Quite simply, some Listing Agents/Sellers shy away from FHA financed offers because they do not completely understand them and when you are in the middle of a large transaction going with "what you now" is just an easier decision.
Truth be told, FHA financed purchases are no more difficult than conventional financing in my opinion. Aside from a Condo project that is not FHA Approved, FHA financing typically only gets difficult when there are "Health & Safety" concerns associated with the property; however, so do conventional loans.
Below, Tim stated:
"FHA scares some sellers more than conventional because there is a FHA inspection that must be done where the conventional does not have to have an inspection.â€
In my experience, I have never had a specific separate Health & Safety inspector visit a property. What has taken place is that when an FHA appraisal is performed on a home the appraiser is also performing a "Health & Safety inspection" as well - main focus being the identification of safety hazards the house is structurally sound. Conventional appraisals could also cover some of the same issues. For example, I have had conventional appraisals condition a patio railing be constructed and a stove be installed.
In various areas of the FHA Appraiser's Handbook there is clear direction to have the Appraiser note safety/hazards for repair. For example:
"Required repairs are limited to those repairs necessary to preserve the continued marketability of the property and to protect the health and safety of the occupants."
"The property must be free of all known hazards and adverse conditions that: may affect the health and safety of the occupants.."
"The appraiser must note and make a repair requirement for any health or safety deficiencies as they relate to the subject property,.."
What actually constitutes a "health & safety" issue was revisited in a 2005 Mortgagee Letter (this is how FHA changes/clarifications are announced). There are many examples of items that DO and DO NOT fall under the category of a "health & safety" issue. http://docs.steven-anthony.com/ML05-48-Repair-InspAppraisalP