Home appraisers received a reprieve in the form of a clarification of a requirement issued earlier this year in HUD’s recent updates to FHA’s Single-Family Housing Policy Handbook [1].
When published earlier this year, the handbook contained a new requirement for appraisers to physically observe and operate appliances in a home while an appraisal was being conducted. Subsequently, realtors and appraisers expressed concerns that this requirement effectively turned appraisers into inspectors and exceeded the previously understood appraiser duties—and that it would ultimately hurt the consumer, resulting in longer and more costly appraisals.
The new guidelines clarify the requirement [1]; in most cases, appraisers are now only required to make sure that certain appliances that contribute to a property’s market value are physically present.
“Appraisers have a lot on their plate, and their work is important to ensuring buyers, sellers, lenders and everyone else involved in a transaction has a credible source to turn to when determining the value of a property,” National Association of Realtors President Tom Salomone said. “Requiring appraisers to perform duties that are better left to a home inspector only slows the process while potentially adding unnecessary costs. FHA did appraisers and consumers a big favor by clarifying appraiser duties and specifically listing the appliances to which this new guidance applies. While there are still improvements to be made, FHA’s announcement provides our realtor members with additional certainty as they continue playing a critical role in the home buying and selling process.”
The update to the requirements alleviates other problems as well. In some cases, appraisers were being blamed when homeowners reported after the appraisals that appliances were either broken or malfunctioning.
“The greatest impact of the revision to the HUD Protocol requirements relating to operational verification of appliances and fixtures is the relief for FHA panel appraisers from concerns of testing a malfunctioning appliance or fixture or being blamed for having broken an appliance or fixture as a result of testing during the inspection of the property,” said Greg Stephens, Chief Appraiser/Compliance with Metro-West Appraisal Co. “To ensure compliance with the previous guideline, some lenders were actually requiring the FHA panel appraisers to provide photographs of the actual operation of each fixture and appliance within the property being appraised.”
The new guidelines provide a clear definition of what constitutes an appliance: “Appliances refer to refrigerators, ranges/ovens, dishwashers, disposals, microwaves, and washers/dryers.”
Ernie Durbin, Chief Valuation Officer with Valuation Vision, noted that, “The handbook actually states that appraisers still have to confirm that remain and contribute to the market value opinion' are operational. So the appraiser is not fully off the hook for inspecting appliances. That being said, many times appliances do not contribute to the market value and therefore do not need to be confirmed as operational. A high-end built in appliance such as a subzero refrigerator would necessitate operation by the appraiser. Most freestanding appliances are not considered as contributing significantly to the value of a property, therefore they would not require operation. It is probably a good idea for appraisers to note all appliances that are on premises and simply state whether they contribute to value or not. Those that in fact contribute to value should be noted as functional and operated by the appraiser.”