FHA: Hazards & Nuisances

From time to time when inspecting properties in and around Philadelphia, we come across homes that have less than desirable locations due to external influences.  External influences are conditions locate on or beyond the premises of the subject property that may have an adverse (or positive) affect on the value or marketability of the home.  An example of a positive influence is a property located on a golf course or on the beach.  But the focus of this post will be negative external influences and hazards.

FHA realizes that these conditions exist.  When an FHA Appraiser notes a Hazard and/or Nuisance at a property, they must “indicate whether the dwelling or related property improvements is located within the easement serving a high-voltage transmission line, radio/TV transmission tower, cell phone tower, microwave relay dish or tower, or satellite dish (radio, TV, cable, etc)”

Other external influences that are considered to be Hazards & Nuisances by FHA are:

  • Airports
  • Railroad tracks and other high noise sources
  • Flood zones
  • Lead based paint
  • Radon
  • Overhead high voltage transmission towers and lines
  • Operating and abandoned oil and gas well, tanks and pressure lines
  • Water towers
  • Insulation materials
  • Lava zones
  • Avalanche hazards

Here are some pictures of Hazards & Nuisances that Coyle Group appraisers have taken over the years.  If you ever have any question as to whether or not your property affected by a negative external influence, please feel free to call our office. 

  

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“Anti-Flipping Waiver” Extended

On January 28, 2011, HUD/FHA distributed a press release announcing extension of the temporary  “anti-flipping waiver”.  This regulation was waived last year through January 31, 2011.  Now FHA will permit the waiver through the end of 2011.  

The release states: “This action will permit buyers to continue to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. It will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.”  Follow this link to read the entire press release.

This program is a good thing for Philadelphia and the region.  It will help properties to move by allowing investors and market forces to operate free of cumbersome restrictions.  Prior to the “anti-flipping waiver” FHA required 90 days between the initial acquisition and the date when the property could be place under contract, again.  FHA research found that in the current market, purchasing, renovating and reselling a property typically takes less than 90 days.  Click this link to read the Anti-Flipping Waiver.

If you have any HUD/FHA or appraisal related questions, please feel free to contact our office at 215.836.5500 or submit your question through our Ask PAB! page link.

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FHA Protocols

The FHA has a number of appraisal inspection protocols which must be followed by FHA Appraisers.  Agents and Sellers should be aware of these inspection protocols as they may affect the appraisal and upset settlement timelines.  These protocols are intended to assure a level of due diligence that must be performed by the appraiser in order to property assess whether or not a property meets the Minimum Property Standards set forth by HUD/FHA.

The Head & Shoulders Test – this standard simply means that when inspecting attics, basements and crawl spaces an FHA appraiser must enter the space to “head and shoulders” level, at a minimum, to allow for a proper visual inspection. 

Mechanicals & Plumbing – all of the homes mechanical systems and plumbing must be turned on and available to be tested by the appraiser.  A representative sampling of switches, outlets and fixtures must be tested.  The heater must be operational.  If temperatures permit, cooling systems must be tested.  Water pressure and temperature should also be tested.

If for some reason, the appraiser cannot access any of these spaces or complete any of the necessary system tests, the appraiser must contact the lender and reschedule another inspection of the property at such a time that property access can be made.

This is where Agents and Sellers have to be proactive.  Make sure that these areas are readily and safely accessible to the appraiser.  Have a ladder ready for the attic inspection if there are no drop stairs.  Clear the access to the crawl space and have a light available to light up those dark corners.  Remove any personal property that could block these areas from access and view.  Make sure that all of the utilities are turned on and are ready to be tested.

These simple steps will save time and money.  The FHA appraisal process will move more quickly without having to schedule unnecessary reinspection appointments; and the appraiser won’t have to charge a re-inspection fee.

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FHA Q&A

 

Also, take into consideration, that while the FHA may be OK with these conditions, most Buyers in the Philly region are not.  Would you be OK purchasing a property with either of these situations present?   

As more and more Buyers use FHA financing, Sellers and their Agents will have to educate themselves on the FHA repair guidelines and requirements.  This can be a daunting task.  As of today, the HUD Handbook, also known as Valuation Analysis for Single Family One-to-Four-Unit Dwellings (4150.2) is comprised of nine chapters and four appendices, totaling hundreds of pages.  And, it seems like the handbook is revised or updated on a weekly basis.  

When marketing your home, try to position it to appeal to the widest range of buyers.  If your home’s sale price is at or under the current FHA program limits for the Philadelphia region ($420,000) then you would be wise to make sure that your home is compliant with the FHA guidelines and be prepared to repair any FHA required repairs or inspections.  

If you don’t know the FHA Guidelines 4150.2 and how they apply to your situation, you may want to consider hiring an FHA Appraiser to visit your property prior to listing.  In addition to providing a Pre-Listing Appraisal, the Appraiser could point out potential FHA issues that might affect a potential Buyer’s ability to obtain funding as well as issues that could be addressed ahead of time…essentially taking them off the negotiating table and possibly speeding up the selling process.   

For answers to any other FHA related questions, please feel free to send us an email or just post to this site.   

 

Q: What do these two pictures have in common?  

A: They are both acceptable property conditions under FHA Guidelines.  Now, local laws and zoning may take issue with heaving concrete sidewalks and blood stained flooring surfaces but, not HUD/FHA.  In Mortgagee Letter 2005-ML-48, these conditions were cited along with a list of other “minimum property conditions that no longer require automatic repair.”

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FHA & Distressed Paint

Appraising in Philadelphia, typically means that from time-to-time you will appraise a property for an FHA insured loan. That invariably brings up questions from realtors, lenders and homeowners about FHA Guidelines and, more specifically, those guidelines pertaining to distressed paint. The FHA guideline for peeling, chipping, “alligatored” and otherwise distressed paint on a residence is pretty straightforward.

In 1978, paint manufactures stopped using lead in their products. This was in reaction to studies that indicated lead paint was a contributor to a myriad of health issues among children and adults. It falls into the category of being a health issue. FHA doesn’t like issues that could affect the health or safety of  residents.

So, if a house was built prior to 1978, it can be assumed that there is lead based paint present. Given the age of the housing stock in Philadelphia, you can see what an issue distressed paint can be since the vast majority of Philadelphia’s homes were built prior to 1940.  If that paint is chipped, peeling, “alligatored” or otherwise distressed, the FHA Guidelines state that it must be properly cured. The FHA publishes guidelines on exactly how to properly cure lead based paint issues at a house.

Does that mean that homes built after 1978 are in the clear when it comes to distressed paint? Well, yes and no.

Yes, they are in the clear as far as the health and safety issues brought about by Lead Based Paint…and No, because if there is distressed paint (especially on an exterior surface), it can become an issue that would diminish the economic life of a property, especially if there is exposed wood that would be prone to decay if not properly painted. Distressed paint in a post 1978 house would also need to be properly cured.

Hopefully, this information will be useful to you. If you have any other questions regarding FHA insurability and guidelines, please feel free to call our office – 215.836.5500

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