FHA-approved appraisers evaluate a property’s value and safety for potential buyers who may not qualify for a non-FHA mortgage. They use comparable sales in the area to determine the property’s value and recommend repairs to make it habitable. Lenders employ their own FHA-approved appraisers who must be licensed and certified.
Appraisers approved by the Federal Housing Administration (FHA) are responsible for judging the value of a property that is the subject of an FHA insured mortgage application. The FHA assists people who may be unable to obtain a mortgage for credit or employment reasons to obtain a mortgage at a competitive interest rate. Appraisers are also responsible for verifying that a property is safe and habitable for the proposed buyer. Evaluating the risk to the lender if the property falls into foreclosure is the main reason a mortgage lender employs an appraiser before a mortgage is processed. An FHA appraiser must receive specific education and training to receive a license and certification.
Mortgages are insured by the FHA in order to provide lender protection when providing funds to purchase a property from a buyer whose credit may not meet the required levels for a non-FHA mortgage. Each lender employs an appraiser to find the property’s value based on factors such as the property’s size, location, and condition. FHA-approved appraisers generally value a property by finding an average price based on the sales prices of three comparable properties in the same area (often called “comps”) of comparable size and condition. All three properties generally sold within the previous 12 months to provide an average value of the property to be foreclosed on.
The safety and condition of the property being appraised is not the FHA appraiser’s top priority, although FHA guidelines allow an appraiser to make basic judgments about the condition of the property. Appraisers can decide whether a property is uninhabitable and recommend that an FHA property sale not take place. Lenders are given a list of repairs that must be completed to make the property safe for habitation. Repairs recommended by the appraiser may be required by the lender in order for the mortgage to proceed.
Lenders are responsible for finding and employing an FHA appraiser to ensure that potential losses associated with foreclosure are no greater than the property’s value. Appraisers determine whether a property’s proposed purchase price is reasonable and reflects market value. The value of the property should be high enough to ensure that the lender can recover most of the mortgage and costs associated with potential foreclosure.
Each FHA appraiser must be licensed or certified by the state upon completion of relevant education courses. Specialized education courses are completed by appraisers who wish to be accepted by the FHA as approved appraisers. Each lender generally employs its own appraisers who are approved to appraise properties under FHA guidelines.
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