Dallas/Fort Worth Real Estate Investor Club

Appraisal Differences - for your Buyers

  • 05 Jun 2018 5:07 PM
    Message # 6287388

    Hello again, I recently had a discussion with an investor who was wanting to know the differences between appraisal types when they sold one of their properties.  As in if you are flipping, and received a FHA offer, what should you expect on the appraisal?  And what are the appraisal differences between conventional and government loans?  Just to quickly summarize some of the differences I've written a summary below.

    All Loan Appraisal Types – Water Intrusion or anything that could jeopardize the "structural integrity" of a property will need to be addressed for 99% of the loans out there.  So if there is wood on the external part of the home that is not painted….then that would mean water could seep into that wood and cause problems later on (at least that is the thinking on it).  So exposed wood needs to be painted.  Rotten wood need to be removed entirely, replaced, and the new wood needs to be painted (I hope that makes sense).

    As far as foundation and roof goes, a visual inspection is performed by the appraiser (under no circumstances are you to provide the actual home inspection to the lender).  So the appraiser doesn’t test anything, but just makes pictures.  And if the appraiser notices something like cracks in the sheetrock on the inside of the home, that could mean that the foundation needs to be inspected – not automatically fixed – but just inspected by a professional; usually a structural engineer.  And if that professional says “it’s good” then that is good enough.  Same thing for the roof.  So the appraiser will defer to a professional, and as long as that professional’s report is satisfactory, then that will allow the loan to go through.

    FHA Loans (and also VA loans) – these will also have a few more inspections points than the ones I listed above.  In general, everything must be functioning in the home…doors shutting, water faucets, water heater is at code, ABSOLUTELY NO CHIPPING OF PAINT (especially pre1978), no broken windows or panes, Roof must have 2 years of life left (it also can’t have 3 layers), attic and crawl spaces are required to be viewed, if more than 3 stairs then a handrail must be installed, and so forth.  Also ***VERY IMPORTANT*** if an FHA appraisal is used on one of your properties, and that transaction doesn’t close, the FHA appraisal stays with that property for 6 months.  So if an FHA appraisal comes in low, you don’t continue, any FHA purchaser for the same 6 months MUST use that value. 

    Just VA Loans – these will always require a termite inspection.  MUST have.

    This post isn't about the appraisal values or anything like that.  Just some of the main differences between condition requirements on appraisals.  Feel free to ask any questions if needed.  Thanks!

  • 06 Jun 2018 9:24 AM
    Reply # 6289564 on 6287388

    great info Andrew.   better to learn this stuff here  instead of losing money underestimating a rehab! 

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