The Federal Housing Administration (FHA) has a number of mandatory compliance statutes that directly impact appraisers and the appraisal process in this day and age. Being an appraiser in today’s industry involves staying up to date on regulatory changes that impact both lenders and the valuation process. But this can be a heavy burden, especially given the high rate of change in the real estate industry itself. That’s where an appraisal management company like Oxford AMC can come in handy! AMCs can help assist appraisers with FHA compliance risks so that there are no pitfalls in the process.
For example, one of the FHA’s compliance risks most recently released is the Single-Family Housing Policy Handbook. The guidelines of this handbook directly affects how appraisers do their jobs. Sure, it falls on the appraiser to read and understand these changes, but a good AMC (like your friends at Oxford) will help the appraiser stay on top of those changes and assist them in getting clarification where necessary.
How else can AMCs assist appraisers with FHA compliance risks? Let’s take a look.
New FHA Compliance Risk Statutes
First, here’s what you need to know about recent FHA changes. The administration has both added and expanded on some appraisal-relevant requirements:
- A 36-month history of sales/transfers for the comparable
- If a property’s roof has less than two years of physical life left, it must be reported and inspected
- Swimming pools must be in working order to receive full contributory value
- For properties near an airport, appraisers are required to refer to the airport’s contour map as part of the analysis
- For mixed-use properties, the allowable limit of non-residential use has increased from 25 percent to 49 percent
FHA is also now seeking more detailed information about the surrounding neighborhood’s market trends, specifically when markets are changing:
- Appraisers must analyze the 12 or 24-month time period to establish the market trend
- A minimum of two sales closed within 90-days of the effective date are required to be reported
- Two active/pending comparables in addition to the closed sales are required for a changing market
- Appraisers must report and analyze an absorption rate analysis
Appraisers are also going to have to get more hands on. Here are some of the new responsibilities:
Inspection of all Rooms in a Property
Appraisers must now inspect all rooms of a property. They will likely also have to take at least one representative photo in each room. If a borrower fails to give access to a specific room, it may require an additional trip to inspect it again at a later date.
If the subject has outbuildings, accessory dwelling units, garages or storage sheds on site, the appraiser must also inspect these areas as part of the FHA compliance risk requirements.
Inspection of all Extremities, too
Appraisers must be able to inspect the attic, scuttle, crawlspace, and/or basement if the property has these features. FHA compliance requires the appraiser to photograph these areas.
Appraisers are going to test mechanical systems, appliances and a representative number of light switches, faucets and electrical outlets. FHA now requires the appraiser to turn on the furnace and/or air conditioning systems to see if they operate normally.
The appraiser must turn all lights on and off, test plug outlets, and check to make sure that the appliances considered as “real estate” are operational. Any items not operating at the inspection are required to be mentioned in the appraisal.
Don’t Forget the Exterior
As per the FHA compliance risk guidelines, appraisers must check the property’s exterior and interior for peeling, cracking, or defective painted surfaces. FHA requires that all defective paint on the exterior be remedied so the subject will not be damaged by the elements.
Homes built prior to December 31, 1978, may contain lead-based paint, so any defective paint noted on the exterior and interior of these older homes will have to be scraped, painted with two coats of paint, and the debris cleaned up and disposed of properly.
How an AMC can Assist in FHA Compliance Risk Management
The changes and new requirements mentioned above are not even all of the changes made by the FHA. In fact, there are about 60 pages within the handbook that will impact appraisers. Plus, keep in mind that the handbook is not yet complete and will have future changes as well.
Don’t hesitate to reach out to an educated and informed AMC partner – someone who is abreast with all of the current FHA compliance risks and the ways in which you, as an appraiser, can mitigate each one to reach total compliance.
When you work with Oxford AMC, you can confidently turn your appraisal projects over to our experienced team, and we will deliver a reviewed, certified, and 100 percent FHA-compliant project while working with your staff and local approved appraisers. We will keep you in the know every step of the way – whether things are running smoothly, or something needs to be tweaked. Our secure, online portal is available for ordering, checking, and monitoring 24/7, and we screen every detail of a process that has been refined over many years.
While it takes considerable time to learn about all of these changes, being aware and paying attention to the new requirements will save you time in the long run. Remember, don’t hesitate to ask your AMC about ways they can help you with FHA compliance. At Oxford, we strive to assist both appraisers and lender/clients in complete and total FHA compliance risk management. Reach out to the experts at Oxford today to learn more!