FHA Appraisers Increased Liability with New Requirements

Appraisers Increased Liability with New FHA Requirements

FHA Appraisers Increased Liability & Responsibility with New FHA Requirements


New FHA Requirements Put More Responsibility and More Liability on FHA Appraisers

After reviewing the new HUD handbook, my overall conclusion is that there were not many changes to the overall requirements other than the word MUST. The prior handbook was a list of items that should be completed and verified whereas the updated HUD handbook clearly states that the properties MUST meet these items and the appraiser MUST verify the items in question.

The following is a list of FHA requirements that MUST be completed and verified by the appraiser. It is my opinion that these items will make the appraiser far more liable than the prior HUD handbook.

All verbiage in italics was verbatim from the FHA Handbook 4000.1. The bold and colors are the AAREA editor’s.

Commencement of the Appraisal

a. Information Required before Commencement of Appraisal

The Appraiser must obtain all of the following from the Mortgagee before beginning an appraisal:

  • a complete copy of the executed sales contract for the subject, if a purchase transaction;
  • the land lease, if applicable;
  • surveys or legal descriptions, if available;
  • any other legal documents contained in the loan file; and
  • a point of contact and contact information for the Mortgagee so that the Appraiser can communicate any noncompliance issues.

Based on the following requirements it is my opinion that the title report, CC&R’s, and a survey will be required prior to the commencement of an Appraisal in order to comply with all of the HUD requirements. Note the line above that the appraiser MUST obtain any legal documents contained in the loan file.

For full story, please visit Arizona Association of Real Estate Appraiser (AAREA).

Mark Glade, Arizona Association of Real Estate Appraiser (AAREA), Vice President and Certified Residential Appraiser in Flagstaff

Image credit flickr - GotCredit

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27 Responses

  1. Avatar ValleyGal says:

    So I guess I’ll stop doing FHA appraisals in September. Can’t imagine crawling under the entire home. I don’t mind poking my head inside but no way I’ll be crawling all the way under the house!

    • Retired Appraiser Retired Appraiser says:

      You may as well turn home inspector if that is the case.  The pay per hour rate is now light years ahead of that of appraisers.  Imagine doing 2 hour inspection and writing a 1 hour report for the same $250. Imagine getting paid AT THE DOOR or in advance.  No need to go on the roof either…that’s why God invented binoculars and digital cameras with a zoom feature.

      What’s next?  Forcing the appraiser to take a crap each toilet and timing each flush?

    • Avatar Wayne says:

      I am curious as to what FHA would do if a very large number of FHA approved appraisers said no. I am not talking about a simple no to the fee or turn time. I am simply saying a very loud H*** NO! Will they get an AVM or maybe a broker opinion? When an AMC or lender CANNOT get any FHA approved appraiser to prepare the appraisal…..what then? I know of one FHA approved appraiser that has already started refusing these assignments. Join me!

      • Avatar Nick says:

        If – in the entire history of the appraisal profession – we were able to convince a significant number of appraisers to agree on a common cause and take action, we would not be in the position that we are today:  reluctantly swallowing whatever the various governing bodies decide to throw at us. I am all for protest and will be the first to sign up but getting a consensus in the appraisal community? Good luck with that. I’ve been trying for thirty years and we’re still in the same ineffectual position of whining compliance that we were when I started. As I have had cause to mention previously, the Appraiser’s motto: “Somebody should do something”.

      • Retired Appraiser Retired Appraiser says:

        The answer to that question is easy.  Remember when the housing crisis slammed the U.S.?  FHA decided to fling their doors open to every appraiser on the planet.  No need to pass a test or anything else…you simply needed a pulse.  If appraisers stand up and say no to the fee and (or) their demands they’ll simply turn to home inspectors and Realtors.  No appraiser license required.  If those guys stand up and say NO they’ll turn to McDonald’s employees.

        • bubba jay bubba jay says:

          i wish they would do that now. if FHA wants to know if the dishwasher works or not, they should get a copy of the home inspection report from the realtor. same goes for the crawl spaces, etc. appraisers are not home inspectors and home inspector work should be left to those who do a THOROUGH job and are trained/licensed to do so. appraisers should be doing appraising. all this sideline BS that opens us up to more liability and requires more of our time (without additional pay of course) is whats driving people away. D-U-H.

          our house is in total disarray, it needs cleaned badly, and we need to find some decision makers with a little common sense. until that happens . . . . .

          the bleeding continues . . . . .

  2. bubba jay bubba jay says:

    in our world of nothing is ever good enough, you have to wonder what we will be doing in the future?

    will we eventually have to pull title work? will we have to get ON the roof? will we be taking the furnace apart and examining the heat exchanger? will we have to pull credit and take the loan application? will we be doing a termite inspection? will we be doing minor repairs at our own time and expense?

    will we be forced to take on more liability and have to pay for the additional costs out of our own pockets too such as higher premiums because we will be doing more?

    more than likely.

    of course we will also be making even less money too because 20 years from now the fee for an appraisal will still remain unchanged and out of our control.

    “I urge FHA appraisers to consider the amount of work that is required to complete the appraisal as well as the liability involved in completing the assignment. If you are still brave enough to work for FHA, then you should consider increasing the appraisal fee to cover the increased amount of work and liability.”

    ya, right. like we have any control over THAT.

    lets face it, this “profession” will be an even bigger mess in the future, and for that reason . . . . .

    the bleeding continues . . . . .

  3. Deb Heger on Facebook Deb Heger on Facebook says:

    Not really loving the idea of crawling thru the crawl spaces

    Definitely going to raise my fees

    And to those AMC s that think they need to dictate my dress code

    Yes I will be wearing jeans or work pants of some type to do these

  4. bubba jay bubba jay says:

    let me say this while we are on the topic of inspecting crawl space. a home inspector will tell you to be VERY careful about going into some crawl spaces. crawling around in crawl spaces is not like crawling around on your living room floor. inside crawl spaces there can be a lot of nasty things that can make you very sick and possibly kill you. think about it – there can be mold, toxic mold, feces, urine, poisons, decaying animals, living animals, etc.. here are a few decent articles about what i am saying.


    Crawlspace Hazards and Inspection

    there are many very darn goods reasons why it is recommended that inspectors wear hazmat suits while in crawl spaces. every appraiser will have to decide for themselves as to what extent they are willing to risk their health and/or life for a couple hundred bucks.

    because we are once again being forced to do other peoples jobs . . . . .

    the bleeding continues . . . . .

  5. Deb Heger on Facebook Deb Heger on Facebook says:

    Honestly, I would like to see FHA make every roster appraiser go through testing again. Before you start shooting me for saying this—the reason I feel this way is because there are way too many appraisers out there that are not doing their job. Countless numbers of times I have been the target for complaints because “the guy before you didn’t say I had to paint anything” – Really? Its time we all get the same training and perform our jobs in a consistent manner. I am not whining about anything. I personally still love my job and I get paid what I quote for doing that job. If there is an AMC or client that does not want to pay me the fee I quote – then there are lots more out there that will do anything for buck. And I think we all know what I mean by “anything”. IF we are all held to the same standard and start acting like this is a career or profession – truly do the job we need to do then maybe we wouldnt be in the predicament we are in. FHAs new guidelines do not scare me only that everyone involved needs to be made aware. That means buyers, sellers, tenants etc. And there really shouldn’t be anyone balking at paying for the risk – hazmat, respirators etc. It is still our job to report what we see and if we document it, photograph it and report it all in consistent manner – does not mean we are without risk – but at the end of the day we did what was supposed to have been done. Not any one of our assignments comes without some type of risk . FHA just upped the ante so now the consumers get to pay for it. Just like any other business, the costs get passed along.

    • Retired Appraiser Retired Appraiser says:

      Will you be loving your job when interest rates hit 6+ percent? Time will tell.

      • Deb Heger on Facebook Deb Heger on Facebook says:

        I’ve been doing this for 17 years
        I try to view to opportunity
        Vs negativity

        • Retired Appraiser Retired Appraiser says:

          Ah yes, another “glass is half full type”!

          I’m a “glass is half missing” (referring to the bottom half) type.

    • Baggins Baggins says:

      Appraisers will line up for FHA disapproval and assignment companies won’t have a clue why they keep having to find new approved FHA appraisers.  The industry will learn through trial and error and trial by fire, what is really necessary when it comes to the new FHA fee, and the new updated FHA review standards.  All fees are going up lately, so FHA is going to be no different.  I’m thinking $600 as a new minimum fee for FHA, perhaps to $800 depending on how many appraisers get chopped in the first year, maybe even $1,000.  More requirements equals a higher service fee.  What’s new?  Action reaction, and it’s that simple.  / Bubba Jay, it’s time to man up and get down into that crawl space. LOL! Can we sub out crawl space duties to home inspectors? And furthermore; Why does all this liability and responsibility fall on the appraiser, when we are never ever furnished copies of home inspection reports? It’s high time that FHA had ‘approved inspectors’, alongside approved appraisers. So much for ‘the appraisal is not synonymous with a home inspection’ default statements, and so long to client confidentiality when buyers use the home appraisal report to counter terms, because the appraiser has now been forced to focus on inspection more so than value. It’s quite possible that with these new stringent requirements, appraisers literally will perform a more thorough inspection service than the inspector himself. Realty listing is where this whole thing is going to get rough, because those guys are going to take even longer to adapt than assignment companies and reviewers. MUST CHARGE MORE. LOL!

    • Avatar Wayne says:

      YES….we really do need more FHA training from fat cat bureaucrats who sit in an air conditioned office all day and write handbooks! Since appraisers will soon be doing the “FHA crawl” we could be taught to identify the 115 species of snakes we may encounter while under houses in North America. A study of the 3,000 species of spiders will also be useful. We could learn how much fiberglass insulation we can inhale before our lungs develop cancer.

      Maybe these FHA trainers could teach us how to locate the abandoned and/or capped oil/gas wells that are not identified by the state. They could teach us how to determine the water table under a city lot or the market reaction to a lignite lease on the subject. We are supposed to do these things and much more while working for chump change for a parasitic AMC who is saying hurry, hurry. Not me, you guys can have that!

  6. Avatar Tom D says:

    All this whining about a 400 page HUD rule book, a 2 inch thick uspap book. and the state’s axe on your neck for comfort.  When i read these books each night before i go to sleep, it helps me have pleasant dreams about the life  choice i made being an appraiser.  Or, maybe i died in my sleep and this is hell.  Crawl spaces kinda look like what i imagine hell could look like.  Lucky us, the damned.

  7. Baggins Baggins says:

    Retired appraiser has a great point.  If I’m going to represent as a home inspector, I might as well be one.

  8. Lisa Molnar on Facebook Lisa Molnar on Facebook says:

    I for one say NO! I’ve joined. How bout you?

  9. Avatar Sandra says:

    I’ll not be accepting any FHA orders for houses with crawl spaces. I’d rather just sit down & eat a sh*t sundae with spider sprinkles in the comfort of my kitchen.  Life is too short to go from being the developer of value opinion to becoming Billy the Exterminator in a HazMat suit.

    • Retired Appraiser Retired Appraiser says:

      As unappealing as it may sound, Billy The Exterminator in a HazMat suit (home inspectors) continue to make around $50 to $80 per hour and collect their fee upfront.  In my opinion appraisers are eating sh*t sundaes with manure sprinkles every day of the week while working for less than minimum wage.  I can understand not wanting to dive into a crawl space but let’s be realistic about what’s taking place here Sandra.

  10. bubba jay bubba jay says:

    i think what makes so many of our rules and requirements so hard to swallow, is their lack of common sense and how hypocritical can they be.

    we really need to tattoo this question on all decision makers foreheads – “what if it was me?”.

    scenario – im buying a house, and that house had a crawl space. would i want that crawl space inspected by a licensed inspector who knows what they are doing, or would i want that space inspected by some who kinda- knows what they are doing ? common sense tells me that anyone would want that space inspected by a licensed inspector, and they would want that space inspected thoroughly. would you agree that just looking at an electrical panel is not a thorough inspection, and taking the cover off is? makes sense, right? (say yes here). if i am correct, then:

    1. why is an appraiser inspecting the crawl space at all? why is an appraiser inspecting/checking for operation any of the appliances? why do we inspect anything at all?

    2. if the loan is going FHA, why is a home inspection by a licensed inspector not mandatory? (i dont know if it is now or not).

    3. if a home inspection should be/is mandatory, then why is the home inspection report not turned into the bank and FHA as part of the loan paper package? (i dont know if it is now or not).

    4. but, the BIGGER QUESTION – why are we not making home inspectors FHA qualified to do FHA inspections? yes, we are FHA “qualified”, but i dont think we should be because we arent LICENSED to do any inspections – roof, HVAC, foundations, electrical, etc. ANY inspections should be done thoroughly by licensed people who do nothing else but thorough inspections. they should be dealing with the 4150.2, not us. we already have enough to worry about.

    ask 1,000,000 people if they would want a contractor to do a half-a*s job on their home, and every one of them would flat out tell you NO. we are not licensed home inspectors, we are not fully qualified or licensed to do inspections. then why are we being forced to do them? IMO, us doing them for anyone is doing them in a half-a*s manner because we are not home inspectors, we are appraisers. WE SHOULD BE DOING APPRAISALS, thats it. we shouldnt be doing others peoples work, especially when we arent qualified to do so. FHA, banks, AMC’s, us, all want any job done to the best of someones ability, right? well, if thats the case, then let us focus on appraising, and quit making us do all this other nonsense. if a home inspection is needed, then CALL A HOME INSPECTOR.

    AGAIN – “what if it was me?”.

    until it stops and people start using a little common sense . . . . .

    the bleeding continues . . . . .

  11. Avatar Wayne says:

    Ok, so you have been around real estate long enough that you probably have seen termites. Have you seen powder post beetles? How about the thousands of other pests that could have an infestation in a home. You have seen mold. Yes, some are useful in making cheese and some mold will kill you. Are you “REALLY” knowledgeable enough to find construction problems in the framing of floor sub-structures or roof components? Can you take the electrical panel cover off and have any real idea what problems you may be looking at? Can you make the determination whether the HVAC system is sized properly for the home you are inspecting? Some of you say you will not crawl under the home. What about crawling in the attic? Trust me, there can be snakes and spiders, insulation, mold, etc. there also!

    Since we have all been to law school (ha ha) our inspection and analysis of all of the legal documents pertaining to the real estate and mortgage should be a snap. We all have training in the oil, gas, lignite and related fields so that finding abandoned wells and unrecorded easements of pipelines installed in the 1930’s should be no problem. Each of us know that zoning can be different in every city/community we work in and can predict with certainty what to expect in the future from any and all zoning boards. We are as sure of that as we are that 40 years is the remaining economic life. My crystal ball tells me so! I could continue but you see where I am going with all of this.

    Appraisers are not qualified to perform all of the requirements that FHA is attempting to impose upon us. He!! if we were that smart, we certainly would not be working as an appraiser. We need to draw the line here and now. SAY NO, and mean it!  Yes, I know there are some pitiful appraisers who are hungry enough to do or attempt to do ANYTHING any AMC or client tells them. Most of us are smarter than that. When FHA cannot find enough appraisers to play this silly game, they will retract these rules and we may gain some respect at the same time. It really does not make me any difference. I know I will not prepare FHA appraisals under these guidelines, come on and join me!

  12. Avatar Nick says:

    I seems to me that unless you are completely conversant with all of the subjects above noted by Wayne, completing assignments for FHA will be a CLEAR violation of USPAP. (Competence, misleading conclusions, due diligence – the list goes on) Without being able to demonstrate in court that you have training, education and experience in all of those assorted fields, you are just begging for a verdict of incompetence. As he pointed out, there will always be “pitiful appraisers” who will do anything that they’re told – but this group of individuals are generally not even qualified enough to be Appraisers – let alone all of the other hats they would need to wear to conform to these new requirements – so I am anticipating that their numbers will dwindle pretty rapidly. They will be sued into oblivion for representing themselves as knowledgeable in fields for which they have no training. We are being asked (actually, TOLD) that we MUST certify things that are well outside the purview of our professional responsibility, training, education and experience. Once more, we get dumped upon and are expected to swallow whatever we’re being fed. If Appraisers don’t draw a line in the sand now, they never will.

    • bubba jay bubba jay says:

      isnt it comforting to know that as one entity attempts to make USCRAP tighter and tighter, another entity, (probably the same entity), continues to force us to do things that we arent fully qualified/licensed to do?

      yeah sure, that makes total sense.

      the bleeding continues . . . . .

  13. Baggins Baggins says:

    These new requirements will certainly shake up the existing balance of things.  I’ve ran a half dozen FHA reports lately, and I’ve said;  Come September, this would not pass.  You’ll need a vapor barrier in that crawl, etc, etc.  The market will bring forth balance to this issue, because FHA qualified buyers will be given the back seat for seller preference for non FHA qualified buyers.  Only in slow markets, or newer homes, will sellers even consider working with FHA buyers.  At first there will be a big argument about it, as people are shut down by appraisers, or even appraisers are shut down and lose their FHA qualification.  Obviously, the realty staff will continue to operate as normal, until they learn from example, and that will follow with a dozen hit piece news articles about how appraisers suddenly got tough on FHA sales and killed all those deals.  Assignment companies will drop appraisers whom do their job correctly, and the systematic elimination of ethical participators will continue.  It’s obvious that if FHA is going to have these standards, they need testing and training to accompany.  Also possibly forcing a fair balance by demanding to see the home inspection reports for anything FHA.  If the bureaucrats had a clue, they would have included something like forced presentation of the inspection report to appraisers, or even better; forced FHA approval for inspectors whom would manage those deals and not trying to push this on the appraisers plate.  One of the reasons why this is levied on appraisers and not inspectors, is because there is no national standard for inspectors licensing or operation procedure, but rather only individual private accreditation that is optional in most places.  CO does  not have licensing for inspectors.  You can pay 350 for your 50 page home inspection report to actually fight with the seller, and get thorough disclosure.  Or you can pay 100, and get a quickie 5 page report which basically passes everything and the inspector does not even bother disassembling anything or even looking in the attic.  That’s for when you don’t want the inspection, but have to have it for the lender. Now how exactly will this play out if in FNMA conventional, the home qualifies for C4, but with FHA standards, it’s a fail, but is also technically proper to be entered as a C4, subject to, and not C6.  Will the FNMA system auto fire when you note subject to on a C4?  It’s one government department vs another now, and they’re not communicating well with each other.  Just wait until FNMA gets the bright idea to follow FHA standards, and/or lenders decide to include those same standards, for conventional appraisal services.  Anything could happen.  I’d suggest demanding to see a home inspection report, and demanding that report cover all of the critical analysis required for appraisers.  From the other side of the desk, this is silly, because underwriters and such have access to both the appraisal and the inspection report, and they always have had that superior knowledge of all disclosure.

  14. Avatar cassandra says:

    Well, in September, FHA and I will part ways because I am NOT crawling under a house or walking around an attic in any semblance of an inspection. Not gonna happen. I’ll just send my resume around to more lawyers and make sure individual homeowners know I do appraisals from my ads.

    Good luck to those brave enough to do this…I think we all need to ask these simple questions:…WHO is responsible for any snake/poisonous insect bite hospital bills? WHO is going to pay for you falling through attic and the resultant damage? WHO will be performing those appraisals in your office while you are laid up recuperating…for a $600-$1000 appraisal that you now can’t complete because you’ve damaged the property or YOU are damaged/hospitalized? HOW hard is it to see that the potential liabilities ALL AROUND outweigh that $6-1000? HOW many are willing to put their good standing/name to the test with the FHA’s new rules?

    Just reading my paragraph tells me again I’m right for no longer doing them. I’m adjusting for the change now. I’d suggest you do also.

  15. bubba jay bubba jay says:

    cassandra! tell me where do you live girl! i could actually make a decent living doing appraisals for $600-$1000!

    you think you have it bad? try doing FHA appraisals for $350. no thanks, not anymore i’m not.

    the bleeding continues . . . . .


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FHA Appraisers Increased Liability with New Requirements

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