Why An FHA Appraisal Is Not A Duplex Inspection

It seems there’s some confusion about what, exactly, an FHA appraiser does and how that differs from a home inspector.

First, what is FHA? FHA is the division of the federal Department of Housing and Urban Development (HUD) that insures residential mortgages of one to four units.

When a buyer chooses to get an FHA loan, he or she is usually able to purchase a property using a down payment of as little as 3.5 percent, in exchange for agreeing to make a monthly mortgage insurance premium payment.

An FHA appraisal is conducted by a regular duplex appraiser. His or her primary job is to determine whether or not the property is worth the amount you’ve offered to purchase it for. That appraiser is also simply required to check whether or not the property meets FHA’s minimum criteria for them to be willing to insure the mortgage.

Some FHA red flags include things like peeling paint, broken windows and leaking plumbing. If the appraiser finds these things, he or she can require them to be repaired or replaced before telling the bank it’s OK to issue the loan.

A home inspector, on the other hand, is an independent contractor who goes through the duplex with a fine tooth comb on your behalf, looking for any immediate health and safety concerns, as well as anything that may be in imminent or future need of repair.

For example, a roof may be in good enough shape for the FHA appraiser to accept. However, the inspector can tell you the roof is nearing the end of its useful life and will need replacement.

An appraiser will check to see if a furnace is working.

A good home inspector will look to see if there’s a cracked heat exchanger in that same furnace which is emitting carbon monoxide and can kill you.

An appraiser will tell you if you’re overpaying for a duplex.

An inspector will tell you whether or not you’re going to have to put a lot of money into it.

A good inspector should give you an extensive report of the issues he or she found with the property. I have yet to see a perfect inspection report, so know that there will always be items for you to note.

Most will probably not be worth asking the seller to address. In fact, the most important are those that will concern the health and safety of you and your tenants.

Consider the rest a “to do” list.

For someday.