5 Must-Know Facts About FHA Appraisals
When you’re buying a home with an FHA loan, understanding the ins and outs of the FHA appraisal process is crucial. While it might seem like just another step in the buying process, there are several things you need to know about how FHA appraisals work and what they mean for you. Here are five key insights to keep in mind:
1. FHA Appraisals Aren’t Full Inspections
This is an important distinction to make. An FHA appraisal is not a home inspection, and it’s not designed to uncover every issue with a property. While an inspector thoroughly examines the home’s systems—like the roof, HVAC, and plumbing—the appraiser is primarily concerned with determining the property’s market value in comparison to similar homes in the area. If there are issues with major systems, they may go unnoticed in the appraisal.
2. Appraisals Are Based on Comparables
FHA appraisals compare the property you’re looking to purchase to similar homes in the area to determine its value. This can be challenging in some cases, especially for unique homes like tiny houses or barndominiums. If there aren’t enough comparable properties nearby, it may be hard for the appraiser to come up with a fair market value for your home.
3. Local Building Codes Matter
FHA appraisers rely heavily on local building codes to assess whether a home meets the necessary standards. The FHA itself doesn’t maintain a database of every local code, so it’s crucial to understand your area’s regulations before moving forward. Issues like septic tanks, wells, or structural defects can prevent a home from passing the appraisal if they don’t meet local standards.
4. Appraisal Costs Aren’t Free
FHA appraisals come with a price tag, and the cost can vary depending on your location. It’s also worth noting that while home inspections are technically optional, they’re highly recommended. They provide a much deeper analysis of the property and can identify potential issues that the FHA appraisal may miss.
5. Appraisers May Require Corrections
If the appraiser finds problems with the property, they may require repairs to bring the home up to standard. If corrections are needed, there may be an additional “compliance inspection” to ensure the work was done properly and that the home meets both FHA and local codes. It’s wise to budget for this extra inspection, just in case.
In summary, while FHA appraisals play an important role in ensuring your home meets minimum standards for lending, they’re not the final word on the condition of the property. Understanding the appraisal process will help you be better prepared for what lies ahead in your homebuying journey.
