We’re looking at selling a house and we have a buyer that is pursuing FHA financing. Our realtor tells us that FHA inspection is different than a conventional loan inspector. Is this true and if so in what ways?
What types of areas can present a “major defect” that could allow the buyer to walk from a purchase agreement if we the seller chose not to repair?
For the home to be qualified for an FHA loan it has to be inspected by Home Inspector that is on a list with FHA. got to FHA/HUD web site and find a Home Inspector near you.
Whenever I consider “federal” standards…I am reminded that “federal” standards will actually allow a certain amount of rat feces in my lunch meat before it fails their inspection.
As a consumer, I prefer NO rat feces in my salami, thank you.
My inspection reports to the general public are upwards of 38 to 42 pages, but the inspection checklist I am asked to use for USDA rural inspections is four pages long. My inspection standards of practice prints out to three times as many pages (12) as the entire USDA inspection checklist.
I would have to think that the “federal” standards under any program are going to be of greater benefit to the seller than to the buyer…just like lunch meat.
“…What types of areas can present a “major defect” that could allow the buyer to walk from a purchase agreement if we the seller chose not to repair?”
The answer to this depends upon where you live and what the inspection contingency in your contract states. In some states “Ohio” for example, they state that only major concerns or safety items have to be addressed. That would be defined as something affecting the habitability of the home, something if left un-addressed would affect the habitability in the future, or items of a safety or security nature. Minor maintenance items or improvements would not be grounds to walk away.
In other areas, such as Missouri, the contracts don’t say anything about Major concerns. A buyer could walk away from the deal if the inspection was completely free of defects. They would only need to say that they did not like the results of the inspection.
Your best option would be to hire an inspector to do a pre-inspection on your home. That way, you will have an excellent idea of what needs to be done, and you can get bids for the cost of that. Even if you choose not to do the repairs, knowing what they will cost ahead of time, will help you set the price of the home, and negotiate better with the buyers when the time comes.
In Missouri, the FHA inspection on an existing home is done by the appraiser. If the appraiser is unsure about something then that item is referred to a home inspector. The FHA inspection is more of an evaluation.
In central Missouri the Rural Development inspection is down to an one page form. I always perform a full inspection with a full report to the buyer when I do a R.D. inspection.
The Home Inspector DOES NOT have to be on a list with FHA/HUD to perform an inspection on a dwelling that will be purchased with an FHA mortgage…this is a myth. Google ‘FHA’. Any of one of the sites that pop up should clarify this.
Scott is correct…
http://mortgage.lovetoknow.com/FHA_Mortgages_and_Home_Inspection_Requirements
http://www.sunnations.com/mortgagelibrary/fha_appraisals/fha_home_inspection.asp
from the first link above:
"The FHA does not currently have home inspection requirements.
Even so, a home inspection is in your best interests;
it is a very good idea to get one prior to making a home purchase.
A home inspection will:
* Evaluate the structure and construction of the home.
* Estimate the remaining useful life of the home’s structure and mechanical systems.
* Identify potential problems and items that will need to be repaired and/or replaced.
Once your home has been inspected, you will receive a written document that details all findings.
This document is very important and can protect you from making a poor investment. Remember, FHA provides insurance for lenders, not borrowers.
They do not guarantee anything and they will not buy the home back from you if you find a problem after closing.
This makes the small amount that you will have to pay for a home inspection well worth the money. "
Actually there is such a thing as an FHA Fee Inspector. (I am one.)
The inspection that they recommend is a regular home inspection. However, there are specific forms that FHA often require that only an FHA approved appraiser or FHA approved inspector can do.
I have to agree with Mark. I have made several phone calls and went to the website. There is a list/roster that they use. You have to fill out a VA 26-6681/HUD-92563. On the application it will list some of the requirements needed.
Hope this helps.
HUD Mortgagee letter 88-5 provides that qualified Home Inspectors are allowed to conduct Home Inspections and reads as follows:
U. S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
WASHINGTON, D. C. 20410-8000
February 29, 1988
OFFICE OF THE ASSISTANT SECRETARY FOR
HOUSING-FEDERAL HOUSING COMMISSIONER
Mortgagee Letter 88-5
TO: ALL APPROVED MORTGAGEES
SUBJECT: Single Family Development - Certifications of Mechanical
Equipment, Roofing or Structural Components by Qualified
Home Inspectors (Existing Properties)
As a specific condition on Form HUD-92800.5B, for existing
properties, HUD or a Direct Endorsement (DE) Underwriter can require
an inspection and certification of the heating, plumbing, electrical
roofing or structural components of a dwelling by a reputable,
independent licensed contractor or engineer, as set forth in
paragraph 3-32 of HUD Handbook 4150.1.
The purpose of this memorandum is to expand those instructions
to permit qualified home inspectors to perform these inspections.
You are reminded that these inspections and certifications do
not imply any warranty by HUD of the inspections performed and do not
relieve the requirement for an inspection of the other items listed
as specific conditions on Form-92800.5B by a HUD fee appraiser or
inspector (or DE staff appraiser or inspector).
Please ensure that this procedure is used on only existing
properties. Inspections on proposed construction properties must be
accomplished by members of your fee inspector panel.
If you have any questions, please contact the Housing
Development Branch in the local HUD Field Office for your
jurisdiction.
If you have any questions about this posting feel free to contact me.
Also, if you really want any of these, you need to be a HUD fee inspector. The lenders look at the HUD site to find folks. If you haven’t applied, then you aren’t listed on the HUD/FHA web site.
An FHA Inspection or Minimum property inspection is required for FHA financing.
It is, however, very lacking compared to a traditional home inspection.
A Good inspector can do both the FHA and the full home inspection for you or your buyer and anything else is less that adequate. Buyers relying on just an FHA inspection are taking a huge risk. Sellers should also insist on a fully-credentialled inspector as I siggest above, because anything lett is probably shoddy and the outcome may be full of bogus concerns that could kill the sale without good basis.
FHA: https://entp.hud.gov/idapp/html/insplook.cfm?in_fha=No
My state (NC): http://www.ncdoi.com/OSFM/Engineering/HILB/Documents/DirectoryAlphaHI-All.pdf
(You may have to find your state or this may not be a regulated industry.)
If not, then read this this first:
http://www.hud.gov/offices/hsg/sfh/insp/inspfaq.cfm
then find one here:
http://inspectorlocator.com
If you are in NC, I can help. If not, I am glad to advise you if you need me, just call. NO CHARGES for this offer… (919) 625-2382 http://fergusonandcompany.com