Brokers – Is Your Listing FHA Friendly?
I was speaking with a Realtor just a few days ago and realized that there are some simple things Brokers can DO RIGHT NOW that will make their LISTINGS SELL FASTER and maybe FOR TOP DOLLAR.
IS YOUR HOME LISTING FHA FRIENDLY?
All too often after parties agree to the purchase price escrow can come to a grinding halt or be delayed for days – and even weeks – due to an appraisal being completed “subject to” various repairs or inspections. This doesn’t have to happen and it’s not the appraiser’s fault. If your home is in the price range that it would qualify for FHA financing then chances are the home has to qualify and part of an appraiser’s fiduciary responsibility is to report any defects or items that FHA considers would affect the “health and safety” of its occupants.
Let’s step back a second.
In Tarrant County (Texas) the FHA threshold is $510,400, and there were 2,571 detached SFR homes sold in the month of September (2020). Of these, 2,325 homes were sold under $510,000 – or roughly 90.4% of all homes sold may have qualified for FHA.
As a broker or Realtor, you should familiarize yourself with some of the areas that FHA considers “red flags” and which appraisers are bound to report. These often seem insignificant, yet ignoring them will generally lead to delayed transactions. When you have a new listing, you should take a walk around the property and look for the following to be repaired immediately:
1. Peeling paint: if the home was built prior to 1978 it may contain lead-based paint. A listing disclosure is required but is not enough. You will need the seller to repair or paint any peeling paint. If the buyers use FHA financing, this will become a “subject to” repair condition, and may delay the transaction.
2. Utilities: All utilities should be on and functional, including gas, electric, and water.
3. Handrails: If the home has a second floor or a walkout basement, or any stairs for that matter, it will need handrails. Patios, wood decks and balconies need rand rails. If there are none, FHA considers this a trip/fall hazard and would require it.
4. Broken Windows: Any broken glass window panes need to be repaired/replaced, as this may fall under health and safety.
5. Security Bars on Windows: All windows that have security bars must have an emergency release mechanism to allow emergency ingress/egress as well as access to emergency responders.
6. Deadbolts: if a front or rear door only has a deadbolt that requires key from the inside, it is a health/safety condition. If the door only has a deadbolt it must have a latch or means to open from inside without a key in the event of an emergency.
7. Sagging Floors/Cracks: if the home has sagging floors, uneven flooring, and cracks on the inside or outside, these can be caused by foundation settlement or other structural concerns. If your listing has any sign of foundation issues, get a foundation inspection done as soon as possible and make repairs. If the home buyers are using FHA, it will most likely be a condition to place on hold pending reports and/or repairs, and will add days or weeks to the transaction.
8. Attic and Crawl Space Access: FHA requires appraisers to view the attic and crawl space. Make sure these areas are accessible, particularly crawl spaces where access might be a trap door in a closet or a panel on the exterior of the home. Manufactured also require viewing the crawl space so it’s a good idea to see if there is a panel that can be opened or if there is an exterior opening.
9. Smoke and Carbon Monoxide Detectors: While these are now required on new home construction, many existing homes either lack detectors or have inoperable ones. FHA guidelines has changed over the years on placement of detectors, but a safe bet is to install one in every bedroom, hallway, and at least one living area on a ground floor if the home’s bedrooms are all upstairs. If the home has gas utilities, you will need to add CO2 detectors on each floor. A good recommendation is to have one in the laundry room, garage and/or attic if there are any gas lines in these areas. The good thing is you can also buy combo smoke and CO2 detectors. Keep a few handy, and get them installed WITH WORKING BATTERIES to ensure that the home sale process does not get delayed.
10. Loose Wiring/Missing Outlet Covers/GFI: all electrical outlets near water (kitchen and bath sinks) are required to have a GFI outlet. All outlets and light switches must have covers to prevent accidental shocking. Any loose or cut electrical wires will need to be properly secured or repaired. These are items that a home inspector will find, so it may be a great idea to get a home inspector at the beginning of the listing process and ensure that there are no hidden or undetected concerns that might be a delay later on after a contract is accepted.
If you do these 10 tips on every listing you will likely save days or weeks later on if buyers use FHA financing. Some of the above tips are not FHA inclusive, and just make sense to get done as part of your listing process. And you might find that the home has a greater selling potential.