Ego, Hubris, Hot Markets, & WAMU's Collapse

    Realtors are often frustrated about “condition” and “health & safety” issues that get called out by appraisers, and they come to us for guidance.

    They obviously want to avoid getting conditions called out by appraisers that will either cost too much to repair, delay closings, or kill deals altogether.

    Our Appraisal Manager, Jennifer Muzzall, provided the below list of common items to watch for. She further broke them down by “FHA and Conventional” and “Exclusive for FHA.”

    BUT – this is the key point: the rules are NOT hard and fast!

    There is a huge amount of discretion left to both the appraiser and the underwriter.

    Underwriters need to make sure they have a salable loan so they will often require repairs that are on the “FHA-only” list, even for conventional loans.

    For example, I have seen conventional underwriters require pool repairs and flooring repairs numerous times.

    Similarly, appraisers need to protect their licenses and reputations, so they can never turn a blind eye to anything significant.

    But, seasoned appraisers will do their best to avoid calling out too much or pointing out “ordinary” wear and tear, and settling for example.

    This is again why we maintain our own appraisal panel – so we can make sure our appraisers are very good at making those judgment calls.

    In general, as I have mentioned many times, the only condition issue that seems to surface more often with FHA is peeling paint.

    FINAL TIP: Any condition issues referenced in MLS will have to be called out by the appraiser.

    Hence, agents should purge all condition-related comments from the MLS before the appraisal is ordered if they do not want those conditions called out.

    Common Condition and Health & Safety Issues

    Common for both FHA and Conventional

    • Exposed Electric Wires
    • Active Roof Leaks
    • Broken windows
    • Bars on windows without quick release
    • Handrails on stairs and decks
    • Smoke detectors – one per bedroom, one in the hall outside of the bedrooms, one on each level
    • CO detector – one per level installed in the hallway outside of bedrooms
    • Water Heater – requires at least 2 two straps

    Exclusive for FHA

    • Roof nearing the end of its life – appraiser must warrant that the roof has at least 3 years life left. If there is doubt, the appraiser can ask for an independent roof certificate
    • Utilities MUST be on and working
    • Built-in appliances must be installed
    • Appliances must be working
    • Heater must be working & able to heat the home to 58 degrees
    • Peeling paint must be scraped & re-painted
    • Attic will be inspected for leaks & pest infestation
    • Crawl will be inspected for water intrusion & pest infestation
    • Pool must be free of debris & pool equipment must be working
    • Walls/ceilings should be free of large cracks

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