On Real Estate & More – June 2018

Selling a home is not for sissies. Between the last-minute showings, scurrying to clean up the pile of toys and stuff more junk into the junk drawer, the stress of negotiations when an offer finally does comes in, and wondering what hidden issues the home inspection may bring, there are many challenges a homeowner will face.

Then the home appraisal comes along. Everyone knows the appraiser needs to confirm that the property is worth the price the buyer and seller have agreed to. But there is another potential challenge that can be an issue, when the appraiser cites repairs that are needed on the home.

It’s important to understand that there are different requirements for the various types of financing that a buyer can get. For example, an FHA or a VA loan appraisal has more stringent guidelines than that of a conventional appraisal. The type of financing the buyer is getting can make a huge difference whether the bank appraiser cites repairs or not. The following are some of the most common required repairs.

Peeling Paint: One of the most common repairs cited during an FHA appraisal relates to peeling paint. Homes that are built prior to 1978 can possibly contain lead paint. If peeling paint is cited in the appraisal, in most cases, the repairs must be completed prior to the bank approving the loan.

Water Issues: This is one of the biggest items for an FHA appraiser, and rightly so. Watch for soft floors around toilets and tubs, leaky faucets, roof leak stains in the ceiling or even standing water in a crawl space or significant water standing in the yard.

Missing Handrails: Many loan products require that any set of steps that contain more than three must have a railing, as it can be considered a safety hazard. It’s also common to require a railing on a deck or porch if there isn’t one present to prevent the possibility of someone falling off.

Open/Exposed Wiring: Electrical wires must be properly terminated, secured and finished in an electrical box and covered with the appropriate plate.

Broken or Missing Windows/Glass: Bank appraisers look to make sure window panes are not broken and there are no missing windows.

Roof Issues: One of the most expensive repairs on a home is replacing a roof. Since the cost to replace a roof is significant, a bank appraiser will make sure the roof is in good condition and most require that there is at least two years of life expectancy remaining on a roof.

Non-Functional Heating & Cooling System: If a home’s furnace or cooling system is not functioning properly, it will likely be mentioned in the bank’s appraisal that it must be working prior to the mortgage being approved.

Missing Appliances: Appliances such as a missing dishwasher, range, cooktop, or oven may be mentioned in the bank’s appraisal that it must be replaced; this includes a missing hot water heater and furnace.

Missing or Damaged Carpets/Drywall: Cosmetic issues are generally not a problem unless the carpet is so soiled that it’s not cleanable. But a plywood floor is a problem as are items like large holes in the drywall.

Unpermitted Additions: Add-ons that were obviously not permitted may be an issue. We’ve all seen them; the garage/bedroom conversion with sloping floors, the rented basement apartment that doesn’t have its own meter and is accessible only through the main house.

Concrete Cracks: A small crack typically isn’t a problem, but that large foundation crack extending across the house can be an issue, especially where the surface is uneven or slabs have sunk.

What makes it difficult is not every appraiser will note the same defects. Some appraisers will overlook moss on the roof, or a crack in a window while others will require that the item be corrected before the loan can close. Ideally, the Seller is able and willing to make repairs so that the home can be sold. If that is not feasible, the Buyer may need to pass on the home, change loan types, or try to get an escrow hold back. It also helps to work with an experienced agent to help you spot issues that will be problematic and work with you on a successful resolution.