Birmingham, AL Real Estate Appraiser FAQ: Can a Conventional Appraisal be Converted to an FHA Appraisal?

I get this question quite a bit, and the short answer is “yes”.  There are some conditions for how this is to be done however, depending on the situation.  The most typical case would be where the borrower was purchasing a home with a conventional loan but then changed to FHA financing.  If the loan is with the same lender, and the appraisal was recently completed, the lender would need to get an FHA case number.  A new appraisal inspection would need to be performed after the case number was issued, so it would be necessary to re-inspect the property and complete the necessary FHA requirements.  This includes, but is not limited to the following: inspection of the attic and crawl space, verification of operation of the plumbing, electrical, and HVAC systems, and verification that all appliances operate.  In addition, the appraiser would verify that no problems exist that relate to the safety, soundness, and security of the subject property. These MPR items were covered in another blog post which can be viewed here.  After this is done the appraisal report will be acceptable for FHA financing.conventional to fha conversion

If the borrower has switched lenders, the new lender would need to order a brand new appraisal with FHA case number.  It’s not likely the same appraiser would get this assignment too, however if the they did they would be required to disclose this to the new client.  As in the previous case, if the original appraisal was recently performed and no new sales exist, only those items noted above would need to be performed.  If significant time has passed, the appraiser would need to see if any new sales  have occurred since the original report and use them if they are comparable to the subject.

As you can see the “conversion” of an appraisal from conventional loan to FHA loan is possible but the appraiser must perform certain FHA requirements.  Have you ever needed this to be done?  What was your experience?

If you have any real estate appraisal related questions you can call me at 205.243.9304, email me, or connect with me on facebook.

Comments

  1. Interesting stuff, looking forward to the newletter.

  2. Informative. Good stuff, Tom.

  3. Great blog post. I get this question a lot too. I am often asked why an additional fee has to paid if an appraisal was just done. The key here is like you said, ” it would be necessary to re-inspect the property and complete the necessary FHA requirements.”

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