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Appraisal Changes Coming September 14, 2015 - FHA Loans
September 8th, 2015 1:54 PM

There are hundreds of changes coming as a result of HUD Handbook 4000-1 which becomes effective September 14, 2015.  FHA's new operative words are OBSERVE (the property condition), ANALYZE (effect on marketability and value) and REPORT (observed condition and analysis).

The link below is for the full HUD Handbook:


The following brief discussion covers the changes and a couple of existing requirements  that will have the greatest impact on an appraisal inspection. 

**HUD 4000.1 contains several changes to the inspection protocol previously established for appraisers including, but not limited to, the following:

**The appraiser must state which of the utilities are on and in working order.

**The appraiser must operated and observe all built in cabinets and appliances to ensure they are in working order, this includes making sure all cabinets/drawers operate effectively, and includes, but is not limited to, observing the operation of the dishwasher, stove, oven, disposal, refrigerator, washer and dryer, when included in the sale.

**The appraiser must operate and observe the plumbing system to ensure no foul odors are emitted and the water pressure is sufficient,  this includes, running faucets while the toilet is flushed.

**The appraiser must observe the crawl space and attic areas in their entirety to look for and report structural issues, roof leaks, vermin infestation, crawl space venting and minimum clearance on 18 inches, trash and debris.

**If the property has a shared well, the appraiser must obtain a shared well agreement and include it in the appraisal report.

**Defective lead based paint must be corrected for all properties built prior to January 1, 1979.  this is a change from the previous "prior to 1978" rule.

**Operate a representative number of windows, lighting fixtures, switches and receptacles inside the house, garage and on the exterior walls and note any deficiencies.

As you can see, the role of the appraiser in an FHA property inspection will now have more emphasis on identifying repair items, much like a home inspector does (although the HUD Handbook clearly states that the appraisal is not a substitute for a Home Inspection).  This is only a summary and in no way intended to be all inclusive of changes affecting property inspections for appraisal purposes.  Be aware that time will tell how impactful these changes will be on FHA appraising and lending.


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Posted by Rick Hackney on September 8th, 2015 1:54 PMPost a Comment

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