to treat the damage to the home as deferred maintenance and reflect
such in the conclusion of value. Missing appliances must be addressed by the appraiser
in the valuation process, particularly when the comparable sales included a full
complement of working appliances.
In cases where appliances are missing
and minor repairs may also be needed, lenders are encouraged to have the borrower
take advantage of the Streamlined 203(k) loan product, which has no minimum repair
cost threshold and is designed to cover such improvements/replacements. |