FHA & VA Repairs and Other Related Issues- A Checklist

 

The home mortgage loan process can be a time-consuming undertaking.  For many people, it is the largest financial decision they may ever make.  Making a good financial decision requires being as informed and educated as possible.  

Home buying can also be very emotional and the process is sometimes complicated (but does not need to be frustrating) when dealing with Minimum Property Requirements (MPRs) as a part of any FHA or VA appraisal.  Once you have found the home of your dreams, proceed through the negotiation process, and put monies toward an appraisal, earnest deposit and other inspections, the last thing you want to happen is to find out there are potentially deal killing issues or costly repairs that you were not aware of. 

    Whether you are the seller, buyer, or the real estate agent, the more informed and educated you are in understanding the goals of FHA (safe, sound and secure) and VA (safe, sound and sanitary), the easier the FHA or VA appraisal process can be.

This checklist can be considered a tool in helping you understand possible FHA or VA related repairs or other issues that could present challenges in the appraisal process.  As you investigate and walk through the home, you should think about the aforementioned FHA and VA goals. 

As every property is different, this checklist is NOT INTENDED TO BE A COMPLETE reference on every possible FHA or VA repair or issue.  The information provided is based on HUD & VA handbooks, manuals & guidelines. 

Both FHA and VA recognize that not every deficiency or maintenance issue is considered a MPR violation.  Cosmetic issues are not usually MPR repairs, but rather are condition factors that are addressed in the appraisal valuation.  (Example 1: outdated carpeting would be considered a cosmetic issue that may affect market value, however, torn carpeting could be a trip (safety) hazard that would be considered a MPR and, therefore, require corrective action; Example 2: heavily marked up painted walls would be considered cosmetic, while chipped & peeling paint in homes built prior to 1978 would be considered a MPR.)  The appraiser is tasked with identifying the MPR related issues and providing necessary corrective/remediation actions.

When completing this checklist try to be as objective, complete and accurate as you can!  If any of your responses are ‘Yes’ you should investigate further any potential needed repairs or possible ineligibility by FHA or VA.  For example: If you mark yes to ‘home built prior to 1978” and yes to “defective paint”, then you should consider the severity of the repair.  Are there some minor spots of chipped/peeling paint or will the removal of chipped/peeling and repainting include significant portions of the home (including any outbuildings, painted fences, etc)?  Is there evidence of deterioration of the roofing material?  You should objectively look at whether the roof needs replacement, is nearing the end of its useful life but may otherwise be acceptable or simply has a couple shingles out of place.  What are the costs of the repairs?  Should any purchase offer consider a limit on the maximum repair costs?  Will the buyer or seller be responsible for paying?  By considering the totality of the repairs (whether minor or major), you can make a better educated and informed decision in contract negotiations.  

This checklist is designed to help you understand FHA & VA appraisal MPR guidelines and repairs that may be considered an issue in the appraisal process. Ultimately, however, it is the appraiser’s job to report any observable or known deficiencies to the lender that were found at the time of the appraisers site visit to the home and determine any required repairs, require further inspections (foundation, roof, environmental, etc) or note any related issues. 

 

EXTERIOR FACTORS

 

YES

 

NO

 

 

 

___

 

___

 

Gas or oil wells on or in close proximity to the subject?

 

___

 

___

 

"High pressure" gas or petroleum lines on or in close proximity to the subject?

 

___

 

___

 

Dwellings within a tower’s (high voltage transmission, radio/TV/cell, etc) fall distance?

 

___

 

___

 

Evidence of slush pits, or subsidence/sink holes?

 

___

 

___

 

Noise or hazard from heavy traffic areas or airport clear zones?

 

___

 

___

 

Stationary storage tanks, (above ground & UST's) of flammable or explosive materials?

 

___

 

___

 

In close proximity to dumps, landfills, industrial sites or other locations that could contain hazardous materials?

 

___

 

___

 

Is the property used for active farming activity?

 

___

 

___

 

Are there active farming operations adjacent to or in close proximity to the property?

 

___

 

___

 

Presence of pools of liquid, pits, ponds, lagoons, stressed vegetation, stained soils or pavement, drums or odors?

 

___

 

___

 

Grading does not provide positive drainage from structure(s)?

 

___

 

___

 

Standing water proximate to structure(s)?

 

___

 

___

 

Property is served by a private water system

 

___

 

___

 

If yes, Is public water hookup available?

 

___

 

___

 

Property is served by a private sewer system

 

___

 

___

 

If yes, Is public sewer hookup available?

 

___

 

___

 

Private sewage system shows observable evidence of system failure?

 

___

 

___

 

Separation distance between well and septic tank does not comply with HUD guidelines? (SEE NOTE 1)

 

___

 

___

 

Separation distance between well and drain field does not comply with HUD guidelines? (SEE NOTE 1)

 

___

 

___

 

Separation distance between well and property line does not comply with HUD guidelines? (SEE NOTE 1)

 

___

 

___

 

Are any of the utilities, shared with a neighboring property? (well, septic, gas, electric, etc)

 

___

 

___

 

Structure and accessory building(s) is/are ground level and/or wood is touching ground?

 

 

___

 

 

___

 

The house and/or other structure(s) within the legal boundaries of the property show obvious evidence of infestation from wood destroying insects, fungus growth or dry rot?

 

___

 

___

 

Property inaccessible by foot or vehicle?

 

___

 

___

 

Property is not provided with an all-weather surface?

 

___

 

___

 

Property accessible only by a private road or drive? (SEE NOTE 2)

 

 

 

 

 

BUILDING FACTORS

 

YES

 

NO

 

 

 

 

 

 

Structural Conditions

 

___

 

___

 

Floor Support Systems- Significant cracks; Evidence of water damage; Evidence of spongy/weak/rotted flooring?

 

___

 

___

 

Framing/Walls/Ceiling- Significant cracks; Visible holes in exposed areas that could affect structure; Significant water damage?

 

 

___

 

 

___

 

Attic- Inadequate Access; Evidence of holes; Support structure not intact or damaged; Significant water damage visible from interior; No ventilation by vent, fan or window?

 

 

 

 

 

Foundation

 

 

___

 

 

___

 

Basement- Blocked or inadequate access; Evidence of significant water damage; Significant cracks or erosion in exposed areas that affect structural soundness?

 

 

___

 

 

___

 

Crawl Space- Blocked or inadequate access; Space inadequate for maintenance and repair; Support beams not intact; Excessive dampness or ponding of water?

 

___

 

___

 

Slab- Significant cracks that could affect structural soundness?

 

 

 

 

Roofing

 

 

___

 

 

___

 

Evidence of deterioration of roofing materials (missing tiles, shingles, flashing); Roof life less than two years; Signs of leakage observable from ground; Roof is Flat or otherwise unobservable? (SEE NOTE 3)

 

___

 

___

 

A defective roof with 2 or more layers of shingles? (SEE NOTE 4)

 

INDOOR ENVIRONMENT FACTORS

 

YES

 

NO

 

 

 

___

 

___

 

In climates where heating systems are required, there is no permanent conventional heating source?

 

 

___

 

 

___

 

In climates where heating systems are required, a wood burning stove that is used as the primary heating source without a working permanent back up conventional heat unit?

 

 

 

 

Furnace/Heating System

 

 

___

 

 

___

 

Unit does not turn 'On'; Heat is not emitted; Unusual or irregular noises are heard; Smoke or irregular smell is emitted; Significant holes or deterioration on the unit(s)?

 

 

 

 

Air Conditioning (central)

 

 

___

 

 

___

 

Unit does not turn 'On'; Cold air is not emitted; Unusual or irregular noises are heard; Smoke or irregular smell is emitted; Significant holes or deterioration on the unit(s)?

 

 

 

 

Electrical System

 

 

___

 

 

___

 

(check a representative sample) Electrical switches do not function; Outlets do not function; Presence of sparks or smoke from outlets; Exposed, frayed or unconnected wiring?

 

 

 

 

Plumbing System

 

___

 

___

 

Water- Significant drop or limitation in pressure; No hot water?

 

___

 

___

 

Toilet- Toilets do not function; Presence of leak(s)?

 

___

 

___

 

Sinks/Bathtubs/Showers- Basin or pipes leak; Water does not run?

 

___

 

___

 

Leaks- Evidence of damage under fixtures; Puddles present?

 

___

 

___

 

Sewer System- Observable evidence of malfunction?

 

 

 

 

 

OTHER HEALTH AND SAFETY DEFICIENCIES

 

YES

 

NO

 

 

 

___

 

___

 

Is the home built prior to 1978? (SEE NOTE 5)

 

 

 

 

Defective Paint

 

___

 

___

 

Evidence of defective paint on exterior? (all buildings & structures and any painted items (including fences, etc) are considered)

 

___

 

___

 

Evidence of defective paint on interior?

 

___

 

___

 

Evidence of non- weather resistant exterior wood/wood trim that is bare paint?

 

 

 

 

Other Misc Issues (See Note 6)

 

___

 

___

 

Broken window panes/inoperable windows?

 

___

 

___

 

Broken or missing stairs?

 

___

 

___

 

Broken or missing exterior doors?

 

___

 

___

 

Inadequate/blocked entrances or exits?

 

___

 

___

 

Steps without handrails?

 

___

 

___

 

The mechanical garage door does not reverse or stop when meeting reasonable resistance during closing?

 

 

 

 

 

CONDOMINIUM FACTORS

 

YES

 

NO

 

 

 

___

 

___

 

Property is a condominium?

 

___

 

___

 

Is the property a detached single family residence, but the property's legal description includes the words "unit" or "condominium"?

 

___

 

___

 

This property is not on an FHA or VA approved condominium list? (See Note 7)

 

___

 

___

 

This condominium project does not meet the 51% owner occupancy requirement?

 

 

 

 

 

MANUFACTURED HOME FACTORS

 

YES

 

NO

 

 

 

___

 

___

 

Subject property or any portion of the property is a manufactured home as defined by HUD? (SEE NOTE 8)

 

___

 

___

 

Manufactured home does not have a HUD exterior tag(s)? (usually red or silver)

 

 

___

 

 

___

 

Manufactured home does not have a HUD interior data certification label? (8 ½ x 11 paper containing the data such as the manufacturer, year built, and other data on the home)

 

___

 

___

 

Manufactured home has attached additions/structural modifications?

 

___

 

___

 

Manufactured home does not has a permanent foundation? (SEE NOTE 9)

 

___

 

___

 

Manufactured home is not taxed as Real Estate? (personal property title must be purged)

 

 

 

 

Additional Notes (From HUD & VA guidelines):

 

Note 1: Separation Distances- Well, Septic & Drainfield

(Per HUD/FHA Procedures for Well Waivers Rev 5/13/2010) For existing construction over one-year old, a request for a waiver of the minimum distance requirements from the well to a potential source of pollution may be considered if it is less than that allowed by HUD Handbook 4905.1 or Mortgagee Letter 2002-25. The Handbook and Mortgagee Letter allows for a lesser distance from the well to the following sources of pollution if there is an impervious strata of clay, hardpan or rock and it is acceptable to state and local authorities. · septic drainfield (100 to 75 feet)  · property line (10 feet to 0 feet) provided that the well is not within 10 feet of any roadway or the property line of other than a single-family residential property

Note 2: Private Roads or Drives

HUD/FHA- Private Road Access and Maintenance- Private streets must be protected by permanent recorded easements or be owned and maintained by a HOA. Shared driveways must also meet these requirements.

VA- PRIVATE ROAD/COMMON-USE DRIVEWAY. Evidence that use of the private road or common-use driveway is protected by a recorded permanent easement or recorded right-of-way from the property to a public road, and that a provision exists for its continued maintenance.

 

Note 3: Roofs

HUD/FHA requires that the roof have at least 2 years remaining life. If the roof has less than 2 years remaining life, then the appraiser must call for re-roofing or repair. The condition must clearly state whether the subject is to be repaired or reroofed.

 

Note 4: Roofs

FHA will accept a maximum of 3 layers of exiting roofing. If more than 2 layers exist and repair is necessary, then all old roofing must be removed as part of the re-roofing.

VA requires all old shingles must first be removed, when a defective roof with 3 or more layers of shingles needs to be replace

 

Note 5: Lead Base Paint Hazards

If the home was built before 1978, this may indicate a lead paint hazard.

 

For all FHA insured properties, correction is required to all defective paint in or on structures and/or property improvements built before January 1, 1978 in accordance with 24 CFR Part 35. For any home built prior to 1978, check for evidence of defective paint surfaces, including: peeling, scaling or chipping paint.

VA Guideline- Appraisers must assume that a defective paint condition (involving cracked, scaling, chipped, peeling or loose paint) on any interior or exterior surface of properties built prior to 1978 involves lead-based paint.

 

If the home was built on or after January 1, 1978, correction may be required to defective paint in or on structures and/or property improvements

 

Note 6: Other Misc Issues

FHA Mortgagee Letter 2005-48 states: “In a continuing effort to reform and standardize its appraisal requirements, FHA has shifted from its historical emphasis on the repair of minor property deficiencies and now only requires repairs for those property conditions that rise above the level of cosmetic defects, minor defects or normal wear and tear.” Items such as cracked window glass, leaky faucet, and missing handrails are examples of conditions that are not automatically a required repair but could be a repair if the appraiser or the lender, considers it an issue for the MPR goal of “Safe, Sound & Secure”

 

Note 7: Condominiums

Both FHA & VA have guidelines on condominium approvals. You should check whether the condominium is on the respective condominium approval list, prior to purchase contract negotiations.

 

Note 8: Manufactured Homes

A manufactured home is defined as a structure that is transportable in one or more sections. In the traveling mode, the home is eight feet or more in width and forty feet or more in length and is built on a permanent chassis and designed to be used as a dwelling when connected to the required utilities, which includes the plumbing, heating, air conditioning and electrical systems contained therein. A Manufactured Home is designed and constructed to the Federal Manufactured Construction and Safety Standards (MHCSS) as evidenced by an affixed certification label. Manufactured Homes may also be referred to as mobile homes, sectionals, multi-sectional, doublewides, triple-wides or single-wides. Modular housing is built to local/state codes and is not to be considered manufactured housing. When erected on site, to be eligible for FHA insurance the manufactured home is: • Built on or after June 15, 1976 to the MHCSS • At least 400 square feet • Built and remains on a permanent chassis • Designed to be used as a dwelling with a permanent foundation built to FHA criteria

 

Note 9: Manufactured Home Foundation

HUD/FHA- Permanent Foundation must comply with the HUD Permanent Foundation Guide for Manufactured Housing - (Engineering Certificate Required).

VA- The VA Pamphlet 26-7 describes a number of methods considered to be permanent foundations, based on whether the manufactured home is situated on piers & footings, a concrete slab or continuous footings.