FHA Appraisals Are Not Just About Value
A conventional appraisal has one job: determine fair market value. An FHA appraisal has two jobs: determine fair market value and confirm that the property meets HUD's Minimum Property Standards (MPS). This dual mandate is what makes FHA appraisals different — and sometimes more demanding — than conventional appraisals.
The MPS exist to protect FHA-insured borrowers from purchasing homes with significant safety, soundness, or security issues. If a property doesn't meet these standards, the lender cannot fund the FHA loan until deficiencies are corrected — or the appraiser must condition the value on repairs being completed.
What the Appraiser Evaluates
An FHA appraiser performs a full walk-through of the interior and exterior of the property, looking at:
Safety Conditions
- Exposed electrical wiring or panels
- Missing handrails on staircases or decks
- Inoperable windows that are required egress points
- Evidence of carbon monoxide sources without proper venting
- Chipping or peeling paint (in homes built before 1978, due to lead paint risk)
Soundness Conditions
- Roof condition — must have at least two years of useful life remaining
- Foundation issues, settling, or cracking that suggests structural problems
- Water intrusion, moisture damage, or evidence of flooding
- Significant pest damage visible during inspection
- HVAC, plumbing, and electrical systems must be functional
Security Conditions
- All doors and windows must be functional and lockable
- Garage doors must work properly
- Property must provide safe access — driveway, walkways, and entry points
Common Issues That Cause FHA Appraisal Problems
Most FHA appraisals come back clean. But certain issues reliably cause conditions or value impacts:
- Peeling paint on the exterior or interior — especially common in older homes. HUD requires that peeling paint be remediated before closing on a home built before 1978.
- Roof at or near end of life — if the appraiser estimates less than two years of remaining life, the lender will typically require a roof inspection and possible replacement before funding.
- Water in the basement or crawlspace — active moisture issues must be addressed. Evidence of prior flooding that has been remediated may be noted but doesn't automatically kill the loan.
- Missing utilities — all utilities must be on and functional at the time of inspection. Water, gas, and electricity must be operable.
- Unpermitted additions — additions without permits can create appraisal complications. The appraiser may not be able to include the unpermitted square footage in their value calculation.
How the FHA Appraisal Process Works
Your lender orders the appraisal through an Appraisal Management Company (AMC) after your loan application is accepted. You do not choose the appraiser. Here's the typical timeline:
- Order placed — typically within 1–3 days of loan application approval.
- Inspection scheduled — the appraiser contacts the listing agent or seller's agent to schedule access, usually within 5–7 days.
- Inspection completed — takes 1–3 hours depending on property size.
- Report delivered — most FHA appraisals are delivered within 3–5 business days of the inspection.
- Lender review — the lender reviews for compliance with FHA guidelines, which may take 1–2 additional days.
What Happens If Repairs Are Required
If the appraiser notes required repairs, the FHA loan can still proceed — but the repairs must be completed and re-inspected before closing. The appraiser will typically write the appraisal "subject to" the repairs being done. Once work is completed, a re-inspection (called a "1004D") is ordered to confirm completion. The re-inspection fee is typically $150–$250.
In some cases, the seller agrees to make repairs as a condition of sale. In others, the lender may allow the buyer to escrow funds to complete repairs after closing — though this is less common with FHA loans than with conventional loans.
Preparing Your Home for an FHA Appraisal
If you're selling a home that will be purchased with FHA financing, a few steps can help avoid delays:
- Address peeling paint, especially on exterior surfaces of older homes.
- Ensure all utilities are on and accessible.
- Fix obvious safety issues: replace missing outlet covers, repair handrails, ensure all smoke detectors are functional.
- Make sure all windows and doors open, close, and lock properly.
- If you have an older roof, get a roof inspection report to document remaining life.
An FHA appraisal that comes back clean means your transaction can move forward without delays. With a little preparation, most homes pass without issue.