When getting a USDA mortgage the property you are buying must meet HUD minimum property requirements of being safe, sound and secure. HUD hasn't published an easy to follow list, but a HUD approved appraiser in Sacramento put together a list of what he looks for at FHA Appraisal Requirements (.pdf) which are:
- Utilities should be turned on so the appraiser can test systems and appliances.
- Appliances must function properly.
- There should be proper drainage around the perimeter of the house.
- The heating unit must be in working order (and AC if applicable).
- Water pressure must be adequate for the house. Appraisers flush toilets, turn on all faucets and ensure that both hot and cold water are working.
- The water heater must be in working order and strapped according to local code.
- Attics and crawlspaces are to be viewed at minimum from the shoulder up by the appraiser. When viewing the attic, appraisers make sure there are vents, no damage, no exposed or frayed wires, and that sunlight is not beaming through. When inspecting the crawl space, appraisers make sure there are no signs of standing water or any other foundation support issues. Excessive debris in the attic or crawl space should be removed.
- Paint must not be chipping, peeling, or flaking on homes built before 1978 because of the danger of lead-based paint (lead was used in paint prior to 1978). However, there must be no defective paint or bare wood for properties built after 1978 because defective paint impacts the economic longevity of the property. Defective paint should be scraped and repainted (with no wood chips on the soil).
- Electrical outlets must work (outlets should have a cover plate also).
- Toilets must flush and be mounted.
- Any active termite infestation needs to be cured.
- Minor cosmetic issues such as stained carpet or a need for interior paint are okay. The house does not have to be perfect, but if there are issues that impact health and safety or the longterm economic viability of the property, then those issues must be cured.
- Windows must open and close and they cannot be broken. Minor cracks can be okay so long as there is not an issue with safety, soundness and security.
- No dangling wires from missing fixtures or anywhere else.
- FHA doesn't require air conditioning, but if present the system should work as intended.
- Smoke detectors & carbon monoxide detectors are required insofar as required by local code
- The firewall from the garage to the house should be intact. Missing sheetrock, a pet door installed in the door, a lack of self-closing hinges, or a hollow door could pose a safety issue.
- A roof should not be leaking and needs to have at least two years of economic life left.
- A house will be rejected if the site is subject to hazards, environmental contaminants, noxious odors, or excessive noises to the point of endangering the physical improvements or affecting the livability of the property (this isn’t an issue for the vast majority of properties).
- A trip hazard is a subjective call to make by the appraiser and not necessarily an automatic repair, but if there is a legitimate safety issue it should be called out by the appraiser.
- There are things any appraiser will call out in an FHA appraisal, but there are times when appraisers have to consider how the spirit of FHA might apply in a situation. FHA is black and white on many issues, but other times appraisers simply need to use good judgment.
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