The appraisali and property condition assessmenti is used to determine the market valuei and acceptability of the property for FHAi mortgagei
insurancei purposes. The value serves as a basis for determining
the maximum FHA insurable mortgage loan.
The appraisal is performed for the use and benefit
of HUDi, and the lender involved in an FHA transaction. In addition
to providing an estimate of value, the appraisal provides an examination
of the property for any visible, obvious and/or apparent deficiencies
that may affect the livability of that property in terms of basic
needs, health and safety of the property's occupants.
HUD/FHA MAKES NO WARRANTIES AS TO THE VALUE AND/OR
CONDITION OF ANY FHA-APPRAISED PROPERTY, therefore buyers/borrowers
must determine for themselves that the price of the property is
"reasonable" and that it's condition is "acceptable".
The following are the general guidelines required
for a property. Any condition not met by the list below may
require the property to be repaired in order to meet FHA appraisal
guidelines. Refer the HUD handbook 4150.2 for more information.
Roofs and Attics:
The roof must prevent moisture from entering the home
and provide reasonable future utility, durability and economy of
maintenance. The roof should have a remaining physical life
of two years. If the roof has less than two years remaining
life, the appraiseri must call for re-roofing or repair.
FHA will accept a maximum of three layers of existing
roofing. If more than two layers exist and repair is necessary,
all of the old roofing must be removed as part of the re-roofing.
Roofing on slopes of 2.5/12 pitch or less must be
installed by a licensed roofer using built-up roofing that meets
the Uniform Building Codei.
All flat roofs require a roof inspection.
If the subject property is part of a large multifamily building
(i.e. condo), no roof inspection is needed. If the building
is a small 4 unit building or townhouse type unit covered by a condo
association with the subject property having its own roof, then
a roof inspection is required.
The FHA appraisers are required to inspect the attic
area unless the property is a mobile home or dwelling with little
or no attic (due to the interior roof slope).
The appraiser will notei any evidence of holes in the
roof/ceilingi, the condition of the support structure, any significant
water damage that is visible from within the interior and evidence
of ventilation by vent, fan or window.
The following are the general guidelines required
for a property. Any condition not met by the list below may
require the property to be repaired in order to meet FHA appraisal
guidelines. Refer the HUD handbook 4150.2 for more information.
Kitchens and Bathrooms:
A property must have adequate water supply and fixtures
to support its use. This guideline requires an appraiser to
check:
-
the function of toilets and observe any evidence
of leaks -
for structural damage under fixtures and the presence
of puddles -
for any obvious evidence of malfunction of the
sewer system -
the sinks and pipes for leaks
-
if the home has running water
-
any significant drop or limitation in water pressure
An appraiser may require the repair or replacement
of countertops and flooring wherever underlayment is exposed or
damaged.
The following are the general guidelines required
for a property. Any condition not met by the list below may
require the property to be repaired in order to meet FHA appraisal
guidelines. Refer the HUD handbook 4150.2 for more information.
Basements and Crawl Spaces:
Basements must be examined by the FHA appraiser for
dampness or wetness, any obvious structural problems and the
condition of the furnace, hot water heater, and/or other components
located there.
Sump pumps are acceptable to HUD/FHA guidelines provided
that they are properly functioning at the time of appraisal.
The sump pump may be hard wired by an acceptable wiring method or
may have a factory electrical cord that is connected to a receptacle
suitable for such use. Use of an extension cord for the sump
pump is not acceptable. Though the sump pump is not a cure-all
for water problems, the appraiser may still elect to reject the
property if there is significant incurable ponding of water in the
basement.
Property owners must insure that there adequate access
to the property's crawl space, clear of debris, and is properly
vented. The appraiser must enter the crawl space with a minimum
entry of his/her head and shoulders (unless access is not possible,
could damage the property, or an adverse situation is suspected).
HUD guidelines recommend a minimum height of 18 inches from the
bottom of the joists in order to provide adequate space for maintenance
and repair. Furthermore, the crawl space must not be excessively
damp and not have any water ponding.
The following are the general guidelines required
for a property. Any condition not met by the list below may
require the property to be repaired in order to meet FHA appraisal
guidelines. Refer the HUD handbook 4150.2 for more information.
Electrical and Heating:
The FHA appraiser should examine the electrical box
to ensure that there are no frayed or exposed wires. Electrical
boxes may be either circuit breakers or fuses. Existing 60-amp
service is acceptable if it appears that this is adequate amperage
for the appliances present in the property, or those considered
"standard" if the present appliances appear to be less
than found in the "standard" home. Knob and tube
wiring is acceptable if found to be in good condition and a minimum
of 60-amps. For all electric homes and those with electric
heat, 200-amps is recommended
In general, all habitable rooms must have a heat source.
This does not mean that each room must contain a heating device
but that each room must receive sufficient heat. In some situations
where it is not feasible to extend the capacity of the main system,
an electric and thermostatically controlled baseboard unit is acceptable
provided it is permanently installed with concealed wiring.
Heating must be adequate for healthful and comfortable
living conditions. This is defined as providing and maintaining
a temperature of at least 50 degrees Fahrenheit in all living areas
and areas containing plumbing systems. Further more, all permanent
primary heating systems must be thermostatically controlled and
properties with electric heat sources must have an acceptable electric
service that meets the general requirements of the local municipal
standards.
Wood stoves and solar systems: Homes
with wood burning stoves or solar systems as the primary heat source
must have permanently installed conventional heating systems that
can maintain at least 50 degrees Fahrenheit in all living areas
and those containing plumbing systems. These systems must
be installed in accordance with the manufacturer's recommendations.
Wall heaters: Wall heaters are acceptable
as long as they are installed to code and designed to heat the size
and layout of the entire house.
Floor heaters: Due to the inherit dangers
of a floor heater, it is highly recommended that floor heaters in
need of repair be replaced with another permanent heat source.
They are acceptable as long as they are properly functioning and
meet current code.
Non-conventional heating systems: All
non-conventional heating systems, such as space heaters and others,
must comply with local jurisdictional guidelines. Often these
are not acceptable as the primary source of heat.
Finally, propane tanks must be a safe distance from
the property. Leased tanks are acceptable when not offered
for sale. Propane fired furnaces located in a crawl space
area is not acceptable.
Electrical, plumbing and/or heating certifications
may be called for by the appraiser when he/she cannot determine
if one or all of these systems are working properly. However,
the appraiser should not arbitrarily call for such certifications
as they are still responsible for checking on the adequacy of these
systems at the time of appraisal. If an inspection is required,
it must be done by a home inspector, an inspector from the local
building department, an FHA compliance inspector, a professional
in the specific field (e.g. electrician, plumber) or any individual
deemed qualified by the lender's underwriter.
Public, Community and Individual Sewer Systems:
Public Sewer Systems: Public sewer systems are
owned, operated and maintained by the city, county or local unit
of government with the power of taxation or assessment. No
certification is required by the appraiser.
Community Sewer Systems: In general, the appraiser
must note on the appraisal the name of the community system(s).
However, the lender must ensure that the community sewer system
is in compliance with the requirements of the Health Authority having
jurisdiction for satisfactory operation of the sewage treatment
plant and discharge of treated wastes.
Individual Sewage Systems: For properties that
cannot connect to a public system and are served by an individual
sewage system that is acceptable to the local health authority,
the system is then acceptable to HUD/FHA. This includes numerous
types of sewage systems including cesspools, individual pit privies
and mound systems.
Certifications are only required if the appraiser
suspects a problem with the system, or problems are customary in
the area. The appraiser will require certification by the
local health authority, a licensed sanitarian or an individual determined
to be qualified by the lender. Certifications obtained within
three months prior to the appraisal may be acceptable if the appraiser
and other parties in the transaction do not detect or know of possible
existing problems.
-
The following types of systems are not acceptable:
-
Individual septic tank/drain field on a neighboring
property -
Individual lagoon-type or other "open"
systems -
The property should be rejected if it, or neighboring
houses show indications of, and/or have had unsatisfactory operation
of the sewage disposal system. -
The property should be rejected if inspection
reveals repetitive failure of the subject system and/or neighboring
systems, or in an area subject to flooding or seasonal high
ground water tables.
Improvementsi such as driveways, parking areas, patios,
etc. covering the drain field are unacceptable due to the inability
for future servicingi and should be removed or the drain field relocated.
For distances between water sources and sewage, see
the water / plumbing section.
Public, Community, and Individual Water Systems
and Shared Wells:
Public water systems are owned, operated and maintained
by the city, county or local unit of government with the power of
taxation or assessment. These systems do not require certification.
Community water systems are a central system that
is owned, operated and maintained by a private corporation or a
non-profit property owners association. It is the lender's
responsibility to ensure that the community system is licensed and
adequate to service the property.
Individual water supply systems (i.e. wells) may be
acceptable when connection to a public or community water system
is not available and there is assurance of a continuing adequate
supply of safe potable water for domestic needs (to include auxiliary
uses for lawn and garden maintenance). The appraiser may condition
for certifications of water quality and quantity such as the appropriate
Health Authority approval and pump test.
Individual water wells are owned and maintained by
the homeowner, and are subject to compliance with all water quality
requirements of the local and/or State Health Authority having jurisdiction.
As of June 19, 1988, new construction shall have lead-free
water piping. Solder and flux shall not contain more than
0.2% lead and pipe fittings shall not contain more than 8.0% lead.
Whenever the property lacks a connection to public
water, water testing is required. If the local authority is
unable to perform the water quality analysis in a timely manner,
a private, commercial testing laboratory acceptable to the local
authority may take and test water samples. Certification obtained
within three months prior to the appraisal is acceptable if the
appraiser4 and other parties in the transaction do not detect or
know of possible existing problems.
Well Location: Individual water wells
should be checked to establish the distance from the septic system.
See below
A well located within the foundation walls of a dwelling
is not acceptable. Water which comes from any soil formation
which may be polluted, contaminated, fissured, creviced or less
than 20 ft. below the natural ground surface is not acceptable,
unless it is acceptable to the local health authority (certification
is required for such cases). Individual water wells are not
acceptable for individual lots in areas where chemical soil poisoning
has been or is practiced if the overburden of soil between the ground
surface and the water bearing strata is coarse grained sand, gravel,
or porous rock, or is creviced in a manner which will permit the
recharge water to carry the toxicants into the zone of saturation.
The following shall be used in establishing the minimum
acceptable distance between wells and sources of pollution located
on either the same or adjoining lots. These distances may
be increased by either the health authority having jurisdiction
or HUD:
| Source of Pollution |
Supplemental |
Minimum Horizontal Distance (ft) |
| Property line | 10 ft | |
| Septic Tank | 50 | |
| Absorption Field | SUP1 | 100 |
| Seepage Pit | SUP1 | 100 |
| Absorption Bed | SUP1 | 100 |
| Sewer lines (w/ perm. watertight joints) |
10 | |
| Other Sewer Lines | 50 | |
| Chemically Poisoned Soil | SUP3 | 25 |
| Dry Well | 50 | |
| Other | SUP2 |
SUP1: This clearance may be increased
or decreased depending upon soil and rock penetrated by the well
and aquifer conditions. The clearance may be increased in
creviced limestone and pereable strata of gravel and sand.
The clearance may be reduced to 50 ft. only where the ground surface
is effectively separated from the water bearing formation by an
extensive, continuous and impervious strata of clay, hardpan, or
rock. The well shall be constructed so as to prevent the entrance
of surface water and contaminants.
SUP2: The recommendations or requirements of the local
health authority shall apply.
SUP3: This clearance may be reduced to 15 ft.
only where the ground surface is effectively separated from the
water bearing formation by an extensive, continuous and impervious
strata of clay, hardpan, or rock.
Individual water wells should be located on the subject
property. If not, they must be on an adjacent property, and
evidence of water rights and ongoing maintenance must be provided
for acceptancei of the well.
Also, possible sources of water pollution from the
subject and adjoining properties must be considered.
Quantity of Water: Water quantity is
to be certified by either the local health authority or a licensed
well driller/engineer. The pump test must evidence that for
new well construction the system is capable of delivering a flow
of 5 gallons per minute over at least of 4 hour period, and 3 gallons
per minute over at least a 4 hour period for existing. Systems
should be checked to establish that adequate amount of water pressure
is present and can be sustained.
Holding Tanks: The use of holding tanks
are not considered to be normally acceptable as the sole source
of water unless there is no other available source of acceptable
water, the use of holding tanks is "typical" for the market
area, the dependence of a holding tank does not adversely affect
the marketability of the property, there are readily available sources
of hauled water to serve the property, fire insurancei is available
at reasonably affordable rates, tanks are equipped with a clean-out
plug at the lowest pointi and a suitable pressure relief valve, and
the tank has a minimum capacity of 500 gallons or larger.
Misc: Wells must be drilled no less than
20 feet deep and cased with steel or other durable, leak-proof,
and acceptable casing material.
Any of the following items may cause the property
to be rejected or conditioned for certified compliance:
-
Mechanical chlorinators are not acceptable
-
Hand-dug wells, "bored" wells, and/or
"sandpoint" wells are not acceptable -
Individual water systems utilizing springs, cisterns,
lakes, or rivers are not acceptable.
Shared Wells: Shared wells may serve
existing properties which cannot feasibly be connected to an acceptable
public or community water supply system. A shared well shall
have a valve on each dwelling service line as it leaves the well.
A shared well shall service no more than four properties.
A shared well must have a shared well agreement and shall be binding
upon signatory parties and their successors in titlei. The
agreement shall also be recorded in local Deedi Records.
Water heaters: All water heaters must have
a non-adjustable temperature and pressure-relief valve. It
must comply with local building codes regardless of its location.
Rental water heaters are not acceptable.
Pest Control: FHA requires maximum assurances
that a home is free of any infestation. A pest inspection
is always required for and structure that is ground level or any
structure where the wood touches the ground. However, structures
in a geographic area with no active termite infestation may not
require a pest inspection.
New Construction: The builder of a new home,
proposed construction, a home under construction and a home less
than one year old must provide a warranty against termite infestation
in a new home for a minimum of on year.
All chemical soil treatments, bait systems, and chemical
wood treatments must be approved by the Environmental Protection
Agency (EPA) and applied in accordance with the EPA label instructions.
In some cases where these methods are not feasible, pressure treated
wood may be used as a measure of termite protection. Also,
the use of post-construction soil treatment where the chemicals
are applied only around the perimeter of the foundation is not acceptable
in new construction.
Termite inspections are not required for streamline
refinances with or without an appraisal.
Securityi bars: Security bars are acceptable
if they comply with local fire codes.
Smoke detectors: At least one operating
UL-approved smoke detector, acceptable to the local building and
fire codes must be installed in each hallway adjacent to the bedrooms.
On levels of the home that do not include bedrooms, at least one
operating smoke detector must be centrally located.
The property may not be eligible for FHA financing
when it is subject to hazards, environmental contaminants, noxious
odors, offensive sights, or excessive noises to the point of endangering
the physical improvements or affecting the livability of the property,
its marketability, or the health and safety of its occupants and
cannot be acceptably mitigated.
Airports: Locations near an airport may
be subject to the noise and hazard of low flying aircraft.
Existing properties are not to be rejected solely based upon the
property's proximity to an airport unless there is indication that
adverse changes in market attitude is taking place in the area (such
as declining market values due to the noise). Existing homes
more than one year old are acceptable in a Runway Clear Zones if
the buyer acknowledges awareness of such location. Homes less
than one year old are not eligible.
Railroad tracks and other high noise sources:
If the home is over one year of age, noise exposure will not result
in automatic rejection unless the environmental noise is a marketability
factor. A site exceeding an average day-night sound level
of 56 decibels in normally unacceptable, though measures may be
taken to reduce these levels. Anything over 75 decibels is
not acceptable. The loan may not close until certification
has been made that the average day-night sound level is within acceptable
levels.
Flood areas: Homes located in zones "A"
and "V" (as stated on the FHA appraisal) will require
flood insurancei. Homes located in zones "B" and
"C" do not require flood insurance. Homes that require
flood insurance and are not located in an area where the National
Flood Insurance Program is in force are not eligible for FHA financing.
New and proposed construction is not eligible if any part of the
home that is essential to the property's value and subject to flood
damage are located within the 100 year flood plain. Properties
subject to frequently recurring flooding, subject to any potential
hazard to life and safety or where escape to higher ground would
not be feasible during flooding conditions are not eligible for
FHA financing.
Overhead high voltage transmission towers and lines:
High voltage lines are those that carry 60 kilovolts or greater.
Distribution lines are the common lines used for supplying power
to housing developments and similar facilities that often carry
12 kilovolts or less. No home may be located within the designed
fall distance of any pole, tower or support structure of a high-voltage
transmission line, radio/TV transmission tower, microwave relay
dish or tower or satellite dish (radio, TV cable, etc.). Neither
high voltage nor distribution lines shall pass directly over any
structure on the property (this does not include service lines that
deliver power to the house).
Oil and gas wells and tanks:
Operating wells: No existing home may be located closer than
300 feet from an active or planned drilling site. If an operating
well is located in a single family subdivisioni, no new or proposed
house may be built within 75 feet of the operating well.
Abandoned wells: Assuming a letter from
the responsible authority in the state government that states the
subject well was safely and permanently abandoned, a home may be
located no closer than 10 feet from the abandoned well. If
no such letter is provided, the home must be located at least 300
feet from the abandoned well.
Underground tanks: If an underground
tank has been abandoned, its removal or proper abandonment is required
(subject to applicable requirements and guidelines for removal)
Lead based paint: For all properties built
before January 1, 1978, the FHA appraiser must inspect all interior
and exterior surfaces, such as walls, stairs, deck, porch, eaves,
windows, doors, fences, etc. for defective paint surfaces (i.e.
chipping, peeling or flaking paint).
If the paint is cracking, scaling, peeling, or loosening
on any interior or exterior surfaces, the affected areas must be
thoroughly washed, sanded, scraped or wire-brushed to remove all
of the defective paint (machine sanding or use of a blow torch is
not acceptable). A ground cloth should be used to catch particles
of paint and surface removed and a thorough clean up should be accomplished
after the surface has been prepared for painting. All materials
cleaned up should be removed from the possibility of ingestion by
humans. The treated surface must be repainted by a paint that
closely matches the existing color, using a minimum of two coats
of paint unless the affected areas are covered, when appropriate,
by a material such as plywood, plaster or other suitable material.
Radon: HUD does not require radon testing
of homes to be insured by FHA financing.
Asbestos: Asbestos used as roof shingles
or siding on a house does not pose a danger. When used as
a wrap for hot water pipes, it is usually covered and poses no danger.
When the material is deteriorating into a fine powder and can be
inhaled, it may pose a danger to one's health. Asbestos should
be removed by an expert only in those cases where the deterioration
poses a serious health threat; otherwise the appraiser may condition
for repair of the puncture or other damage.
Private Roadways: Each property shall be provided
with vehicular and pedestrian access by a public or private street.
Private streets shall be protected by permanent easements.
Existing or proposed streets at the site shall connect
to private or public streets and shall provide all-weather access
to all buildings for essential and emergency use, including access
needed for deliveries, service, maintenance and fire equipment.
FHA defines all-weather surface as a road surface
over which emergency and the area's typical passenger vehicles can
pass at all times.
Private streets must be protected by permanent recorded
easements and have joint maintenance agreements.
Zoningi: To be eligible for FHA insurance, a
property is to be legal and free of health and safety hazards and
major structural problems. If the use is not legal, the property
is not eligible for FHA mortgage insurancei until it becomes legal.
Personal Propertyi: Items such as ranges, refrigerators,
dishwashers, washers/dryers and microwaves may be considered as
part of the real estatei and included as part of the sale.
No other appliances or chattel should be considered part of the
real estate.
A dollar for dollar reduction to the mortgage amount
for items not considered part of the real estate is required unless
the item has no monetary value and left to the buyer's discretion
to dispose of the property.
