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What Makes FHA Appraisals Different?

by Guest on Sep 28, 2012 Residential Appraisal 667 Views

For most residential appraisers the answer to this question is already well known because if you are delivering appraisals of this type you have to complete and deliver them every day, so I am going to answer this question with the assumption that you are not a FHA appraiser.  FHA appraisers have read and are familiar with their charge, knowing FHA guidelines, or they end up out of business quickly.

FHA appraisals focus not only on the market value of a home for mortgage lending purposes but also on the health, safety and functional condition of a home.  Appraisers who complete reports for conventional lenders don't usually need to check things like; complete plumbing system operation, appliance operation, heating / cooling system operation, etc.  Obvious problems, like significant structural cracks, roofing problems and deferred maintenance are identified for banks in conventional loan appraisals, but FHA appraisals force the appraiser to make a number of decisions about a property that at times blur the line between the duties of an appraiser and a building inspector.

Appraisers in FHA assignments thus take on an increased liability.  There are many more responsibilities associated with following FHA Guidelines, and appraisers often become the "bottle neck" that keeps certain properties off of the approval list.  It's not a situation that appraisers relish, most are not trained as building inspectors when they are trained and many are uncomfortable dealing with the laundry list of FHA review items.

Since the recession significantly curtailed conventional mortgage lending FHA loans and with them FHA appraisal assignments have become prominent in the market.  Completing FHA appraisals has thus become for many appraisers their "bread and butter" service.  Its already a chore to comply with FHA guidelines, and proposed regulatory changes could make it even more difficult.

What's important for a market participant a buyer or seller of real estate to understand is that completing an appraisal that concludes not only a well founded market value opinion but also considers all of the items required by the FHA is a daunting task.  Many experienced appraisal professionals struggle to meet the ever changing requirements and fees have remained steady or they have actually fallen over time.

Some criticisms have been leveled at appraisers because FHA rules force appraisers to disqualify a property, but its not the appraisers fault if the roof is in poor condition or if the plumbing system needs to be upgraded.  Appraisals are also not science, and one appraiser may conclude a lower value for a property even after repairs are completed, so there are always going to be some individuals who will get burned trying to work with what is an imperfect system.  Many buyers and sellers just don't consider the real fact that there is a variability in appraisal opinions and at times a lack of flexibility that is built into the process. 

Thus, FHA appraisals are a subset and a specialized portion of the appraisal business.  When conventional lending volume returns, assuming that it does, FHA appraisals may return to being only a small portion of the residential appraisal business.

For more appraisal information contact Glenn Rigdon MA, MRICS, ASA is a Las Vegas / Henderson Nevada appraiser who can be contacted via email or via his business website Appraiser Las Vegas  (, or you can also click on “Contact Us” on the home page of this website or visit my public profile at LinkedIn at  

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