If you’re applying for a reverse mortgage, you may need to get an FHA appraisal.
The purpose of such an appraisal is to ensure that the amount of the loan does not exceed what the home is actually worth.
Why do you need this? Because if the worst happens and you end up defaulting on the loan, the lender needs the assurance that they can sell the home for enough money to avoid any loss of profit.
Ideally, the appraiser will find that your home truly is worth every cent of the desired loan amount...and maybe even more.
If the FHA appraiser discovers repairs are needed, he will note them on the report. The underwriter will then order you to make repairs. Besides the cost of the repairs themselves, you will also have to pay for a new inspection when the appraiser comes back to check that these repairs have been completed.
Not only can this be costly, but it can hold up the financing process. The lender might even hold back as much as 150% of the bid while waiting for you to complete the repairs.
So how can you avoid this headache?
Here are a few things to keep in mind when preparing for an FHA appraisal.
The Roof
Does your roof leak? Are there water stains on your ceilings? Is it obvious your roof needs repairs?
Leaky or worn-out roofs are one of the most common problems noted by appraisers. FHA lenders require that a roof keeps moisture out and that it has no more than three roofing layers.
If you know that your roof is 30 years old, or if it appears to have issues, be proactive and get it taken care of before the appraiser’s visit.
The Carbon Monoxide Detectors
Every state has different requirements regarding the number of CO detectors that a home is required to have. Check your state guidelines to make sure you have the right number of them. This is one of the easiest issues to address, and yet it’s the one people most often miss.
Double Strapping
Depending on where you live, FHA lenders may require double strapping to protect against damage from earthquakes. California is one state that has this requirement; and yet people often neglect it when preparing for inspections or appraisals.
Outside -Chipped/Peeling Paint
If your home was built before January 1, 1979, be prepared to address FHA requirements regarding lead paint.
Any chipped or peeling paint will have to be taken care of in order to pass the inspection.
Depending on how severe the problem is you may need to do this by repainting it, priming the area, and/or treating wood surfaces.
Dry rot and peeling paint on facia board is another very common repair that needs to be completed to meet FHA guidelines.
If your home has stucco, inspect it for cracks. If you have cracks, these will additionally need to be repaired and painted prior to inspection.
Access
In most cases, FHA appraisers will need to submit photos of all rooms and outer buildings including attics, crawlspaces, garages, basements, and closets. If doors to these areas are locked or if access is blocked in some way, the appraiser will not be able to get what she needs and will need to come back for another inspection.
In addition, appliances like the hot water heater have to be readily accessible. The appraiser cannot pry it open or unlock it. It is up to the homeowner to do this beforehand.
Structural Issues
Structural and foundation problems are common reasons for appraisers to order repairs. If the foundation has been damaged due to settlement, you will be required to make repairs.
Electrical Wiring
Electrical defects or exposed wiring are a red flag to the safety and livability of your home, and should be addressed before the appraiser comes to visit.
Tidiness
While the overall tidiness and cleanliness of your home does not affect your home’s value, clutter and mess can make it difficult for the appraiser to get what he needs. Ensure there is nothing blocking easy movement through doorways from one room to another, and that access to all entryways is clear. Clear out any junk that might be considered a safety hazard.
Cleaning up and dealing with repairs before the appraiser comes is a proactive way to ensure you get the best possible results to move the process along in a timely fashion.
You are not obligated to tell the appraiser about any repairs you have made, as the condition of the home speaks for itself. But feel free to share all of the things you love about the property.
By giving your home some TLC before the appraisal, it will get the attention and value that it deserves.
