The appraisal has been ordered. Things are moving forward. You can see the closing table in the distance! Your Realtor calls and tells you that the appraisal came back just fine. Good news! Not so fast, though. There are repairs, and you’re going to have to fix them. Here’s a list of a few things you can do to move the process along, and ensure that the all the repairs are complete when the appraiser comes back. But first, let’s consider a couple of reasons why a final inspection is needed.
- New Construction / Rehab. When a home is being built or renovated, appraisers often complete an appraisal subject-to the home being built or renovated. We base our opinion of value on the hypothetical condition that the home will actually be built/rehabbed just like the builder said it would be. To check and make sure everything was built according to plans, the lender usually sends the appraiser back out after the home is complete, to do a final inspection. At this point, the appraiser checks the original appraisal, plans & specs, and all other relevant information, to make sure it is complete, and built per plans.
- FHA / USDA / VA. All government loan programs have specific appraisal guidelines that usually go above and beyond what is typically required in a traditional, conventional loan. I’ve blogged about some of those items here. As with new construction, if the appraiser notes any deficiencies, the appraisal is then completed subject-to repairs or re-inspection. Once those repairs are complete, the appraiser is called back out to verify that the home now meets guidelines.
Now that you have an idea of what a final inspection is, and when they might be ordered, here are three tips to getting through the process quickly and successfully.
- Read carefully. The appraiser should very specifically spell out what repairs are to be complete, or indicate that the appraisal is subject to plans and specs. If there are any specific conditions, read those carefully. If a repair needs to be done in a particular fashion, you’ll need to make sure you follow the appraiser’s instructions. Look at the photographs included in the report for guidance. The number one reason some FHA/USDA final inspections don’t pass is when peeling paint chips are left on the ground. All of our reports clearly spell out the steps for removing peeling/chipping paint: scrape the paint, repaint the wood, and clear out the debris. If the debris is just left on the ground, we’ll have to come back out as this presents an even greater health hazard.
- Communicate clearly. If you’re a Realtor or the Loan Officer, this means that you give the buyer/seller specific instructions. Some lenders will copy and paste portions of the appraisal and send that to the buyer/seller. That’s a great idea! If you’re the Realtor, you’re in the middle where communication often breaks down. So make sure you know exactly what is being required, and that you relay that information very clearly to your seller or purchaser. And, if anyone has a question, or needs something clarified, call the appraiser! We love to help, and if we can clarify the conditions we made in our appraisal, we’ll be happy to do so!
- Plan accordingly. This one is tricky. When should you notify the appraiser that the repairs are complete? Or, if you’re a builder, when should you let the bank know to send out the appraiser for the final inspection? My advice is to make that call early. Communicate with the lender that the repairs will be done on xxx day, and if you can, give the bank as much notice as possible. Why? Because contrary to popular opinion, an appraiser usually can’t just drop everything and run out to the property to do a final inspection. We have days and sometimes weeks of appraisals scheduled already, and sometimes it can be tough to fit in a final inspection. So here’s an example: You’re a builder and the home is nearing completion. You know for a fact that the home will be done and ready for the appraiser in seven days. Call the bank today. Tell them to order the final inspection, but have the appraiser plan on going out to the property in seven days. That way, the appraiser gets it on the calendar, and can call the builder the day before, just to make sure everything has been done. Easy! The same can be said for repairs. If you know the peeling paint will be repaired in a few days, go ahead and make that call to the bank and have them relay the information to the appraiser.
Whether you’re a builder, banker, or Realtor, these are tips you can easily implement into your business that can make a huge impact on your closing. By following these simple examples, you can reduce the amount of time it takes to get a final inspection back, and also prevent multiple trips made by the appraiser.
If you have any questions about the final inspection process, or about the appraisal process in general, feel free to give us a call anytime!