Thread: Appraisers rejecting Home Inspection Comments

The Alaska Housing Finance Corporation (quasi-governmental mortgage fund source) included the following in today's seller/servicer memo:

"Final Inspections
(Section 2000)
When a home inspector or engineer has inspected a property and recommends repairs, lenders should rely on the home inspector or engineer to make the final inspection for completion. AHFC has seen an increased reliance placed on appraisers to determine which repairs should be required and to inspect for completion of the repairs. In those cases where a home inspection report requires only a few minor repairs, it may be reasonable to allow the appraiser to certify that they have been completed when he/she makes his inspection. However, when an appraiser states that repairs called for by the home inspector are not required, the lender should investigate further with the home inspector. Typically, AHFC will require that the home inspector certify that his/her required repairs have been completed."

I think at least two points are worth discussing here. 1. AHFC is acknowledging that HI's should not be ignored when appraisers try to modify the HI's comments. 2. Just who should be "requiring" repairs in the mortgage lending system?

I recommend improvements and repairs in categories with the items I define as "Recommended for Immediate Attention" usually being "required" by the mortgage lenders. I know of several occasions where important repairs have been ignored when appraisers advised the lender that my suggestions should not be required and a couple of other occasions where they "required" items that I categorized as "Suggested Upgrades" or "Maintenance Suggestions". It makes me wonder who is really in charge in this lender funding system. I know that many HI's do not categorize but in Juneau, the lenders want to know what I "require" and if I do not categorize, they rely on the appraisers to do it.

Chris Roust
Juneau, Alaska

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Originally Posted by Chris Roust

The Alaska Housing Finance Corporation (quasi-governmental mortgage fund source) included the following in today's seller/servicer memo:

"Final Inspections
(Section 2000)
When a home inspector or engineer has inspected a property and recommends repairs, lenders should rely on the home inspector or engineer to make the final inspection for completion. AHFC has seen an increased reliance placed on appraisers to determine which repairs should be required and to inspect for completion of the repairs. In those cases where a home inspection report requires only a few minor repairs, it may be reasonable to allow the appraiser to certify that they have been completed when he/she makes his inspection. However, when an appraiser states that repairs called for by the home inspector are not required, the lender should investigate further with the home inspector. Typically, AHFC will require that the home inspector certify that his/her required repairs have been completed."

I think at least two points are worth discussing here. 1. AHFC is acknowledging that HI's should not be ignored when appraisers try to modify the HI's comments. 2. Just who should be "requiring" repairs in the mortgage lending system?

I recommend improvements and repairs in categories with the items I define as "Recommended for Immediate Attention" usually being "required" by the mortgage lenders. I know of several occasions where important repairs have been ignored when appraisers advised the lender that my suggestions should not be required and a couple of other occasions where they "required" items that I categorized as "Suggested Upgrades" or "Maintenance Suggestions". It makes me wonder who is really in charge in this lender funding system. I know that many HI's do not categorize but in Juneau, the lenders want to know what I "require" and if I do not categorize, they rely on the appraisers to do it.

Chris Roust
Juneau, Alaska

If this is becoming the norm or if most homes go the route of AHFC, I would think that an inspector would need to develop or offer two type of inspections. One that would meet the needs for AHFC and one that meets normal standards for a home inspection. I would also state that home inspectors can not really "require" anything, they can only advise and recommend. The appraiser is the only one that can really require repairs to be made.

AHFC sounds like they are following the direction that FHA took several years back. The appraiser would "ding" an item and it would end up as a VC Condition. In order for the loan to be approved the VC Conditions had to be repaired or a certification offered saying that everything is OK.

Chris wrote: "Typically, AHFC will require that the home inspector certify that his/her required repairs have been completed."
__________________________________________________ _______________

That last statement is providing you with an additional means of income!! If you are going to have to certify that repairs have been made, then it will require another fee...

rr

This is off the track a little, but I always recommend that my report NOT be shared with the lender but used for my clients benefit.
I have been involved with situations where the lender got a copy of my report and proceeded to make EVERY repair mandatory before the deal could close.
The lender is not protecting the borrower, but their collateral. Many times the buyer is getting a deal on the house because repairs are needed and the buyer plans on doing repairs and upgrades after they have possession of the property.
The Appraiser should be the person the banks are using to set the value.
I have never seen a perfect house and very few that the seller is willing to make all of the repairs before closing.

While having the banks and government acknowledge our abilities is great, we need to keep in mind that the client is our customer, not the lenders.

Scott,
I have tried to resist two inspection types. Knowing that most local mortgage lenders follow AHFC's lead, I just use the "Recommended for Immediate Attention" to be the code for their list of "required" items and do a normal report - except that I do make the "cut" for them but call it a "recommendation".

Richard,
You bet I do charge extra for a "reinspection" but try to be careful not to "certify" that the repairs are adequate. I say that the items in the original report "appeared to be addressed".

It is a little tricky in this market as the 6 inspectors have different standards as to which items go into the "Recommended for Immediate Attention" category and the appraisers have different standards as well. This can lead to a bigger challenge than in other areas when the same property is inspected by multiple inspectors before it is sold. Only two of the 6 of us are members of national HI groups (ASHI).

Three of the 6 are civil engineers (engineers and architects can inspect real estate in Alaska with no CE's or specific training in home inspection) and they have very different standards.

Originally Posted by Jim Luttrall

This is off the track a little, but I always recommend that my report NOT be shared with the lender but used for my clients benefit....

Jim,
That would be great but the reality in my area is that most buyers do not know about home inspection and most realtors would rather not mention that inspection is an option UNLESS the mortgage lender requires an inspection. So, if I did not allow the lender to see my report, I would get very little work. The lenders are not my client but they are the reason that an inspection is being requested. The only influence the lender has on my report is to request that I make a recommendation on which items their underwriter or appraiser will require. Suprisingly, the safety items I recommend for immediate attention almost always are included in their requirements so they are looking at more than just the potential resaleability of a potential foreclosure, they are concerned that the property is safe for their clients.

Chris, sounds like you have a workable arrangement with the lenders.

But,

Surprisingly, the safety items I recommend for immediate attention almost always are included in their requirements so they are looking at more than just the potential resaleability of a potential foreclosure, they are concerned that the property is safe for their clients.

I would guess their real reason behind their concern is more liability than concern... but maybe I am just a little too jaded.

I don't disallow lenders or anyone else from seeing the report, not my choice or concern, I just advise the clients what "can" happen.