Legal Hotline Advice Concerning FHA Inspections
Advice from the Virginia Association of Realtors Legal Hotline
Mack Strickland, a dedicated founding member of VaCAP, recently contacted the Virginia Association of Realtors Legal Hotline concerning FHA inspections. He shared with VaCAP his findings.
“I called VAR legal hotline, a service to all REALTORS (appraisers are REALTORS too if paying dues). I inquired about the liability of the FHA inspection protocol of operating appliances. The lawyers confirmed my belief that to reduce the appraiser’s liability as to operation of appliances and equipment is to have a responsible person present to operate the appliances for the appraiser. I have adopted this as a standard policy on all FHA/USDA assignments including HUD REOs.”
Thanks for sharing Mack!
New Legislation Anyone?
Each year the VAR Public Policy Committee (PPC) embarks on the long process to review, discuss and recommend legislative priorities for the next Virginia General Assembly session. The process begins with ideas being submitted by local associations and individual REALTORS®. Those ideas are researched and vetted by the PPC and VAR staff. Finally the recommendations are reviewed and ultimately approved in the fall by the Board of Directors at VAR’s Annual Convention. Contact str…@comcast.net with your ideas and suggestions. Make sure you explain why we need the legislation and provide any supporting documentation. Please have this submitted to Mack prior to June 10th.
AMCs’ Overdue Invoices and Returned Checks….
VaCAP has learned of a recent uptick in overdue invoices and a few returned checks from some AMCs. We cannot stress enough the importance of keeping up with your receivables, especially this time of year when we are busy. If an AMC stops paying on time, if the check they issued is returned for insufficient funds, these could be signs of trouble. We cannot tell you how to run your business, but we strongly advise you PROTECT YOURSELF and limit your exposure to only what you can afford to lose if the AMC goes under owing appraisal fees.
The Time Has Come Today
By Richard Hagar, SRA – Originally released in Working RE Magazine Spring 2016
The wheels of justice turn slowly, but grind exceedingly fine. After years of working with regulators and helping write several real estate laws and regulations, my experience tells me it can take years for laws to be adopted, the staff of regulatory agencies to be trained, and have that finally result in enforcement and lead to real changes. Appraisers are upset with how slowly enforcement actions have been brought against various AMCs… Continue reading
- We the People… - April 9, 2023
- Federal Valuation Agency Impact on Appraisers & the Public - July 22, 2022
- Is Georgia Going Rogue? - June 13, 2022
Exactly why we stopped doing FHA last September. We do not want the hassle nor the potential for liability both current and down the road. We are FHA’s new home inspectors for their sub-prime loans
Same here! Stopped doing FHA work when the rules changed.
Don’t perform them and VOILA no worries. This is the reason why Realtors are not appraising homes and we appraisers should not be preforming home inspections. Egg Heads say oh we just want more eyes.. blah.. blah.. blah until the legal actions start coming in and they won’t have our backs. I’m thinking the next big problem to hit appraisers this is.
I don’t know how an appraiser can tell home owners with a straight face that they had to pay an additional 200 dollars for a specialist appliance inspector to show up as well. Your normal used appliance price point is 200 dollars for dishwasher and stove. FHA inspection protocol for appliances is obviously misguided.
There is an obvious counter point to these types of arguments though, Koma; The appliances “were observed in functioning condition” as of the specific date of inspection. If it broke the day or even the hour after I left, is not my fault, nor is that my concern.
Thoughts on that standard counter argument? The long standing defensible point for all appraisal services is typically; as of that exact moment in time, and everything else is after the fact.
For Greg, sub primes, LOL. Yep, but then again, you’re not insulated from that just by selecting fha or not. If you’re dealing with gse, you’re dealing with the whole enchilada and are in the mix without a doubt. One great thing about FHA loans these days are that they typically have shorter life spans than conventional. Although people may initially source home loans through FHA, they often bounce away from that at their earliest convenience. Unless they are using the FHA for both the lower rate and the cash out, which seems to be an ongoing problem. I’ll remain mystified how FHA even offers cash out because they should not be allowed to do that on a 30. Perhaps on a 15, but not on a 30.
Baggins what about the roof (more than 2 yrs), attic (foot through ceiling), crawl space (sprain my back)?? Guess what I still had a home inspection when purchasing my, at the time, 10 yr old home several years ago and while the HI was running the dishwasher he broke the locking arm off! Might not be your concern, but it will be after they talk to an attorney. It is not worth headache.
Require a home inspection on every FHA transaction and supply the inspection report to the appraiser prior to the appraisal inspection.
I don’t understand the authors reference to hud reo, because those always come with the PCR property condition report. Although it’s paper light at one page with nothing more than like 20 or so points of simple yes no data entry and 1 line limited free writing, at least it’s there. There are appraisers whom also offer home inspection for standard service, and they had great models in place to support those sur charges, but these days they’re busted out like the rest of us. It’s been years since I’ve heard of a large appraisal group swinging with a full time home inspector and standard sur charge for that accompanying process. My home inspector did not ‘inspect attics’, by his own admission. HUD process is beyond stagnated, it’s gone backwards instead of forward. Now how in the heck does the ‘unearned fee’ argument relate to the appraisers service charge if the appraiser is also bringing in additional non appraiser crew for specific non appraiser tasks? I guess that’s another non issue, since even FHA dropped the unearned fee argument and pays no attention to amc’s variable rakes. But seriously, how would an appraiser go about requiring a home inspection for refinance requests? Such actions should be in the lenders scope. The obvious system correction that hopefully Mr Haggar and such will one day provide is to clearly establish that the appraiser is not a home inspector, nor is the appraiser supposed to be held liable for some one elses physical property or it’s components. Maybe if I worked more hours, I’d be a better appraiser and have a better handle on this. 70 hour weeks for 2 years straight, and I’m still playing catch up. FHA pays 525, and regular 450, I don’t mind taking the FHA. You just check fridge for cold, quick click stove for hot, and tell borrowers to run dishwasher while you’re there. So easy, a FHA certified caveman could do it.
Why not they roll everything else into the loan. It is just common sense and will give everyone what they need.
Or to put it more succinctly:
Hey Gang…it is not just FHA. I did my first FHA appraisal as a member of the Shreveport, LA panel in 1985. Things were much different then. FHA had training for their panel members and we all became friends. Gee….that has changed to the point where the FHA seems to hate everything that an appraiser does and the appraiser most certainly hates the FHA. I have been on the FHA panel since 1985 and was a review appraiser for FHA at one point. Today, I will not even consider accepting any assignment concerning FHA and I have a general certification.
It took me over 12 years to get on the VA panel of appraisers even though I have an honorable discharge from the US ARMY. A certified general appraiser with an honorable discharge and cannot get on the VA panel for TWELVE YEARS….anyone see a damn problem with that???
I remember the time when Appraisal Managements Companies called our office and politely requested that we prepare appraisal reports for them. They were nice, and provided work at reasonable fees. All of a sudden…They became MONSTERS….telling us what to do, when to do it, how much they will pay, and shoveled crap and more crap and more crap into our laps. God…Help those silly appraisers who work with them!
FNMA has proven that they are incapable of earning a profit unless out tax dollars are available to bail them out when they make stupid mistakes (which is everyday). FNMA has taken over the residential appraisal business dictating the forms, scope, etc. of the appraisal process. There we are….playing that game or getting out of the business. If you survive that…you have the AMCs or National Appraisal Companies being a leach on your business. The Appraisal Standards Board cannot wait to reduce the requirements for appraisers to allow the AMCs and National Appraisal Companies to exploit this industry to provide manpower to the “big” folks. Such a shame! They can put appraiser certifications inside boxes of Cracker Jacks but until those “highly trained” folks figure out the real problem the number of appraisers will continue to decrease!
Stopped doing them as well. Not about to stand around waiting for a dishwasher, et al to complete or fall through an attic ceiling or crawl under houses to do what the termite inspector is supposed to do. We are not home inspectors.
oh, i brought some bread, and cheese, for all this fha whine. half say yes, half say no.
well, the grumps here are all saying no. i don’t have any issue with fha. well, they want a narrative report on a summary 1004 form. but that be another discussion cause most fha appraisers aren’t doing the report itself right. that you should worry about, not a dish washer. i also agree, we are not home inspectors, but i think fha states that.
So Tom tell me, how do you determine whether the mechanical systems are safe to operate, are protected from destructive elements, have reasonable future utility, durability and economy, and have adequate capacity? Don’t you operate the mechanical systems and appliances, and observe their performance? How do you determine that a roof has a remaining physical life of at least two years? Can you tell the difference between a 23 and a 25 year old roof? What expertise do you have AS AN APPRAISER to determine the above?
Shouldn’t the above be the responsibility of a home inspector? Why put this on the appraiser? I’m not whining, just wondering how you, as an appraiser, are okay with doing the job of a home inspector when doing an appraisal.
You say FHA states that we are not home inspectors. Then how come it wants us to do the job of a home inspector?
Easy. Assume. The cornerstone of every self respecting appraiser is to assume. If an appraiser cannot tell the difference from a deficient roof, and a decent roof, or a failed hot water heater vs a decent one, leaking lines vs non leaking lines, stable foundation vs instable, they should not be appraisers in the first place. All these new appraiser qualification requirements regarding high level math, and they conveniently forgot mastery of construction and building materials as a relevant inclusion. We’ll just assume they’re incompetent, rather than assuming they would replace our services with computers. The value an appraiser brings is the human element and expertise of construction, materials, and relevant worth relationships. I hang my hat with the logical and manual approach. For every old timer whom knows housing up and down that is replaced with a tech math whiz equipped with a mobile device in his hand, well, that’s what happened to this industry. Appraisers should have to pass tests regarding construction materials, first and foremost. Honestly, I’d be surprised if the people tinkering with FHA rule sets had that knowledge either.
Pretty picture what is it of.. jking When I was a teenager, quite sometime ago, in the summertime my father made me come on plumbing jobs with him. Hated then but appreciated years on. Yes I see and understand what’s going on with the properties I observe but I do not want the added liability. Reading some others who say bah what liabilities all I can say is time will tell. They can do them if they want I/Office are not.
When I took the new FHA class the instructor stated FHA just wants added protection so the borrower won’t have to do any repairs in at least the first two years and then stress the loan. Well I say if they are that so concerned a home inspection MUST be completed and given to us before we observe the property.
You are correct Koma
“Added Protection” as in: An additional party to sue if things go south with the loan.
Just because the delicious bait is dangling in front of your eyes…doesn’t mean you have to go for it.
The most valuable wisdom that an appraiser can possess is knowing when to walk away from an assignment request.
You guys/gals might find this amusing. Had a client’s (local bank) Quality Control Person (I won’t call the reviewers) contact me and ask under drywall/ceiling what is a nail pop and is it harmful or a hazard. OMG! Oh yea it’s a 20 year old house and there are photos included that show what I’m talking about.
If anyone thinks they will not end up in court doing FHA appraisals well I have some good real estate to sell you.
Had a Veteran call me yesterday on a VA appraisal who wanted me in court over a condo appraisal because the HOA would not allow him to enforce his right to a parking space. This report was done 6 years ago. I cannot begin to think of all the areas that can cause problems for appraisers doing FHA assignments. Just as an FYI concerning utilities; VA does not require utilities be turned on and does not want us conditioning reports to require they be on because of the liability involved. We are appraisers who value real estate and the improvements; we do not guarantee HVAC, appliances, plumbing, termite coverage, etc. One HVAC company told me years ago they would never guarantee a furnace because it could fail before they leave the property, not going to that ever he told me.