USDA FHA Let’s Get it Right

USDA FHA Confusion Getting it Right

USDA has it right!

FHA appraisers,

Thanks to TJ McCarthy, a Chicago based appraiser and current web master for the Illinois state appraiser association ICAP, for providing this interesting bit of news.

What this document says is that USDA expects the Home PURCHASER (the loan applicant) to obtain a “whole house inspection” in advance of submitting their loan application. This will be effective Oct. 1, 2015. Inspection can be paid by the seller.

This ‘whole house inspection’ is NOT DONE BY AN APPRAISER. It is to be done by someone licensed or certified as a home inspector, who then provides a written report to USDA. Upon receipt of that report, USDA will then determine what kind of appraisal will be ordered, either “as-is”, or “subject-to”, based on the inspection report, or possibly will deny the loan if the home is in significant disrepair – what they term as not being “decent, safe and sanitary”.

However, USDA still expects the appraiser to follow FHA inspection protocol when doing the report. But the appraiser now has direct evidence of known issues that can be referred to. An appraiser must be on the FHA appraiser panel in order to receive assignments from USDA and must follow FHA-HUD guidelines.

What is interesting is that USDA requires inspections via the FHA protocol, which turns the appraiser into a building inspector (after the loan application), which USDA says should be done by a licensed or certified home inspector. We’re going in circles with this.

It would seem logical that appraiser organizations band together and ask USDA to remove the ‘FHA approval’ from appraisers doing USDA assignments, and open those assignments to any ‘certified’ appraiser – since that’s what FHA now requires.

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Dave Towne
Photo Credit flickr - Brad Montgomery
Dave Towne

Dave Towne

AGA, MNAA, Accredited Green Appraiser - Licensed in WA State since 2003. Dave Towne on

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4 Responses

  1. Herb Martin on Facebook Herb Martin on Facebook says:

    I’m refusing FHA appraisal, I didn’t get in this business to crawl through Attics and crawl spaces. I did enough of that when I was young

  2. Avatar Richard Barnes says:

    I researched this letter when it was sent to me yesterday and as I read and understand it the Whole Home Inspection is only required for the USDA Direct Loan program which is for low-mid income families. There are different eligibility requirements from other USDA loans. I confirmed this with a local lender who stated lender’s aren’t involved in these and also that direct loans are the ones with a recapture.

  3. Elizabeth Morse Rhodes on Facebook Elizabeth Morse Rhodes on Facebook says:

    Does this mean that the appraiser will receive a copy of the inspection report? If we don’t, what if we miss something?

  4. bubba jay / Retired Appraiser II bubba jay / Retired Appraiser II says:

    all this article is saying is that the USDA FHA is expecting the purchaser to get a whole home inspection.

    SO WHAT?

    we already KNOW we dont do whole house inspections! appraisers will still have to do their own inspections of all the appliances, and a partial inspection of the property according to the new handbook. nothing has changed and nothing in this article is new unless i am missing something.

    WHAT WE NEED, is mandatory whole house inspections, done by trained and licensed whole house inspectors, so appraisers can focus on what they are trained and licensed to do, which is APPRAISING.

    the bleeding continues . . . . .


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USDA FHA Let’s Get it Right

by Dave Towne time to read: 1 min