Tony Hernandez, the Administrator of Housing and Community who facilitates programs of the United States Department of Agriculture Rural Development (USDA), distributed a recent memorandum informing state directors that the USDA will begin requiring whole house inspections on existing dwellings. The USDA – Section 502 Direct Loan Program requires all loan applicants to obtain and submit a home inspection effective for applications taken on or after 10/1/2015.
There may be some confusion with buyers on why they would need a home inspection AND a real estate appraisal. For clarity, the appraisal determines the appraised value and the home inspection does an in depth look at the condition of the property and gives opinions of suggested and required repairs.
The benefits of a home inspection to the home buyer:
- The professional identifies problems with the condition of the dwelling.
- The buyer is in a better position to negotiate with the seller the terms of purchase.
- The buyer is more informed and confident in their home buying decision.
USDA will thoroughly review the home inspection report. They may deny the loan request if the subject property is not decent, safe, and sanitary, and if using loan funds to make the property eligible is not reasonable or feasible. If the house is acceptable, the appraisal should be ordered either “as is” or “as improved,” whichever is applicable.
USDA is requiring the home inspector to be a member of the American Society of Home Inspectors, the National Association of Certified Home Inspection, or the Nation Association of Home Inspection.
USDA expects the appraiser to follow FHA inspection guidance when performing the real estate appraisal. Valuation Management Group suggests that appraisers obtain a copy of the home inspection report prior to completion of the appraisal.
Valuation Management Group considers the requirement for a home inspection by the USDA a prudent decision to ensure that potential buyers know the condition of the house and can negotiate that any repairs be completed by the seller or be aware of the repair cost.
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Valuation Management Group is a national, full service appraisal management service company that manages the appraisal process for community banks, mortgage bankers and credit unions. We offer the full array of commercial and residential appraisal products and services. We take the appraisal process from ordinary to extraordinary.