When selling a home, you want to make the property available to as many buyers as possible. Some sellers, however, refuse to even accept offers from buyers using a Federal Housing Administration loan. Before guaranteeing a loan, the FHA requires an inspection. They will deny the loan if the house doesn't meet the U.S. Department of Housing and Urban Development's minimum property standards. If your home fails the inspection, you can fix the problems or seek out a new buyer. Some of the HUD guidelines may seem a bit nit-picky, but your home may appeal to a broader audience and sell more quickly if you understand the FHA guidelines and fix problems before listing the home.
Checking Structural Integrity
Structural problems can botch any sale, whether the buyer is using an FHA loan or not. To pass an FHA inspection, however, your foundation must be free of significant cracks as well as ongoing water damage or evidence thereof. If you have a crawl space under your home, it must have proper ventilation and be free and clear of trash and debris.
FHA inspectors look up as well as down. Your attic and roof need to be in good repair. An FHA inspection will require that you fix any water damage or holes in the roof. Although it may not become a deal breaker, FHA inspectors must make a note of it if your roof will require replacement within the next two years.
The FHA inspector will also check joists and other wooden structures for signs of termite infestation. Repaired termite damage is acceptable, but evidence of an active infestation isn't. If the inspector finds any evidence of recent termites, he must call in a licensed termite professional to evaluate the situation. Foundation, roof and termite repairs lend themselves best to professional intervention. Don't perform structural repairs yourself unless you have adequate training and experience.
Functioning Home Systems
A lot of things happen behind the scenes that keep a home functioning comfortably, and the FHA inspector will check to see that these systems function properly. FHA requirements mandate that a home's heating system function safely and can maintain a minimum temperature of 50 degrees Fahrenheit in the home. The water heater needs to work properly as well and must feature a pressure-relief valve.
Electrical systems also must meet certain guidelines. Frayed and exposed wires need to be fixed before the FHA will approve a loan. For safety reasons, all the light and power switches in the home must actually turn off when moved to the off position. If you have electrical outlets within 10 feet of a water source, make sure they are GFI outlets to avoid inspection issues.
Small plumbing leaks aren't a problem, but you will have to repair large leaks and make sure that running water is available everywhere it's supposed to be. For FHA approval, the home must contain a toilet, shower and sink in the bathroom. Tenants often damage these items when leaving under undesirable circumstances. Give them a preinspection check rather than assuming they work. If the property has well water, you must have a working water treatment system in place to pass inspection. Abandoned wells must meet legal guidelines for proper closing and sealing.
Remediate Environmental Contaminants
Asbestos in a home may require remediation for FHA approval. Don't panic just yet, however. Asbestos isn't an automatic FHA fail. Experts agree that asbestos is safe unless it is falling apart and potentially releasing fibers and particulates. If your kitchen floor contains asbestos tiles but they're in good shape, you don't have anything to worry about. In some cases, you can seal up degrading asbestos by laying new flooring or drywall over the old material.
Lead is another issue that often comes up during FHA inspections. To protect from lead poisoning, peeling or chipping paint that may contain lead needs to be fixed for FHA loan approval. The fix for this problem is as simple as painting over the peeling paint. This fix is temporary and leaves some work for the new owners, but you'll pass your FHA inspection as long as no one can peel paint off of painted surfaces and ingest it.
Mold issues may present a problem too. The FHA guidelines don't mention mold specifically, but they do make a general mention of environmental contaminants. If you have a mold issue, your odds of FHA loan approval decrease greatly. Get mold checked out and fixed before your FHA inspection.
Common FHA Inspection Issues
If you or someone else has been living in the home you want to sell, you likely won't have many problems with failing systems or structural integrity. Since these things affect the comfort and livability of the house, you likely already fixed these problems if you encountered them. There are some issues that frequently pop up during FHA inspections, however, that aren't quite as obvious. One is windows. To pass inspection, you will need to repair any cracked or broken windows. Some FHA inspectors balk at ripped and missing screens, so replace or repair them prior to your FHA inspection.
Although not currently official, many home sellers face issues with household appliances. Some inspectors insist that if an appliance such as a stove or refrigerator is present, it must be in good working order. If your home fails inspection because of a broken appliance, you may replace it, fix it or simply remove it. There is no rule that you must sell your appliances with your house, so just take them out if the inspector cites them as an issue.
Stairs are another common problem. All the stairs in the home need to have a handrail. This applies to exterior steps as well, so check your deck and the steps up to your front porch. Look at your gutters too. Inspectors will note broken gutters and gutter runs that aren't securely attached to the house. When you're done with your gutters, test your garage door. If you have a garage door opener, it must stop itself from closing if it senses an obstacle in its path. If you've disabled this function on your garage door, enable it again before the inspector arrives.
A Word of Warning
Sometimes sellers receive a laundry list of necessary repairs after an FHA inspection. Fixing these issues takes time and money that you may not have. In this case, it's not uncommon for a buyer who has already fallen in love with the home to offer to do the repairs himself. This seems like a win-win situation. The home repairs get done without any effort from you, and the buyer gets his loan approval and the home of his dreams. It's not that simple, however.
The buyer can't take ownership of the home before getting the loan and closing on the house. The FHA won't approve the loan until you complete the repairs and they reinspect the home. That means the home will remain legally yours while repairs are made. If the buyer gets hurt while working on the house, he could hold you liable for the injury he received while fixing your property. If he does a bad job and causes further problems, you'll get stuck with an even bigger mess. It's hard to tell hopeful buyers no, but it's in your best interest to do so if they want to make repairs to the property while it's still yours.
- The Lenders Network: FHA Appraisal Guidelines and Requirements for 2018
- FHAhandbook.com: FHA Appraisal Guidelines for 2018 – What the Appraiser Looks For
- Investopedia: The FHA's Minimum Property Standards
- SlideShare: Cliff Odom, RAA – FHA Inspection Checklist
- FHA News and Views: Is A Property Eligible for an FHA Mortgage Loan If It Has Asbestos?
- U.S. Department of Housing and Urban Development: Property Analysis
- Quicken Loans: What is a Home Appraisal and How Can I Prepare for It?