FHA CHECKLIST for REALTORS REVISED 06/01/2006
The following is a list of common problems that need attention when financing a property with an FHA loan in the Tampa Bay area. This list does not represent official HUD policy and is not intended to be all inclusive. It is only one individual’s interpretation of HUD requirements and is subject to frequent revision. Different lenders and appraisers will have their own interpretations. Its intended use is for real estate agents who need a basic understanding of HUD property requirements. This checklist was created by Robert Vanderlaan, State Certified Residential Real Estate Appraiser #FLRD402. Contact me at 727.785.6993 or Email:rvanderl@tampabay.rr.com

SUMMARY
Since its inception The Department of Housing and Urban Development (HUD) has established minimum property standards. While these standards have varied over time the recent changes have been some of the most dramatic in decades.  By eliminating many of the “nuisance” repairs and mandatory inspections HUD hopes to make it easier to buy or sell a home with FHA financing. The most recent changes are highlighted bold on this checklist.  

   POOR CONDITION

A lack of maintenance that gives a “run down” look to a property is acceptable.Missing or damaged flooring or carpet, rotted or worn out countertops, poor workmanship, damaged plaster or drywall, bathroom tile, missing or damaged interior doors, debris, trash, or other cosmetic items that do not otherwise jeopardize the safety or structural integrity of the property are acceptable and will not require repair.  

   FLIPPING

Flipping is a practice whereby a recently acquired property is resold for a considerable profit with an artificially inflated value. Any re-sale cannot occur within 90 days of a previous sale. The seller must be the owner of record. Any re-sale within six months that is more then double the original price will require two appraisals.

   CONDOMINIUMS

Projects must be at least 51% owner occupied and may not have a "right of first refusal" clause in the association documents.

   PRIVATE ROADS

Private roads are acceptable.  HUD no longer requires a maintenance agreement for private roads.

   ENVIRONMENTAL HAZARDS

Proximity to highways and railroads is acceptable. Proximity to high voltage power transmission lines is acceptable if the property is outside of the easement. HUD does not have a minimum setback for EPA super-fund sites but if contamination of the property is
suspected an environmental assessment inspection may be required.

   STRUCTURAL DEFECTS

Large settlement cracks, sagging floors or roofs, and significant deteriorated wood are conditions that require professional repair. Grading must be adequate to drain away from house.

   TERMITES

HUD will no longer automatically require a termite inspection.  Minor (non-structural) termite damage will not require repair.  Wood/soil contact that is not due to a structural problem will no longer require repair.

   SINKHOLES

A satisfactory inspection by a licensed civil engineer is required. All structural defects must be corrected.

   LEAD PAINT

For homes built before 1978, any peeling, chipping, or chalking paint on the house, detached garage, shed, fence, or anywhere on the property must be scraped, primed, and painted. Use tarps to collect paint chips to avoid contaminating the soil.  If the home is
built after 1978 HUD will no longer require painting of defective paint surfaces, in most cases.

   HEATING

The property must have a permanent heat source.  The heating and air conditioning system (if present) must be operating properly. Space heating systems are acceptable if installed in accordance with local building codes. Combustible (oil/gas) heat requires
exhaust ventilation.

   ROOFS

Leaking and worn out roofs require repair or replacement.  While a remaining life of at least two years is no longer specified a roof with a life of less then two years should be considered “worn out”. HUD will no longer require automatic inspection of a flat roof system.

   WINDOWS/DOORS

HUD will no longer require broken glass to be repaired. Exterior doors that are in poor condition but are otherwise functional are acceptable. Windows that stick, are loose, or are otherwise in poor but serviceable condition should be acceptable with the following exception: Inadequate access/egress from bedrooms to the exterior of the home is unacceptable. At least one window in each bedroom must open and close freely in order to allow escape in case of fire. Burglar bars on bedroom windows must have a release mechanism (at least one per bedroom).

   ELECTRIC

Fuses are acceptable. 60amp electric service may be acceptable (a small house with oil or gas for heating, cooking, and hot water). Loose wiring, open splices, and other hazardous conditions will require repair. An exception is low voltage (telephone or cable TV) wiring that would not present a hazard.

   WELL/SEPTIC

HUD will no longer require an automatic water quality test unless the property is within ¼ mile of a factory, gas station, landfill, junkyard, dry cleaning, or intense agricultural area. A septic test will only be required if a malfunction is suspected. Well must be minimum of 50' from septic tank, 75' from septic drain field (if local code allows), 10' from property line (if adjacent property is commercial), and 25' from house. Connection to public water/sewer is required if the cost to connect is less then 3% of the value of the property.

   CRAWL SPACE & ATTIC

Access to both the attic and the crawl space is required. Both must have adequate ventilation. Crawl spaces must have sufficient clearance for inspection and maintenance.

   VACANT HOMES

All utilities should be on in vacant homes in order to avoid re-inspection. All mechanical systems must be operating.

   PLUMBING

Minor plumbing leaks and defects are acceptable.  Major plumbing problems will require inspection and repair.  Water heaters must have a pressure relief valve.

   MANUFACTURED HOMES

Manufactured homes must be built after June 14, 1976, and have the HUD seal (a small metal tag approximately the size of a credit card) visible on the exterior of each section. If the seal is missing HUD can issue a “Letter of Label Verification” e-mail or fax request to Manufactured Housing Standards Division. The living area must be at least 400 square feet. The property may not be within a FEMA rated flood zone (A or V). The manufactured home may not be within a condominium project. Skirting is required. A licensed civil engineer must certify the foundation meets the standards described in the Permanent Foundation Guide for Manufactured housing.

   SAFETY CONCERNS

Smoke detectors are not required but if they are present they must work properly. HUD no longer requires repair of the safety device that automatically stops an obstructed electric garage door opener. Trip hazards such as uneven walkways or sidewalks will not require repair. Missing handrails on stairways are acceptable.

   HUD DOES NOT REQUIRE

HUD does not require the following:

• Appliances
• Screens
• Driveways
• Lawn sprinkler systems
• Pool repairs (unless they present a safety concern).