Homes financed with an FHA loan must meet certain safety requirements. During an appraisal, an appraiser will inspect a property to identify any issues that may not meet FHA’s minimum standards. It is important for home buyers and home sellers to be aware of this and how it may impact home sale transactions.
Minimum Property Safety Requirements for FHA Loans
The Department of Housing and Urban Development (HUD) is responsibility for setting guidelines on FHA loans. Their primary concern when it comes to properties is safety and security. Thus, much of the minimum standards relate to these two goals. The following are some issues that would be problematic for FHA loans:
- Missing or loose handrails.
- Plumbing leaks.
- Electrical issues.
- Broken windows or doors.
- Chipping/peeling paint.
- Signs of wood destroying insects.
- Uneven or unsafe floor surfaces.
- Rooms lacking heat.
- Roof damage.
- Obvious violations of local building codes.
- Structural issues.
Please note that this is not a comprehensive list of property safety requirements for FHA loans. Visit the FHA website for full details.
What Happens When Issues are Identified
In order to obtain approval on an FHA loan, any issues identified during the appraisal must be addressed before closing. The appraiser may need to revisit the property(for an additional fee) to confirm. In some cases, a photo or statement of the repairs may be acceptable as well.
Unless the repairs were negotiated and agreed to after the home inspection, a seller typically has no legal obligation to address issues brought up by an appraiser. In most cases, home sellers are willing to take care of minor issues to keep the deal together. However, a problem may arise when it comes to major or expensive repairs.
Dealing with Issues in a Real Estate Transaction
When issues arise during a transaction, it can be helpful to have the guidance and counsel of a real estate attorney. Working with a buyer’s attorney before you sign your purchase and sales agreement is advisable. Your attorney can include language in the agreement to best protect your interests and rights. This can be helpful in preventing and resolving issues later on.