The FHA appraisal does two jobs at once: it estimates value and it checks certain minimum property standards. Here is what that means for buyers.
What Does the FHA Appraiser Do?
The appraiser evaluates:
- Market value
- Comparable sales
- Property characteristics
- Certain health/safety/security considerations
- Applicable FHA minimum property standards
Appraisal vs. Inspection
FHA Appraisal
For lender/FHA purposes.
Home Inspection
For buyer due diligence.
An appraiser is not there to perform a complete technical inspection of:
- Plumbing
- Roof
- HVAC
- Electrical
- Pool
- Sewer
A buyer should still consider appropriate inspections.
What Can Create an FHA Appraisal Issue?
Depending on the property:
- Safety hazards
- Significant deterioration
- Missing required utilities
- Exposed electrical hazards
- Structural issues
- Certain peeling paint concerns on applicable older properties
- Roof concerns
- Other minimum property deficiencies
Does FHA Require the House to Be Perfect?
No.
FHA is not a cosmetic inspection.
Ugly carpet is not automatically an FHA problem.
Outdated cabinets are not automatically an FHA problem.
The focus is not:
"Would HGTV approve this kitchen?"
What If Repairs Are Required?
Possible outcomes can include:
- Seller completes repair
- Buyer/seller renegotiate
- Repair escrow where permitted in appropriate programs
- Transaction changes financing
- Buyer exercises contract rights where applicable
What If the Appraisal Is Low?
That is a value issue.
Potential options may involve:
- Seller price reduction
- Buyer contributes more cash
- Appraisal reconsideration where warranted
- Renegotiation
- Contract rights
Lisa can help with the real estate negotiation.
For the whole FHA library, visit the FHA Home Loans hub or the Financing a Home resource center.
