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.  FHA Roster Appraisers are reminded to report all readily observable property deficiencies, as well as any adverse conditions discovered performing the research involved in completing the appraisal, within the appraisal reporting form.  Lenders should use professional judgment and rely upon prudent underwriting practices in determining when a property condition poses a threat to the safety of an occupant and/or jeopardizes the soundness and structural integrity of the property, such that additional inspections and/or repairs are necessary. 

Repair Requirements

As stated in Revised Appendix D, FHA now permits an “as-is” appraisal for existing properties that serve as security for FHA-insured mortgages when minor property deficiencies, which generally result from deferred maintenance and  normal wear and tear, do not affect the safety of the occupants or the security and soundness of the property.  FHA no longer requires repairs for these types of minor cosmetic deficiencies to bring a property into compliance with FHA Minimum Property Requirements.  Specifically, the guidance provided in Handbook 4150.2, CHG-1, Chapter 3, Paragraph 3-6, A-7 referencing all-weather road surfaces; Paragraph 3-6, A-8 referencing poor workmanship; Paragraph 3-6, A-11 referencing debris and trash in crawl space; Paragraph 3-6, A-16 referencing steps without a handrail; Paragraph 3-6, C referencing bare floors, badly soiled carpeting and cracked plaster and sheetrock is no longer applicable.   Additionally, the guidance provided in Handbook 4905.1, REV-1, Chapter 2, Paragraph 2-7, A-2 referencing all weather road surfaces; Paragraph 2-8 referencing poor workmanship and Paragraph 2-14, C referencing crawl spaces with debris and trash is no longer applicable.  Any reference to the Valuation Condition form (form HUD-92564-VC) and protocol for its completion contained in Handbook 4150.2 is no longer applicable as well.  Examples of minor property conditions that no longer require automatic repair for existing properties include, but are not limited to:

·        Missing handrails

·        Cracked or damaged exit doors that are otherwise operable

·        Cracked window glass

·        Defective paint surfaces in homes constructed post 1978

·        Minor plumbing leaks (such as leaky faucets)

·        Defective floor finish or covering (worn through the finish, badly soiled carpeting)

·        Evidence of previous (non-active) Wood Destroying Insect/Organism damage where there is no evidence of unrepaired structural damage

·        Rotten or worn out counter tops

·        Damaged plaster, sheetrock or other wall and ceiling materials in homes constructed post- 1978

·        Poor workmanship

·        Trip hazards (cracked or partially heaving sidewalks, poorly installed carpeting)

·        Crawl space with debris and trash

·        Lack of an all weather driveway surface