James S. Graner


Can A Home Buyer Use a FHA Appraisal Instead of A Home Inspection?

I have wrote in the past about the detail of an FHA observation. The FHA appraisal process requires a detailed observation of mechanical systems, (My personal favorite is the reverse feature on an automatic garage door opener.) attic, crawl spaces, electric fixtures, plumbing fixtures, paint surfaces, wood surfaces, safety concerns, etc.. This observation is not meant to be and is not the same as an inspection of these same systems within the home.

We have a significant difference between the detailed inspection made by a Home Inspector and the observation of a FHA Appraiser. The FHA Appraiser has a purpose of determining an opinion of market value, during the house visit the appraiser must verify the operation of some systems. This is done as HUD requires this as part of the scope of work.

Home Inspections are not required to be performed to fund a FHA insured loan, however a FHA appraisal report is required before a FHA Mortgage is insured by HUD. It is important to understand that the FHA appraiser is working on behalf of the bank or mortgage company, while the Home Inspector usually is working for a home buyer. Realtors are usually much more comfortable when a home buyer chooses to pay the additional money for a Home Inspection, this increases the likelyness that the buyer will be happy with their housing choice or bail out of a contract on a home that might cause litigation and a poor opinion of the REALTOR involved in the transaction. Sometimes the buyer feels this to be a hardship and unnecessary expense, so no Home Inspection is done.

While a Home Inspector has a duty of giving some degree of confidence of what an occupant can expect out of the home tomorrow and the next several years. The home has several thousand parts that must operate properly for maximum enjoyment and use of the home. This requires more time and tools than an appraiser would typically utilize.

The FHA Appraiser does look at many things and tries to verify several things while in a home, however my admission from the Department of Housing and Urban Development (HUD,) we appraisers are not performing a home inspection. There are several examples of where a Home Inspection can uncover things that the FHA Appraisal Report will not. I wrote down a few.

The FHA Appraiser will go into a room and turn on a light or other electrical device to observe the system to be functional and do the same in each room, as required by HUD. Just because an electric system turns a light or television on does not mean it is safe and funcioning in a fully acceptable manner. Most Home Inspectors will take an outlet in a room and verify it is properly wired, check for wiring connections, proper height and put a load on a circuit to verify the system safety and that it can operate more than a simple light bulb. In addition the electrical box will be checked in a Home Inspection for proper sized wires, circuits, etc...

The FHA Appraiser will briefly turn on the water, the hot water, flush the toilet in each bathroom. He/she will look for significant leaks, adequate pressure and loose plumbing fixtures. Most Home Inspectors will run water for a significant period of time looking for the slightest leak, and verify numerous things within the system that an average person would not think of. A Home Inspector that is trained by ASHI or another reputable group has extensive knowledge of what to look for in the system that might be a hidden problem. There is a significant difference between a Home Inspection and a FHA Appraisal Report.

The roof is observed from the ground by an FHA Appraiser, while I do carry a zoom camera and binoculars, many appraisers are left to view with the naked eye from the ground. Problem areas can best be observed from a much closer distance. Most Home Inspectors will walk the roof looking for problem areas with the shingles, sheathing, valleys, chimney areas, caps, vent pipes, loose guttering, etc...

In most basements any leaking is not observable on days that it is not raining. The FHA appraisal report will include an observation of the basement floors and walls, site will be inspected for positive drainage along with gutter downspouts and other factors. The Home Inspector will be able to study a multitude of factors and possible problems with a basement that might not be able to be determined on a day without outside moisture.

Many Home Inspectors are also licensed Termite Inspectors. This training and set of tools is a significant advantage over a regular person trying to observe rotted wood and the smallest inspect tunnels. The FHA appraiser will look for rotted wood and earth touching the frame of the home, however the detailed inspection is not part of the FHA appraisal.

I have wrote this to point out significant differences between the two professionals. Both have a significant purpose in a home purchase.  The opinion of a professional of the market value of the home is very important, and so is being able to determine the utility and well being of the home over the next few years.

 James S. Graner
Real Estate Appraiser
ph  (636)916-4325
cell (314)277-3336
fax (636)949-2637
Website http://appraisalmo.com
Blog       http://jimgraner.activerain.com

Comment balloon 9 commentsJames Graner • December 20 2008 09:39PM


We always advise our clients to get a home inspection. The appraisal is ordered by the lender and usually does not get into the clients hands well after the transaction is completed.

Posted by Patty Carroll over 10 years ago


That is great, and it makes my point in another way. The Appraisal report is really for the lender. However, usually any unsatisfactory FHA property conditions will stop the lender from funding the loan.  

In my area, the appraisal rider is common for residential sales contracts. It is hard to actually use because the limited number of days this rider is active for making the contract contigent on the appraisal meeting the sales price. It is hard to rely on something that is in somebody elses hands to review and read.


Posted by James Graner (Residential Services: http://appraisalmo.com) over 10 years ago

James - This is a great in depth contrast between the two professions.  Thank you.  I will likely reference it to lenders in the future.

Posted by Sara Goodwin, Portland, Oregon Appraiser (Ashcroft & Associates) over 10 years ago

I didn't realize until recently that FHA appraisers actually did a mini-inspection. I assume this isn't done to assess the value of the home.

In one of the transactions I"m working on, which happens to be a foreclosure, the appraiser went to the house (without my or the listing agent's knowledge) and turned in the appraisal. After the fact, the buyer's lender notified me that the appraiser couldn't complete his work because the utilities weren't turned on.

Posted by Retired Notworking over 10 years ago


I do not want to sound critcial, however the agents with success in my area have somebody understand where the loan progress is and how a perspective buyer plans on financing their home.

All utilities must be on when a FHA appraisal is performed. If a buyer is taking out a mortgage, count on an appraisal from the bank or mortgage company.

If the appraiser used the listing agents box, without authorization from the listing agent or his/her workers, he or she might be in violation of the lockbox agreement from the Board of REALTORS.


Posted by James Graner (Residential Services: http://appraisalmo.com) over 10 years ago

James - sometimes I see a listing with the code for the box included in the listing comments - usually a combination lock box - which in my opinion should not be printed for all to see.  As professional courtesy, an appraiser should always contact the listing/selling agent and/or buyers agent to notify them of the date and time of the inspection.  Also to obtain the code for the box if the property is vacant, or occupied with no one being there to allow access. 

You posted a good article showing the differences between the two professions. :)

Posted by David Hintz, AZAppraiser (Accurate Appraisals & Consulting of AZ) over 10 years ago


I always make phone contact before entering a home. I have seen that once or twice a lockbox code on the listing detail, it is better to confirm it is ok to enter.

Thank you for the kind words on my article.

Posted by Anonymous over 10 years ago

James if people would read the Scope of Work in any appraisal they will see that an appraisal is definately not to be construed as an inspection.   In my area we have a form for the buyer to sign stating that an appraisal is not a home inspection and the buyer is advised of his or her right to get a Home Inspection by a licensed professional.  The appraisal is for the lender and not for the buyer. The fact that it is an FHA appraisal makes no difference.

Posted by Brenda Abide (Weichert Realtors Benchmark) over 10 years ago


Thank you for stopping here, I appreciate every visitor and comment to my blogs.

I think you are writing about a form HUD 92564-CN (bottom right.) For Your Protection: Get a Home Inspection. This form certainly puts a very general idea of the difference between the two services. This form is commonly used in my area, as well, by REALTORS.

I originally wrote this article after receiving very heavy critisism from a Home Inspector who thought one of my previous articles put the FHA Appraiser and the Home Inspector in the same catagory or profession.


Posted by James Graner (Residential Services: http://appraisalmo.com) over 10 years ago