HUD HOC Reference Guide

Purpose of the Federal Housing Administration (FHA) Appraisal and Property Condition Assessment

The appraisal and property condition assessment is used to determine the market value and acceptability of the property for FHA mortgage insurance purposes. The value serves as a basis for determining the maximum FHA insurable mortgage loan. The appraisal is performed for the use and benefit of HUD, and the lender involved in the FHA transaction. In addition to providing an estimate of value, the appraisal provides an examination of the property for any visible and obvious and/or apparent deficiencies that may affect the livability of that property in terms of basic needs and/or the health and safety of the property's occupants. HUD/FHA MAKES NO WARRANTIES AS TO THE VALUE AND/OR CONDITION OF ANY FHA-APPRAISED PROPERTY, therefore buyers/borrowers must determine for themselves that the price of the property is �reasonable� and that its condition is �acceptable�.

NOTE: Borrowers should be encouraged to obtain an independent detailed HOME INSPECITON of the property. The actual cost of the home inspection fees, provided the fee is fair, reasonable, and customary for the market area, may be included as closing costs in meeting the borrower's minimum investment.

See HUD Handbook 4155.2 6.A.3.a