FHA Repairs

An FHA appraiser may not require these repairs, but must include them in the overall condition rating and value opinion developed:

• Worn floor finishes or carpeting
• Missing handrails
• Holes in windows screens
• Cracked or damaged exit doors
• Cracked window glass
• Rotten or worn-out countertops
• Trip hazards
• Crawl space with debris or trash
• Lack of all-weather driveway surface

Repairs necessary to protect the Health and Safety of occupants, to protect the Security of the property, and to fix problems affecting the Soundness of the structure – The “3 S’s” – are:

• Inadequate access from bedrooms to exterior of dwelling
• Leaking or worn-out roofs
• If conditions are present with three or more layers –  roof tear off
• Evidence of structural defects, including excessive settlement
• Defective paint on houses built prior to1978

Examples when you might make an inspection or repair requirement include:

• Wood-destroying insects or organisms – where there is evidence of active infestation or such inspections are mandated or customary
• Inoperative or inadequate plumbing, heating or electrical systems
• Structural failure in framing members
• Leaking or worn-out roofs
• Cracked masonry or foundation
• Drainage problems

At the time of your inspection, you have evidence that plumbing is inadequate you should:

• Require an inspection by a qualified plumbing contractor

LOCATION FACTORS CAN AFFECT THE 3S’s:

• The subject may be rejected if the property 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.” Quote by: FHA 4150.2 D-3
• The guidance from the 4150.2 D-3 is, “If there is any doubt as to the severity, report the condition and submit the completed report. For those conditions that cannot be repaired, such as site factors, the appraised value is based upon the existing conditions.”

Detail all hazards and nuisances that may endanger the health and safety of occupants and/or structural integrity or marketability:

HOW TO HANDLE SITE HAZARDS & NUIANCES

• Subsidence
• Operating and abandoned oil and gas wells
• Abandoned water wells
• Slush pits
• Heavy traffic
• Airport noise, hazards, runway clear zones/clear zones
• Proximity to high pressure gas, liquid petroleum pipelines, or other explosive materials
• Location within the fall distance of high voltage transmission lines, radio/TV transmission tower or other types of towers
• Excessive hazard due to smoke, fumes, odors
• Stationary storage tanks containing flammable or explosive materials

Look for readily observable indications of the presence of hazardous substances:

• Pools of liquid
• Pits
• Ponds
• Lagoons
• Stressed vegetation
• Stained soils or pavement
• Drums or odors

In your appraisal report, be sure to note the proximity to dumps, landfills, industrial sites or other sites that could contain hazardous wastes. How about underground storage tanks is another thing to make note of while completing the appraisal inspection.

Make sure the subject is not significantly affected by adverse drainage or grading condition. You are looking for observable indications of grading and drainage problems. Readily observable conditions would include:

• Standing water near the property
• Lack of gutters and downspouts or appropriate grading or landscaping to control water flow
• Grade does not allow for positive drainage

An appraisal must be completed “subject to” the appropriate requirements, which could be further inspection or repair. The description and requirements should appear in the site section of the appraisal report.

INDIVIDUAL WATER SUPPLY

Report the type of water supply in the appraisal. The lender client may require water testing. There two general types of water testing – the first is for the quality of the water supply or potability, the second is of the quantity of water and is usually accomplished by a well flow and draw-down test. If there is known contamination or there are purification systems present due to contaminants, it will require an inspection. Also, the availability of public water must be reported. If it is available, connection will be required by the lender if it is reasonable and feasible. The lender uses a 3% benchmark to determine if connection is reasonable. That is, if the cost to hookup is 3% or less of the estimated value of the property, then hookup may be required by the lender.

Additional factors which may trigger an inspection include:

• Corrosion of pipes
• Intensive agricultural activity within ¼ mile
• Coal mining or gas drilling operations within ¼ mile
• Dump, junkyard, landfill, factory, gas station or dry cleaning operation within ¼ mile
• Unusually objectionable taste, smell or appearance
• Mandated by state, local or other jurisdiction

A domestic well must be a minimum of 50 feet from a septic tank and 100 feet from the septic tank’s drain field as well as a minimum of 10 feet from any property line. An appraiser is no longer required to show the distances on the sketch(Chapter 3-10 4150.2). An appraiser is directed to ask the homeowner or person on-site if there is a survey available and if they may have a copy of it.

When is a well test required?  when the state mandates, the water may be contaminated, corrosion of pipe, with 1/4 mile of large agricultural, dry cleaning,  gas operations, coal mining, land fill, junk yard, or compost spell.

HOW TO HANDLE AN INDIVIDUAL SEWAGE SYSTEM

INDIVIDUAL SEWAGE SYSTEM

sewage system in the appraisal. Inspection of the septic or individual sewage system if such an inspection is mandated or customary. Your inspection is a visual inspection. If there are signs of failure, require an inspection.

Signs of failure can include:

• Flowing liquid waste

• Excessively green or moist areas

• Odors

Report if there is a public or community sewage system available. If either is available, the lender may require hookup to the public or community sewage system. It is the lender who will determine if the connection is required.

ROOF INSPECTION

Report the type of roof surface in the appraisal and its observed condition. Observe and report indications of deterioration, such as:

• missing tiles, shingles, or flashing
• cupped, curled or worn surfaces

When you are not able to see the entire roof look in the interior for ceiling water stains or signs of damage due to a leaking roof.  Make sure to report the extent of your roof inspection so your client does not assume it was more complete than conditions permitted. If you find that one or more of the 3S’s is affected, require inspection or replacement of the roof surface.

But what if it’s snowing outside? Inspect the attic space and interior of the dwelling, comment on the snow covered roof and knowledge that there is no signs of leakage.

MECHANICAL SYSTEMS
Including Plumbing and Electrical Systems

Report the type and condition of mechanical, plumbing and electrical systems. For electrical systems, look for:

• Frayed or exposed wiring in living areas
• Adequate amperage
• Test a representative number of
  • Lighting fixtures
  • Switches
  • Receptacles

“The appraiser is not required to insert any tool, probe or testing device inside the panels or to dismantle any electrical device or control” – 4150.2 D-5

For plumbing systems, report the type and condition of the plumbing system. Do or check for the following items:

• Flush the toilets
• Turn on all faucets – both hot and cold
• Odors and leaks
• Evidence of leaks or structural damage
• Pressure & flow – multiple fixtures at the same time

For heating and cooling systems, report the type of type and condition. Do or check the following:

• Turn on the heating and cooling systems

• No unusual noises, odors or smoke

• Is heating and cooling reaching each room

Very Important: DO NOT turn on any system if damage may result from the test. As an example, outside weather conditions or other factors may not allow operation of a unit without damage.

Be sure to disclose that you did not inspect the unit due to climatic conditions. An electric outlet cover plate missing is another example of something that should be disclosed.

Lead Based Paint

Lead based paint issues are very important in assignments that are intended to serve as decision tools in conjunction with an FHA insurance program. As one element in an overall effort to reduce the possibility of lead based paint poisoning, the appraiser is required to call for correction of defective paint surfaces on properties with homes built before January 1, 1978.

For the appraisal inspection of homes built prior to January 1, 1978 the appraiser is to “Observe all interior and exterior surfaces…” for defective paint, including:

• Walls, stairs and decks
• Porches and railings
• Windows and doors
• Fences, detached garages, storage sheds
• Other outbuildings and “appurtenant”  structures

In your appraisal report, provide a complete description of what you observe. Photographs are particularly helpful. Specify the “exact location” of any defective surfaces. Defective paint includes paint that is:

• Peeling
• Scaling
• Flaking
• Chipping

The appraisal will be made be made “subject to” repair of the defective paint surfaces.

To study the rules in the original, you are directed to Title 24 CFR Part 35 – LEAD-BASED PAINT POISONING PREVENTION IN CERTAIN RESIDENTIAL STRUCTURES:

http://www.access.gpo.gov/nara/cfr/waisidx_01/24cfr35_01.html

Remember, even on properties built after January 1, 1978, it still may be necessary to require paint or some type of exterior surface covering to protect against damage to the structure.

Underground storage tanks, or UST’s: must be inspected if there are obvious signs of failure

The proper way to handle possible soil contamination is to: appraise “subject to” the appropriate requirements