The Experienced Appraiser
Appraisal Tips For Florida Realtors - Top 5 Condition Issues
Updated: Feb 5
There are many condition issues that can hold up home purchase financing. These are the most common problems that we find in the field that may result in loan delays or denials.
Any condition issues that could result in degradation of the structure are a concern for typical financing programs. Addressing these issues prior to listing the home can save everyone time and money down the road, and will make the home more visually appealing to potential buyers.
A pre-listing appraisal is the most effective way to review these condition issues with a qualified professional while also providing an accurate independent view of your home's current worth. Experienced Appraisers Inc provides highly skilled appraisers throughout Florida.
1) Wood rot & Dry Rot
Fascia wood rot is present on many homes in Florida and is a relatively simple fix. This condition will almost guarantee a "flag" in the appraisal report, and it makes the home less attractive to potential buyers. Significant portions of wood that are visibly rotten will likely result in a lender repair condition regardless of the loan type. The most common location where we see wood rot is along the roof line (soffit and fascia), however damaged siding on wood frame homes is also common along the lower 1 foot portion.
2) Ceiling Issues
Appraisers are not home inspectors and they do not typically go on top of a roof. This means they have to rely on observations of the roof from ground level and interior ceilings for signs of potential issues. The appraiser often cannot tell if ceiling damage is from a prior issue or from an ongoing leak during their single site visit. If they see water marks they will probably call for a roof inspection just to be safe.
If you have water marks from prior water damage (especially from something like overflow of an ac drain pan in the roof), it is a good idea to repair the damage prior to listing the home. If the original source of the water intrusion has been addressed, there is no reason that you should not repair the remaining cosmetic damage.
3) Water Heaters
Significant water heater issues will be a problem regardless of the loan program because they are usually a safety issue. The most common issues we see are water heaters located outside of the home uncovered (exposed to the elements), rusted sections, or poor workmanship during installation.
The water heater should comply with local code including incoming power, water lines, and pressure relief valve requirements. The applicable Florida code can be found by clicking here but you should familiarize yourself with your city or county requirements also.
4) Paint Issues
Hopefully you are already aware that chipping/peeling paint on a pre-1978 build is a potential health hazard due to lead based paint concerns, and are aware that any lender or loan program may flag paint surface issues for pre-1978 builds. HUD guideline procedures referring to lead based paint can be found here
Many people are surprised to find out that lack of paint on exterior wood or defective paint surfaces on exterior wood can also be a problem for homes built after 1978. Fannie Mae has related requirements and there are also often specific lender requirements that apply.
Fannie Mae guidelines state:
"If the dwelling or related improvements were built after 1978, the Appraiser must report all defective paint surfaces on the exterior and require repair of any defective paint that exposes the subsurface to the elements"
Painting is one of the least expensive repairs and can carry a disproportionate market appeal gain. In other words, sellers should try to repair defective paint surfaces prior to listing the home. Exterior "raw" wood that is not painted is not acceptable because it leaves the subsurface exposed to the elements. Flaking paint and peeling paint can also be a problem for the same reason, even if the build is post 1978.
There are a million potential electrical issues, but we are focusing here on the obvious ones. If you have exposed electrical lines that are not capped and are a clear potential shock hazard, you are very likely to run into issues. Lenders now require power and water to be on during the appraisal in almost every instance, regardless of the loan type or program. If you think the electrical condition might be a shock hazard, it will probably be flagged for repair.
Regardless of whether the appraiser calls for a repair or not, they are required to report the condition, and then the lender may require a repair even if the appraiser did not. Knowledge of local code and current insurance requirements is also helpful. For example, period knob and tube wiring is often touted by sellers of historical residences, however will likely cause problems in obtaining insurance.
Fannie Mae Guidance
For all potential repair items, the appraiser must consider what the potential impact to occupants would be. Fannie Mae Selling Guide section B4-1.3-06 details their guidance position and is useful to understand. You can read the full selling guide by clicking here. The most relevant section to this discussion is on the last page.
The HUD Handbook 4000.1, FHA Single Family Housing Policy Handbook is the primary source for appraisers. It is extensive but is searchable and can be found by clicking here
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