Selling your home?
Is the house ready for an FHA or VA appraisal and inspection?
I am selling the house. Why do I care if the buyer can get an FHA loan? Well for starters (as of 2012, HUD no longer reports this data) FHA insured home loans represent over 14% of all homes sales, and while it isn’t reported I am certain that this number is higher with true first time home buyers, starter homes and first move up homes. There is no one selling anything that wants to reduce their potential market by 15%, and I am sure you don’t either.
The next reason is because many lenders have adopted HUD and FHA lending requirements, and adapted them to their own risk analysis…so HUD guidelines are a good starting point for ensuring that the lending process doesn’t kill the deal when you find a qualified buyer for your home.
Now that we know why we care, lets look at what we need to do.
We will begin by looking at the HUD resource that is basis of FHA lending requirements, “Valuation Analysis for Single Family One- to Four- Unit Dwellings (4150.2)”. The 9 chapters and 4 appendices of this handbook covers site appraiser credentials, how lenders select appraisers, site requirements, neighborhood hazards and nuisances, guidelines for property analysis, valuation process, finding the land value, how the appraisal is to be reported, full legal definition and description of FHA insurance, repair requirements, planned unit development… and pretty much everything else you might want to know about how HUD values homes.
I am not going to go over all of that today, because quite frankly, its boring and most of it is not germaine to todays topic. Getting the house you are selling within the FHA lending guidelines, so it can sell quickly. What I will do is give you a link to “Valuation Analysis for Single Family One- to Four- Unit Dwellings (4150.2)” so that if you want the whole story… you will have it.
So what are the home conditions that will keep a loan underwriter from allowing my home to close? While this is not an exhaustive list, here are some of the most common things that will be required repairs for an FHA home loan to close:
- Serious plumbing issues and leaks
- Lawn not properly graded away from house
- Dilapidated out buildings
- Damaged gutters and downspouts
- Inoperable doors (sometimes even if they “stick too much”
- ANY exposed wiring
- Non functioning heating and cooling systems
- Failing septic system
- Infestations of rodents or insects
- Bedrooms without dual egress
- Abandoned or dysfunctional pools
- Torn window screens
- Damaged fencing
- Foundation defects
- A lack of or defective kitchen appliances which are typically sold with homes
- Peeling paint (especially with homes built prior to 1978)
- Wood rot on windows, eaves, and fascia
- No pressure relief valve on water heater
Now like I said, this is not a complete list but if you inspect and correct all of these potential issues, then you are in a pretty good place when it comes to things that are likely to prevent your home sale from closing.
I do want to hit on one more area that can cause issues with an FHA loan. That is wells. While you will have to have a separate well and septic inspection, you can get a FHA home loan on a property with a well. There is a caveat though. You see, HUD wants everyone on municipal water. As a result of that, if the home you are selling can be connected to city water for less than 4% of the homes selling price, the lender will require it to be done prior to closing.
Those are the main things to watch for when buying or selling a home with VA or FHA financing. As always, it is always best to hire a Blue Ribbon Team Realtor to guide the way.