Did you know, selling your house to a buyer using a government loan program, such as the popular VA and FHA loans, as well as the lesser known USDA loan is different than selling to a cash or convention loan buyer? Those loans have certain appraisal requirements the property MUST meet before the loan can close. Unlike cash or convention loans which do not have such requirements.
If you didn’t know that, you are not alone. Most sellers don’t, and unfortunately a lot of real estate agents don’t do a good job in letting their sellers know, either.
Most of the items of interest to these loan programs are similar to what you will find on a whole house inspection report a buyer may do to determine the condition of the home. Only difference is, these are noted by the appraiser (not the inspector) and neither the buyer or seller has any say on whether the items will be fixed or not. Because these will be mandatory fixes that need to be done before the property can change hands.
So instead of finding out about these sorts of possible issues just days before closing, I am going to give you a list of items the appraiser will be looking for so you are prepared up front.
According to HUD (which oversees the government loan programs) and the HUD Handbook 4000.1, appraisers must ensure that the home, “must be free of all known hazards and adverse conditions that may affect the health and safety of the occupants.” With this, the appraiser must note any health, safety or structural issues the home might have. No matter how miniscule the problem may be.
So let’s jump in here and see what types of things you will want to take care of before putting your house on the market.
1. House must have proper drainage around the perimeter.
Drainage around a house, and more significantly the foundation, should be of the utmost importance for ANY homeowner. Water is a big enemy of houses, especially water that sits and puts pressure on a foundation. That can cause bowing, cracking and water penetration. All can be very expensive fixes.
2. Adequate water pressure and testing of both hot and cold water.
Too little water pressure and the function of faucets, hoses, etc is lost. Too much pressure causes pipes and faucets to fail prematurely and could cause leaks. Not having the accessibility to hot and /or cold water can be troublesome as well.
3. Water heater must be in working order and up to local code.
A working water heater is important to the function of the house. Many of our appliances use hot water as well as our sinks and showers. Not having a properly functioning water heater could mean no hot water, or too high of a temperature of hot water. Neither are safe.
4. No chipping, peeling or flaking paint on homes built on or before 1978.
Before 1978, much of the paint used on homes was lead-based. Which we have obviously learned in recent years is not good for your health. Chipped, peeling or flakes of paint around the house could easily wind up being accidentally ingested. So anytime the paint on older homes is showing signs of serious wear, the appraiser will mandate that it be scraped off and repainted.
5. Attic must have vents, no damage, exposed/frayed wires or signs of water penetration or leaks and there needs to be adequate insulation.
Most of this is about the integrity of the home. Issues up in the attic tend to work their way down into the living area of the home by way of water penetration, excess heat or cold, or potential fires caused by exposed wires.
6. No rotten or exposed wood.
Rotted out wood no longer is the water barrier it once was, meaning the interior of the house could become exposed to water.
7. Crawlspaces must have no signs of standing water or foundation issues.
Much like the attic before, issues underneath the house tend to cause problems in the living areas as well.
8. Electrical outlets must be in working condition with cover plates.
Obviously when you are dealing with electricity, safety is key. Bad wiring or open plated electric outlets can lead to injury or death.
9. Active termites infestations must be addressed.
Termites in this part of the country are not an “if” but a “when” for houses. Left untreated, termites can inflict great damage to any portion of the house made of wood.
10. Windows must open and close with no broken panes.
For safety reasons, being able to open a window (to exit the house in an emergency) and close the window (and lock it) to keep unwanted people out of the house, are important.
11. If there are safety bars, they must have a quick release.
If you live in an area where safety bars are prudent to your homes security, just make sure there is a quick release for emergencies.
12. No dangling wires from missing fixtures.
Have you taken down an old fan, or removed a broken light fixture, etc. Make sure you tuck the exposed wiring up into the housing or replace that fixture before trying to sell the house. Exposed wires are dangerous.
13. Smoke and carbon monoxide detectors must be present and up to local code.
For obvious reasons, being aware of smoke/fire or a poisonous gas is important for safety.
14. Roof should not be leaking and must have at least two years of economic life left. FHA will additionally not allow any roof with over three layers of existing roofing.
The roof is one of the most important parts to a house, it protects everything under it. Having a serviceable roof is a must for a government loan.
15. All rooms must have flooring. No bare plywood floors. Concrete may be ok.
Government loans mandate that a house must be in basic livable condition. This includes having flooring for all of the living areas. As it notes, a concrete floor may suffice depending on the situation.
16. All flooring must be free from holes, as they would be tripping hazards.
Just as all the rooms must have some form of flooring, the flooring must also be in decent shape. No holes allowed and they can be tripping hazards.
Take a look around your home, do you see any of these items? If so, even if you are not looking to put your house on the market anytime soon, these are some good maintenance type items to put on your list to keep your house safe and in good repair.
If you are going to be on the market soon, make sure you get to work on them right away. Not only will it lessen your load and stress of having to complete them in a short period of time before closing, these won’t be “issues” with the house the buyer sees and counts against the house when making their offer.
If you need help with or have questions regarding these items, you should contact your real estate agent and they can help you with this, and other things you should do to have your house ready for the market!