Appraisers are well-suited to offering an objective home valuation, but testing appliances is a job best left to a home inspector.
That was the message Realtors® sent earlier this year when the Federal Housing Administration’s “Single Family Housing Policy Handbook” included fresh requirements for appraisers to operate and physically observe appliances in action as part of the home valuation process.
All properties purchased or refinanced with an FHA loan must be appraised by a HUD-approved home appraiser. Moreover, appraisers working on an FHA loan are required not only to determine market value but also inspect the home to ensure it meets certain minimum property standards.
Guidance that blurred the line between the home appraiser and home inspector, however, raised concerns that FHA borrowers might not be able to compete in a challenging market, as the new requirements had the potential to increase time and cost on an appraisal.
National Association of Realtors® President Tom Salomone noted the important role appraisers play in a home sale or purchase, echoing their concerns over FHA’s guidance.
“Appraisers have a lot on their plate, and their work is important to ensuring buyers, sellers, lenders and everyone else involved in a transaction has a credible source to turn to when determining the value of a property,” he said. “Requiring appraisers to perform duties that are better left to a home inspector only slows the process while potentially adding unnecessary costs.”
Appraisers have also highlighted the confusion in the market over how appraisals are different than inspections. Requiring appraisers to operate appliances and observe their functionality had the potential to confuse the two for buyers.
To answer those concerns, FHA recently announced updates to its SF Handbook that says appraisers must simply note that certain appliances contributing to the market value of the property are physically present, and not actually test the appliance. Their guidance also lists the specific appliances covered by the rule.
Salomone said FHA’s clarification helps answer appraiser’s concerns and will aid consumers in the marketplace.
“FHA did appraisers and consumers a big favor by clarifying appraiser duties and specifically listing the appliances to which this new guidance applies,” he said. “While there are still improvements to be made, FHA’s announcement provides our Realtor® members with additional certainty as they continue playing a critical role in the home buying and selling process.”