What to Tell Borrowers in an Appraisal Inspection

It can be hard to know exactly what to tell a borrower sometimes in an inspection when it comes to repairs. For example, if you see chipping and peeling paint in an older home, and it is an FHA inspection, do you let the homeowner know that there is a good chance that their lender will ask them to repair it? While it is probably not a big deal either way, I see both pros and cons to both sides of this issue.

If the borrowers seem kind and agreeable, I typically will tell them about the repairs. It gives me an opportunity to explain exactly what needs done so I do not end up coming out a third or fourth time. Additionally, it gives the owners a heads up so they are not surprised when the request comes back from their lender.

As I am walking through the home, if the borrowers seem hostile or defensive (it happens), I usually do not tell them about the repairs. My reasoning for this is thatI have encountered owners who have gotten angry when I mention that they may need repairs. They get upset because they think I am being difficult by pointing out a problem with their home. As you know, we as appraisers are really just the messengers when it comes to these types of repairs, so this is not a situation that I want to find myself in.  It is sometimes better coming from the lender.

Ultimately, it probably does not really matter whether you tell a homeowner about possible repairs that may be required. I typically try to read the borrowers and go with the option that I think will produce the best reaction.  

For more information on this subject, please download and listen to The Appraiser Coach Podcast Episode: 126 Telling Borrowers About Repairs

10 Comments on “What to Tell Borrowers in an Appraisal Inspection”

  1. Technically, would this information not be considered a “confidential” part of the appraisal assignment?

  2. If I get “pushed” by a seller about repairs I’ll show them. AND, I’ll tell them not to do one single thing until I have finished the appraisal process. I had a fellow appraiser run into to a lot of trouble because he shared the repairs with the seller, they immediately started to complete that process then, the appraisal was turned in, for less than the contract price. The sellers had a lot of animosity over completing the repairs without the knowledge of the home’s value.

  3. An appraiser should NEVER tell the owner or buyer what repairs “have” to be done, regardless of the type of loan being sought. Areas that are in need of repair are not called “Appraiser required repairs.” They are called “Lender required repairs” once the lender makes the decision. In an FHA appraisal assignment, it is the Lender’s underwriter that decides what repairs are to be completed. This has actually happened to me: I delivered an appraisal report where there was a list of repairs with estimates of cost to repair. The underwriter waived 2 of the items. If I had told the owner or the buyer that these items “had” to be repaired for FHA, they would have spent money they didn’t have to be spend – and it would have been my fault. The 2 items? One was a garage door opener that did not function and the other was a portion of a privacy fence that was unsafe. Do underwriters waive repair items very often? Hardly ever! But, it does happen…and when (or if) it does, the appraiser does not want to be on that end of things. Appraisers should simply tell the Lender what they saw and let the underwriter make the decision. That is FHA’s protocol anyway.

  4. We usually tell people about repairs and most of the time they are understanding. I mention it is an FHA requirement and then I am off the hook. We also go “the extra” step and mention these things prior to going out to give people the opportunity to make corrections prior to us coming. We see it as a courtesy. One of our local lenders has prepared a check list for listing agents that is quite detailed and we are considering using it.

  5. I agree with telling the borrower about repairs that I see that may come up from the lender. I let them know I have to put them in the report and sometimes they come back and sometimes they don’t. I tell them that it depends on the lender and they may or may not have them fix it. For FHA I always tell them including agents on purchases, what is going to be required repairs for I have never seen required repairs for FHA ever waived. I have experienced both ways and everything could have been done days or weeks sooner when informed earlier thus not slowing the process. I think it is better to educate our process and keep,it in the light than keep this secret black cloak appraiser persona that I feel the industry has developed.

  6. If they are reasonable people, I tell them. But I always tell them this is what will be in my report, but it is the lender’s decision, so don’t do anything until they say so. Another reason for that, is the loan may fall through for another reason. I prefer to tell them because if they go by the lender alone, they will very likely spend money fixing the wrong thing in the wrong way.

    In my opinion, the repairs are not confidential assignment results. They are facts.

  7. I usually tell them what repairs and point them out. I tell them also not to do any of them until they hear back from the loan officer or their Realtor. This way when I come back they are usually done and not half done. Seek The Truth

  8. Bobby, I look back at the time I was up that early working, and ponder why. When your current Ted Kaczyinski beard turns all gray/white, you’ll understand :); but I totally agree. Why open yourself up to another layer of liability?

  9. Like Dustin, I will usually mention repairs if the borrower or seller is being cooperative, for the same reason. I’ve showed up far too many times for a re-inspection where something was missed or not done correctly. I will pre-face it with “The lender will likely require this repair” but also urge them not to do it before they get the official word. If it’s a property that requires many items, or the borrower/seller/owner is not cooperative, I don’t mention it on site.

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