Everyone wants things to be done right the first time. With home appraisals, there are often items that come up, which could have been avoided had the borrower been educated beforehand. This often leads to a final inspection that will cost additional time and money. We spoke with some appraisers and asked them for a list of things borrowers can do to avoid a ‘subject to’ report. Here are the top six responses:
- Make sure all areas of the home, any outbuildings and foundation are fully accessible. This is one I’ve seen a lot in occupied multifamily properties. Sometimes tenants are not prepared or willing to allow appraisers into their space, but this applies to any homeowner. If an appraiser cannot get into a room or outbuilding, they will need to go back to the property for a final inspection.
- Make sure all utilities are on and functional. While it is true that Fannie Mae does not require the utilities on at the time of the inspection (see here Q22.), some lenders still may. That is why it is considered best practice to make sure the utilities are in working order, barring extenuating circumstances.
- Make sure the home has all the appropriate safety sensors, per local code. Carbon monoxide detectors are the real culprit for this one. Every municipality is different, but this link is a helpful tool I have used as a reference on each state’s code. It is also worth noting that many municipalities require safety release latches for barred windows.
- Make sure the water heater is properly strapped, per local code. A handful of states require the water heater to be strapped to protect from any earthquakes, however this is not required by HUD or Fannie/Freddie.
- Confirm that any additions to the home have been completed to local building code. The online legal encyclopedia and advice site Nolo has a great article on how to overcome any unpermitted additions and get everything up to code. Regarding the inheriting of unpermitted additions from a previous homeowner, the author writes, “…consult the house’s blueprints, which contain a depiction of the house as it was originally constructed. Ideally, when you closed on the house, the owner handed you the blueprints. But you may not be so lucky. If you do not have the blueprints, you may try to locate them by contacting the previous owner, searching the city’s records, contacting your homeowner’s association, or even contacting the original construction company.”
- Remember that FHA/HUD have extensive construction guidelines. There is a depth and breadth of information and rules that appraisers need to follow when it comes to an appraisal for an FHA loan, and we won’t touch on all of them here. However, here are a list of some of the more commonly present FHA conditions to look out for:
- Health and safety hazards
- All bedrooms needing egress through some means
- Presence of lead paint
- Presence of handrails for all steps and stairways
These insider tips are great to pass onto your borrowers to make sure they have the best experience possible, when it comes to the appraisal process. Class Valuation is dedicated to having valuations be the last thing lenders need to worry about, and we are here to help you through any issues that may arise. Please stay tuned for additional educational resources that are currently in the works.