Inspections vs. Appraisals 

Pt 2 – The Appraisal

After you have an accepted offer for the sale of your home, and a home inspection has been conducted, the next step will likely be an appraisal.

As we mentioned last week, an appraisal requires a certified appraiser to review your home’s location, size, features and condition to determine the reasonable market value.  The kind of appraiser that is assigned will depend on the kind of loan the buyer is using.

Conventional Loan Appraisal

An appraiser doing a report for a conventional loan will consider three basic factors: Location, condition and comparable houses in the area. The appraiser should inspect the house, but he won’t poke and prod with as much detail as the home inspector did. While the condition of the house can impact the final opinion of value, that valuation is not usually dependent on the seller doing any appraiser-required repairs.

FHA Loan Appraisal

An FHA appraisal has different criteria. Federal Housing Administration loans require the property meet specific standards of condition based on a list of considerations from the U.S. Department of Housing and Urban Development. Those include:

• Bedrooms should have direct access to the exterior, for safety reasons. Any bedroom window must be fully operational and large enough to allow escape.
• Any/all peeling or chipping exterior paint must be repaired.
• Safety handrails must be present at all steps and stairways.
• The heating system must not only be present and operational, but also must create “healthful and comfortable living conditions.”
• The roof should be free from defects with  no expectation that it will need repairs within the next few years.
• The foundation should be free from defects.
• The yard should be graded to ensure water flow away from the home.

If the appraiser finds problems in any of these areas, then the reported value will be “subject to repairs.” This means the repairs must be done and re-evaluated by the appraiser before the loan can close.

VA Loan Appraisal

A VA appraisal is backed by the Department of Veterans Affairs, and is similar to an FHA appraisal because the appraiser must establish value and inspect the home to be sure it meets the VA’s Minimum Property Requirements:

• Confirm that the major mechanical systems are operable and safe.
• Confirm that the heating system can maintain the indoor temperature at 50 degrees or higher. 
• Verify a safe water supply, a functional water heater and a safe septic or sewer system is in place.
• Confirm adequate roofing in good condition.
• Inspect basements and crawl spaces to be sure they are free from defects with proper ventilation.
• Make sure there is no peeling paint, wood rot, or evidence of wood-destroying insects.

If any of these issues are found, then the appraisal report will be “subject to repairs” that must be completed and re-inspected by the appraiser before the loan can close.

So how can you prepare for an appraisal? 

First, evaluate your home against the checklists above. Take a walk around your home’s exterior, peek in your crawl space, look for peeling pain or signs of deteriorated wood. If you find any, call a professional repair company to address them before you list your home. Need suggestions for a local vendor who can help? Call us! We can recommend someone.

Another option is to get a pre-sale home inspection. Before any buyers see your home, write an offer or send their own inspector, you can find major problems before they come up – and correct them. Need suggestions for home inspectors? Again, we can help – just reach out using the contact information below.

You also have the option to wait until the buyer has a home inspection then review the inspection report carefully (if the buyer submits the entire report as part of the Request for Repairs) for any of the items listed above.

Still not sure? Call us. Our listing process includes a strategy session in which we review the condition of your home and make suggestions for changes or repairs you can make before you list to ensure a smoother selling experience.