Why An FHA Appraiser Won’t Give You A Duplex Inspection Report
One of the most confusing things for many first time duplex buyers to understand is that an FHA appraisal is not the same thing as an inspection.
An inspection is a service provided by an independent contractor usually hired by the buyer to thoroughly go through a duplex and determine the condition and functionality of the property’s structure and mechanical components.
An appraisal, on the other hand, is an independent opinion on value. The appraiser is hired by the bank (using money from your closing costs) to make sure the duplex they’re lending you money for is worth what you’re paying for it.
In a way, I can understand why some people are confused. After all, FHA appraisers are required to do some things a bit differently than he or she is asked to do for a conventional loan.
FHA is an insurance company. When a borrower gets an FHA loan, he or she is paying an extra mortgage insurance premium every month to cover any costs the bank might incur if the buyer defaults on the loan.
Before FHA will agree to offer this insurance, they want to be sure the duplex is in relatively decent condition. And so, they have a set of guidelines or set minimum standards they want the appraiser to compare the property to.
A few of the items FHA does not want to see include:
- Missing handrails
- Cracked or broken windows
- Broken doors
- Chipped or peeling paint
- Evidence of wood destroying insects
- Worn out floors
- Damaged plaster or sheetrock in duplexes built after 1978
- Improper attic or crawlspace access
- Leaking roofs and/or missing shingles or tiles
- Trip hazards
- Minor plumbing leaks
- Lack of a functional heat source in every room
- A missing toilet, sink or shower
If a duplex meets these items as well as several other measures, FHA will agree to insure the duplex buyer’s loan. If it fails to, the seller may agree to make the repairs prior to closing, or the buyer may choose to pursue an FHA rehabilitation loan.