With all the changes in the world of real estate it is funny how things really remain the same. When I bought my first house back in the 1970’s an FHA insured loan was the only way to go. After a few years though, FHA loans lost their popularity not only with the public but also with real estate professionals (lenders, agents, etc). Today you can pretty much bet that the typical home sale will be closed using an FHA insured loan, especially with the current maximum FHA loan limits being typically $346,250 in the Metro Atlanta area. So what does this mean to you and me?
First the home will most likely be professionally inspected to the standards of HUD/FHA. This means that everything should be in good working order and that all the utilities are turned on. This has become an issue in today’s market as many people are purchasing foreclosure properties and the banks/lenders do not want to spend any money on these properties to have these items turned on. If you are purchasing or thinking of purchasing this type of property with an FHA/HUD loan, you may want to prepare yourself to have to pay for this yourself. Having all the utilities on and inspected is a requirement of an FHA/HUD loan and cannot be waved. Remember that the appraiser also needs these utilities turned on for his/her appraisal inspection. This has also become a problem for some homeowners who have moved out of town and had the home winterized or otherwise secured and turned off the utilities to keep their costs down. Getting these items reconnected is not an easy task when you don’t live here anymore. Just something to think about!
The second thing to remember is that it is typical for the inspectors (professional home inspector or appraiser) to find items that will be required to be repaired. From my experience, these items are usually minor in nature but are a requirement of FHA/HUD. The most common I have come across is with a home built on a crawl space. The installation of a vapor barrier is required if moisture is present. A vapor barrier is just a sheet of plastic spread over the entire crawl space area to prevent water vapor from entering the home. Doing this before you list your home will prevent headaches later. Another common required repair is to have GFI circuit breakers installed any where water is or could be present (kitchen, bathrooms, laundry areas, garages and outside outlets). This is also becoming a requirement of non FHA lenders as I have been required to test and comment on the existence of these types of circuits on several occasions recently.
Bottom line, whether you are purchasing or selling a home; everything needs to be in working order and/or all the utilities need to be turned on. My best advice to homeowners who have asked me for pre-listing appraisals is to get their home professionally inspected before they put it on the market. This usually identifies problems that can be taken care of by the homeowners themselves. This can save hundreds if not thousands of dollars by not having to rush around and get contractors involved when it needs to be done in a hurry so the loan can close. Remember, if you are a purchaser and your lender requires repairs to a foreclosure property - you may be the one that has to do those repairs yourself (even before you close on the house) if you really want the loan, FHA insured or not.
About the Author: Robert Koppes is the owner of KT Appraisal Services, LLC and is a Certified Residential Real Estate Appraiser with the State of Georgia (License # CR004733). He holds the CREA designation from the National Association of Real Estate Appraisers and also holds the MRA designation from the National Association of Master Appraisers. Robert has been an appraiser since 1994. Robert’s areas of specialty include valuation of properties in the 20 county Metro Atlanta area with emphasis on Conventional and FHA funding and consultation and valuation of foreclosure properties. He can be reached at 678-254-4050 or by email at email@example.com.
Van Purser and his wife Jeanne are a licensed Real Estate Brokers in Georgia. Since1984 they successfully purchased and renovated over 400 homes. Their expertise is in representing Buyers or Sellers as an advocate; which means always ensuring their best interest. Additionally, they represented hundreds of clients over the years as an Associate Broker with Metro Brokers, RE/Max and now with his own firm. He and his wife, Jeanne, have been married since 1977. Van or Jeanne can be reached at 770-623-3313, or by email at firstname.lastname@example.org or email@example.com.