FHA Inspection Checklist

FHA assignments comprise approximately half of my workload.   I do a lot of these. Hundreds a year.  Several of you have asked me to write down the basics for property standards.  To be clear: No FHA appraiser is a property inspector.  We only deal with apparent (obvious) deficiencies, and ask for inspections when an expert is needed. If you click on this link if you want access to the actual 4000.1 Handbook. This is definitely not a complete list.

Here’s the basics: HUD is primarily interested in whether the property is Safe, Secure, and Sound; so that buyers are not unreasonably burdened with expenses related to their home. “Safe” refers to the property and the likelihood someone may be injured in the typical use of the home and property. “Secure” refers to the ability to secure the property to prevent theft and break in.  “Sound” refers to the physical deterioration of the property, and whether it is suitably protected from aging. It’s important to note also that these standards exist even when the improvement contributes no value to the property.  A dilapidated barn that will collapse within the next 2 years probably does not contribute any value. But it will still injure a person.  Property standards for FHA are not only about collateral (the value of the assets).  I cannot, on an FHA assignment say “I can ignore that because I’m not valuing it.”

The FHA handbook is specific in some things, while it leaves a good amount of discretion and judgment to determine Safety, Security, and Soundness.  So - no appraiser can give you an exhaustive list of what things may get identified for repair. But, in the spirit of being helpful - here’s how I typically walk a property and what I look for:

On the exterior - 1. Roof, 2. Gutters, 3. Siding, 4. Paint, 5. Railing, 6. Exposed electrical.

I walk the property and look for the roof condition (HUD specifies there must be a minimum 2-year remaining economic life).  If the roof looks worn, damaged, or significantly mossy, I will likely call for a roof certification to ensure that the roof is compliant with this standard.  Gutters and Downspouts are not required, but if they are present, they must be in working order - disconnected downspouts and gutters pulling away from the roof are common issues.  This is a “soundness” issue in the Pacific Northwest, as water that is incorrectly directed away from the home can create larger problems for the siding and foundation.  

Exterior siding needs to be installed correctly and completely.  Missing or broken siding must be repaired. Warped, cracked, and chipped vinyl siding must be repaired.  Failing paint on the exterior of the home must be repaired.  Flaking, chipping, spalling, or any type of paint failure is directly called out in the handbook.  Now, some exterior wood does not require paint (some cedar shake, pressure-treated wood, etc.).  However, if a pressure-treated deck was previously painted and is now flaking off, the failing paint must be scraped and it must be repainted. (very common with decks and porches) *If the home was built before 1978, HUD instructs appraisers to treat failing paint on the exterior (and interior) as though it may contain lead. In this case, paint flakes on the ground are a health hazard. and paint removal/repair must not result in paint chips on the ground.

Decks and stairs are not specifically identified in the handbook. However, building codes are largely uniform in what they consider safe and unsafe. Most of the mortgage industry defaults to these standards.  For deck height - it’s 2 ½ feet (30 inches).  Measure the biggest drop from the deck/patio. If the drop exceeds 30 inches, it needs a guardrail to prevent someone from falling.  If a stairwell has 4 or more steps, there must be a handrail.  Please note: there are many lenders and some local codes that require a handrail at 3 steps. A handrail assists someone going up and down the stairs. Only one side is necessary.

Any exterior outlets with bare wires hanging out?  Cap them.

Appraisers are expected to poke their heads into the crawlspace and attic, if accessible. Before the appraiser shows up, please clear out the space to give me access.  If the crawlspace is screwed shut, please unfasten the screws.  

In the attic - 1. Rodents, 2. Insulation, 3. Ventilation, 4. Mold, 5. Active leaks. 

Rodents. If there are rodent droppings, does it smell?  If it does, there’s likely an active infestation that needs to be remediated.  Is there insulation?  Is it sufficient to be accepted by the market?  3. Ventilation. Can I see daylight from the vents?  Is the air excessively moist? (bathroom fans sometimes vent into attics, causing problems) does it smell? 4. Mold.  Is there black staining on the plywood roof decking? 5. Active leak.  Is there any staining or efflorescence associated with water intrusion?  Any of these will likely result in a call for a professional inspection. If the professional finds a problem, remediation.

In the crawlspace - 1. Rodents, 2. Insulation, 3. Standing water/moisture, 4. Debris, 5. Sufficient height.

Rodents. In a crawlspace evidence of infestation involves a combination of droppings, smell, and destroyed insulation.  Rodents use insulation as nesting.  Any combination of these may be an indication of rodent infestation.  Crawlspaces are to be sealed up/secured to prevent infestation. (are crawlspace openings screened off to prevent rodent access?  Does the exterior hatch seal up to prevent rodents?  2. Insulation. Is there sufficient insulation for market expectations?  Has it fallen down and become debris? 3. Standing water/moisture. Standing water in a crawlspace must be corrected regardless of how it entered. Vapor barriers are not necessary, but they may play a role in decreasing crawlspace moisture. 4. Debris. Crawlspaces must be clear of debris.  If insulation is all over the ground, a contractor stashes rubble or construction supplies in the crawlspace, it must get cleared out. 5. HUD used to require 18” minimum clearance in a crawlspace explicitly. This has been modified to say “sufficient height for access.”  The idea here is that future repairs on an inadequate crawlspace would adversely impact homeowners with additional repair costs.   Any deficient crawlspace conditions can result in a professional inspection or a call to repair.

On the Interior - 1. All appliances, 2. Heating/cooling, 3. Lights, 4. Mold, 5. Electrical, 6. Utilities.

When I move to the interior, I am systematic in how I walk through. I operate the garage door opener and measure the garage. Did the garage door opener work? HUD requires that all appliances included in the transaction must function.

I walk into every bedroom.  Turn on the light. Turn on the heater (if it’s an electric wall/baseboard), and look for exposed electrical (outlet and light switch covers).  In each bathroom, I turn on the lights, the exhaust fan, the sink faucets, and the shower, then flush the toilets while every faucet is on. Testing every fixture, and stress testing the water pressure. The lights must work. The fan must work. The sink, shower, and toilet must work. (have at least one functional light bulb in each light, I will be checking)  If an exhaust fan does not work, it must be repaired. (If an exhaust fan does not exist in the bathroom, it is acceptable unless there is evidence that its absence is a health/safety issue). Low or no water pressure must be remedied. HUD requires sufficient water pressure to be accepted by the market. 

In the kitchen, I confirm that all utilities are on and functioning.  If water, electricity, or gas are turned off, it will require a reinspect. I also check every appliance in the kitchen. If appliances do not function, they must be repaired, replaced, or removed.  Refrigerator, dishwasher, microwave, garbage disposal, stove/range, hood vent.  Gas fireplaces, if present.  Hot water, heating, and cooling take time to check - as I let the tap run for a while to determine that the water heater is working. Heating and cooling cycles are confirmed by feeling the air through the vents.

Smoke, CO, Water Heater straps.  These are the bane of my existence.  FHA says nothing about these. In Washington State, they are all required to be present by law.  The legislators have determined that homes without these features are not safe.  Since HUD broadly identifies that homes must be safe, secure, and sound, I have a difficult time defending the absence of these features in the presence of clear legal safety regulations.  For me, these are required for my FHA assignments.

Safety, Security, and Soundness are broad-sweeping ideas that require judgment to a certain degree.  Is there glass and piles of debris all over the property (safety)? Do the doors or windows of the home prevent safely exiting in an emergency (safety/egress)?  Do they have no door locks at all (security)?  Does the fencing or shed look like it could collapse on someone (safety/soundness)?  

Also outbuildings.  Is there a stick-built shed with peeling paint, a weathered door, bare wood, or a leaking roof?  HUD 4000.1 handbook says that minimum property requirements are applied to the primary dwelling and all additional structures.  Sheds, detached shops, garages, and ADUs are all required to meet these standards. 

Agents - best of luck on your deals!  I hope this helps to better navigate listings with your clients.  When you’re better informed, they’re better informed!

Hope to see you on a deal sometime soon!