With the new changes that became effective September 14, 2015 there is a perception of increased scope of work and liability. The perception is house appraisers are being asked to perform the work of property inspectors, and would be violating the competency rule of Uniform Standards of Professional Appraisal Practice (USPAP). As a result many house appraisers are choosing not to perform FHA appraisals or significantly increase their fees.
There are three main areas of concern:
- Crawl Spaces.
I talked about the appliances and offered up some suggestions as well as the attic to help clear up misconceptions. This appraisal post is going to address the crawl space observation requirements for an FHA appraisal.
Crawl Space Observation Requirements
The Appraiser must visually observe all areas of the crawl space and notify the Mortgagee of the deficiency of MPR and MPS when the crawl space does not satisfy any of the following criteria:
- The floor joists must be sufficiently above ground level to provide access for maintaining and repairing ductwork and plumbing.
- If the crawl space contains any system components, the minimum required vertical clearance is 18 inches between grade and the bottom of the floor joists.
- The crawl space must be properly vented unless the area is mechanically conditioned.
- The crawl space must be free of trash, debris, and vermin.
- The crawl space must not be excessively damp and must not have any water pooling. If moisture problems are evident, a vapor barrier and/or prevention of water infiltration must be required.
The Appraiser must report any evidence that may indicate issues with structural support, dampness, damage, or vermin that may affect the safety, soundness and security of the Property.
In cases where access through a scuttle is limited, and the Appraiser cannot fully enter the crawl space, the insertion of at least the head and shoulders of the Appraiser will suffice. If there is no access to the crawl space but there is evidence of a deficient condition (such as water-stained subflooring or smell of mold), the Appraiser must report this condition and the Mortgagee must have a qualified third party perform an inspection.
If there is no access, the Appraiser must report the lack of accessibility to the area in the appraisal report. There is no requirement to cut open walls, ceilings or floors.
Not all houses (especially historic houses) with a vacant area beneath the flooring are considered to have a crawl space; it may be an intentional void, with no mechanical systems and no intention or reason for access.
HUD HANDBOOK 4000.1, page 488-489
What’s The Problem?
Most house appraisers don’t want to enter the crawl space, me included, and physically expose themselves to trash, debris, vermin, cobwebs, droppings, pooling water and foul odors.
The Bad News
Unlike the attic and appliance requirements the language here is clearer. FHA wants house appraisers to enter the crawl space to visually observe all areas. Outside the liability concerns house appraisers have, this one is the deal breaker as house appraisers don’t want to dress up like our friend here for appraisal inspections.
What Can You Do?
If the crawl space can be adequately accessed then address any of the above issues it has. Otherwise expect a higher incidence of house appraisers to call for third party inspections as it relates to the crawl space.
Make surre to watch the 60 second video below which will show some examples of defecient conditions.
Do you have FHA appraisal questions? Give me a call or better yet I can come to your office and speak to your staff and clear up any misconceptions.
Did I leave anything out or do you want to join the conversation? Let me know in the comments below.
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Thanks for reading,