NMLS # 6395
Financing Kentucky One Home at a Time
I never, ever allow my clients to have the appraisal done before they sign off on the inspection and here's why. What if the inspection comes back with something major and you end up walking away from the contract, that's right you wasted $400 - $500 on an appraisal for nothing.
Do not allow anyone to talk you into ordering the appraisal until after you've completed the inspection.
A visual inspection is not good enough! You need to pay for the home inspection. It shouldn't be more than $250 - $400 (depending on additional buildings/ pool/ etc.). It is the best money you can spend during escrow!! If you find nothing wrong with the house, great. However, if you find it has electrical or plumbing issues, it's better to spend a few hundred bucks on the inspection than to be stuck with thousands of dollars in repairs!
As for the requirement of "passing an FHA inspection" that means that the house must meet FHA requirements. Those items will be called out by the appraiser. The appliances must be in working order, there needs to be permits on file for any additions, patio covers and pools, etc., there need to be no health and safety issues that are obvious to the appraiser. The house must also meet the value.
Any items that don't meet FHA standards, will be listed on the appraisal report.
The home inspection is much more involved and is for your knowledge --- very important to do both!!
There is no FHA Inspection. FHA/HUD strongly recommends that a Homebuyer get a Home Inspection but that Inspection is done by your own Inspector, not an FHA Inspector.
ALWAYS do your Home Inspection before applying for your mortgage.
Here's the Home Inspection Primer I provide my First Time Buyer clients here in New York:
Typically your Home Inspection will alert you to problems in five key areas, and these key areas directly relate to the contract of sale:
1. Foundation: sound and solid
2. Roof free of leaks
3. Plumbing working and leak-free
4. Heating system sufficient and operating
5. Electrical system sufficient and up to code
If there is a serious problem with any of these five items, typically the Seller has a responsibility under the terms of the contract of sale to repair the problem at their expense, not the Purchaser's expense. Sometimes a Purchaser will receive a credit at closing to repair one of these items (assuming the home and the defective issue has not compromised the Lender's appraisal). When the Purchaser receives a credit at closing, the amount of the credit is based upon legitimate estimates for repair and negotiations between the Attorneys representing each party.
Other items you discover are in need of repair/upgrade (i.e. diswasher not operating properly; air conditioner on second floor inoperable, etc.) can be negotiated for a repair credit or replacement at the Seller's expense. Again, these negotiations are handled by the Attorneys.
It is extremely RARE that a purchase price is reduced due to repairs from a Home Inspection. Best to consult with your Attorney for more detailed information in this area.
If you don't already have a good real estate Attorney and you're shopping for homes, you need to reverse your process. First, get properly prequalified for mortgage financing by a Local Mortgage Banker. Second, line up your Attorney. Third, line up your Home Inspector. Fourth, line up a great local Realtor with personal experience in the area in which you'd like to buy.
It is best to do the home inspection (no such thing as an FHA inspection) while the appraisal is ordered. With a short sale, I would just be sure not to do ANYTHING before you have the official approval letter from the short sale bank.
Once you have that, the inspection can usually be ordered within a day or two. You can decide whether or not to order the appraisal after you meet with the inspector.
The appraisal is ordered through your lender, so the agent would not be the one ordering it and therefore cannot make you have it done until you want to! Most lenders will not order it until you come in to pay for it... so just don't pay for it until after you have the inspection!!