Home Buying in 93309>Question Details

Krysta Cortez, Home Buyer in Bakersfield, CA

Is it common practice to do appraisal before the FHA inspection? I brought up my concerns to by agent and he told me it was just how its done.

Asked by Krysta Cortez, Bakersfield, CA Tue Sep 18, 2012

I am Buying a short sale and will have to pay for appraisal if its done before inspection even if house fails inspection.

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15
Yes, do the appraisal first. If the home appraises below asking price, by a lot, the bank won't give you the loan, so you will have wasted the inspection fee and the appraisal fee. Also an appraisal will point out things wrong with the property that will affect the sale, same as an inspection might. If you pay for an inspection first, and then the appraisal comes in low, you've lost money twice because you have to pay for both.
2 votes Thank Flag Link Thu Dec 10, 2015
In California, you do not need a home inspection, however, I would recommend you have one done to be on the safe side. Normally, an appraisal runs around $400 - $450. A home inspection usually runs $275 - $350. The other inspection I generally recommend is a termite inspection. When I represent a buyer and the house looks fairly good, I recommend that they get the appraisal done first BUT put my home and termite inspections on notice that I will want them to schedule into their calendars the inspections approximately 15 days after the offer is accepted. This is because the sales contract, unless it is modified, states buyers' inspections must be completed within 17 days of acceptance of buyer's offer. If the appraisal is low, the deal may fall out of escrow unless the parties can renegotiate the price. If you are worried about the condition of the property, I would immediately get the inspections done and then pay for the appraisal. Good luck!.
1 vote Thank Flag Link Tue Oct 2, 2012
An appraisal is required but an inspection is not, however, I would have an inspection done. You decide which to order first, I would go with the inspection first. I wouldn't do either until the bank signs off on the deal. Good luck,

Jim Simms
NMLS # 6395
JSimms@cmcloans.com
Financing Kentucky One Home at a Time
1 vote Thank Flag Link Wed Sep 19, 2012
Hi Krysta,

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.
1 vote Thank Flag Link Wed Sep 19, 2012
This is a decision that has to be made by you. If the house does not appraise and you cannot negotiate a compromise, you may feel you have wasted your money on an inspection. But, you may need the inspection to negotiate a new price. If the home appraises low and no major repairs are required you may agree to pay over the appraised value. If the home has a lot of inspection issues you may not want to pay over the appraised value. Ultimately, you do not want to be in escrow in a home you are not willing to spend some money on.
0 votes Thank Flag Link Tue Oct 8, 2013
Krysta,
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!!

Good luck!
Valerie
0 votes Thank Flag Link Thu Sep 27, 2012
Thank you guys. I am a little confused since I have been told the house must pass inspection by FHA for our loan to be funded. We do plan on a visual inspection of the home sometime next week and are thinking of having an inspector go through the house with us. Our short sale is already approved and we have opened escrow.
0 votes Thank Flag Link Thu Sep 27, 2012
Good afternoon Krysta,

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.

Trevor Curran
NMLS #40140.
0 votes Thank Flag Link Wed Sep 19, 2012
I would do the inspection first. I have had many clients that have canceled because they didn't like the inspection. If they had done the appraisal first that would have been out $450 for the appraisal cost.
0 votes Thank Flag Link Wed Sep 19, 2012
You have some solid responses here. It's NOT uncommon. Both items, the appraisal, and the FHA inspection have to be done. Appraisals can often take a week or two to complete so perhaps that's why it was started sooner. Talk with both your Realtor and your lender.
0 votes Thank Flag Link Tue Sep 18, 2012
An inspection from the FHA appraiser is way different then a personal inspection and it is also different than a bank sending out an appraiser. TALK to your lending agent and ask them what is going on. They should be guiding you through the process. You are not in a buyer's agreement with with your lender. Make sure they are helping you through all of these questions and decisions!
0 votes Thank Flag Link Tue Sep 18, 2012
If you are purchasing with FHA financing then the appraiser will do an FHA inspection. This is far different than a home inspection. The appraiser will call any health and safety issues in the home. Any items called on inspection will need to be addressed prior to funding. In a short sale situation you should rely on your agent on any items that they think may be called so that you can negotiate with short sale lender and or selller prior to approval and opening eacrow. It's typically much more difficult to get short sale lender to address repairs after short sale has been approved. Utilize your agent's expertise in this situation as a short sale is a long process and if property has FHA issues and seller will not do repairs you would want to know this early on to determine if this would be a transaction worth attempting.
0 votes Thank Flag Link Tue Sep 18, 2012
Actually, yes there is such a thing as an FHA inspection... it's done at the same time (and by the same person) as the appraisal, and they're looking for unsafe conditions (missing handrails, missing appliances, or bathtub, sinks or toilets, missing HVAC, lead-based paint in poor condition, mold, cracked foundations... you get the idea).
0 votes Thank Flag Link Tue Sep 18, 2012
What if the FHA appraisal is fraud and you just figured this out after had bought the house OCT 2010. I am a first time home owner, mother of 4 boys, and one son is disabled. Trusting my lender and relator has not worked well for me. They advised me that FHA appraisal and termite inspection is just as suffice, and that since I was having to pay 400 for them already, it made no since to hire another, so I didn't. HUD sold me a house with extreme structural damage, mold so bad my kids stay sick, and a 6x6 sinkhole straight under my house, that was covered up. According to the pictures that HUD appraiser had taken there is no way he could had taken these pictures of crawl space and not had feel straight in it. I don't know what to do, but I do know, that I wished I had this house inspected. Please if anyone knows how to help me, let me know! Thanks :(
Flag Tue Apr 15, 2014
Alan, I work at an FHA Approved Direct Lender and I've been originating FHA loans for 23 years. There is no such thing as an FHA Inspection. What you describe is the FHA Appraisal. "Unsafe" conditions are part of the FHA Health And Safety Standards required in an FHA Appraisal.
Trevor Curran
NMLS #40140
Flag Wed Sep 19, 2012
Alan May, Real Estate Pro in Evanston, IL
MVP'08
Contact
Krysta,
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!!

Good luck,
Valerie
0 votes Thank Flag Link Tue Sep 18, 2012
Most of the lenders that I know, prefer to have the inspection cleared, before they send out the appraiser. After all, why bother spending the money on the appraiser, if you decide that you no longer want the home based on the appraisal?
0 votes Thank Flag Link Tue Sep 18, 2012
Alan May, Real Estate Pro in Evanston, IL
MVP'08
Contact
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