Preparing your Home for a Home Inspection

Appraisals, HUD. FHA. VA. vs Home Inspections

All too often buyers confuse the role the appraiser with that of the home inspector, and when the difference is discovered it is too late, you have already purchased the house. Average appraisal time is about fifteen minutes in the house, verses about three to four hours for a home inspection of the same house.

This is a copy of the text in form issued by HUD explaining the difference between appraisals and home inspections. (HUD92564-CN(6/99))

Note: The concept discussed in this form is the same if you are buying for cash, with a conventional bank loan or a HUD, VA, or FHA loan.

US Department of Housing OMB Approval No.2502-0538
and Urban Development
Office of Housing
Federal Housing Commissioner

For your Protection: Get a Home Inspection

Name of Seller: __________________
Property Address: __________________

What the FHA does for buyers....and What We Don't Do.

What we do: FHA helps people become homeowners by insuring mortgages for lenders. This allows lenders to offer mortgages to first time buyers and others who may not qualify for conventional loans. Because the FHA insures the loan for the lender, the buyer pays only a very low down payment.

What we don't do: FHA does not guarantee the value or condition of your potential new home. If you find problems with your new home after closing, we will not give or lend money for repairs, and we can not buy the home back from you.

That's why it's so important for you the buyer, to get an independent home inspection. Ask a qualified home inspector to inspect your potential new home and give you the information you need to make a wise decision.

Appraisals and Home Inspections are Different

As part of our job insuring the loan, we require that the lender conduct an FHA appraisal. An appraisal is different from a home inspection. Appraisals are for lenders; home inspections are for buyers. The lender does an appraisal for three reasons:
- to estimate the value of a house
- to make sure that the house meets FHA minimum property standards
- to make sure that the house is marketable

Appraisals are not home inspections.

Why a Buyer Needs a Home Inspection
A home inspection gives the buyer more detailed information than an appraisal - information you need to make a wise decision. In a home inspection, a qualified inspector takes an in-depth, unbiased look at your potential new home to:
- evaluate the physical condition: structure, construction, and mechanical systems
- identify items that need to be repaired or replaced
- estimate the remaining useful life of the major systems, equipment, structure and finishes

What Goes into a Home Inspection
A home inspection gives the buyer an impartial, physical evaluation of the overall condition of the home and items that need to be repaired or replaced. The inspection gives a detailed report on the condition of the structural components, exterior, roofing, plumbing, electrical, heating, insulation and ventilation, air conditioning, and interiors.

Be an Informed Buyer
It is your responsibility to be an informed buyer. Be sure that what you buy is satisfactory in every respect. You have the right to carefully examine your potential new home with a qualified home inspector. You may arrange to do so before signing your contract, or may do so after signing the contract as long as your contract states that the sale of the home depends on the inspection.

I understand the importance of getting an independent home inspection. I have thought about this before I signed a contract with the seller for a home.

X__________________
Signature and Date

An appraisal is not a substitute for a Home Inspection
by a qualified home inspector.

Dear Barry,

We bought our home several months ago. During the escrow, the property was inspected by a VA inspector, and everything was approved. But two months ago, the heat pump began to malfunction. When our contractor came to repair it, he said the unit had been installed incorrectly, resulting in damage to the heat element. Now we have to replace the system at considerable cost. Shouldn't this have been discovered by the inspector? -- Barbara

Discovery of defects in a heating system is something to expect from a professional home inspector, not from a VA inspector/appraiser. If you looked for a VA appraiser to conduct the same level of inspection as a home inspector, you made a fatal, but common, error.

VA and FHA appraisers are often thought to perform detailed and comprehensive property inspections, when in fact, their task is to determine the market value of property, while checking for obvious physical defects. VA inspections are general overviews and do not begin to approach home inspections in scope, depth or detail. But don’t fault yourself to harshly for this misunderstanding: The Department of Housing and Urban Development recently made the same error, when they required FHA appraisers to begin performing the equivalent of a home inspection, as part of their appraisals.

To clarify the essential difference between a home inspection and a VA or FHA inspection, consider the relative backgrounds of these two unrelated professions. Home inspectors typically derive from the construction, architecture, or engineering professions. The physical aspects of real estate constitute their primary area of knowledge. Although some appraisers may also possess this type of experience, most draw their expertise from business, banking, accounting or other finance-related professions.

As examples of conditions inspected by home inspectors but not by VA appraisers: A home inspector evaluates the electrical wiring in the various breaker or fuse panels and tests the outlets for safe and proper wiring. A home inspector checks the operational condition of the various plumbing and heating components throughout the property. A home inspection includes a full roof evaluation, not from the ground, but on the roof itself (not to mention inside the attic). A home inspector crawls under the house and checks beneath the sinks, inside the fireplace, and down the chimney. The specific details checked by a home inspector number in the hundreds, and most of these exceed the scope of a VA inspection.

If a home inspection was not performed during your escrow, it is strongly advised that you have one done now. Regardless of who is liable for nondisclosure, you owe it to yourself to learn as much as possible about the safety and operability of your newly acquired home.