How knowing the rules of a final inspection can save you time and money

How knowing the rules of a final inspection can save you time and money

I thought I would write a post this week about a topic I saw in an appraisal forum. That topic revolved around a final inspection and how the appraiser was accused of “nickel and diming” the owner to death. This issue revolved around the appraiser needing to visit a home multiple times to verify that repair conditions in an appraisal were met, or in other words repaired. When agents and sellers know the rules of a final inspection they will better understand their role and how doing it right can save them time and money.

What is a final inspection?

A final inspection occurs whenever an appraiser must revisit the property that they previously appraised in order to verify if property condition items that were a part of the assignment have been met. These property condition items are most likely based on lender or client guidelines as well as governmental requirements in the case of FHA or VA loans. These items may also be requirements that are part of a sales contract.What you need to know about final a final inspection

Examples of condition items

Some common examples of condition items in an FHA or HUD appraisal may be the correction of peeling paint or proper operation of either appliances or mechanical equipment in the house. Peeling paint is common in older homes and prior to 1978 paint was made with lead in it. The lead in the paint could result in extreme sickness or even death if ingested. Because of this all FHA appraisals must be conditioned on the removal of any peeling, chipping, or flaking paint present on the house or accessory buildings on site.

Another example of a condition item might occur during a home purchase whenever the contract calls for the installation of new appliances, HVAC unit or water heater. These are only random examples I have listed here but they are typical things I have seen in the past. If the sales contract price reflects the installation of a new HVAC unit, but it has not been installed yet at the time the appraiser visited the property, then the appraisal would be made “subject to” the installation of the unit, meaning that whenever the unit is installed then the final opinion of value shown in the appraisal will be valid. The lender wants to know if this has been done so that the value of their collateral is what is reflected in the appraisal.

How NOT to be “nickel and dimed” to death

Final inspections, and correction of condition items in an appraisal, are not uncommon so it pays to know what needs to be done to satisfy the requirements. I believe that the biggest problem that exists is that the buyer and seller, or their agents, may not know exactly what has to be done so it becomes a guessing game until all the requirements are met.

The items that need to be corrected as part of the appraisal assignment will be listed within the report, so this is where your “checklist ” of things to do should come from. The loan underwriter will make the final determination as to exactly what needs to be done so they should also be consulted. If the required items have not been completed when the appraiser is asked to do the final inspection then they will be required to go back out a second time (or 3rd, or 4th…) until the requirements are met and each visit will cost the borrower money so it is important to get it right the first time.

The appraiser typically calls the real estate agent to verify the items have been completed before doing the final inspection so this is a good time to go over what was done and to make sure it meets the requirements of the appraisal. If this is done then a second trip will not be necessary.

A good practice would be to speak with the appraiser (yes agents you can do this) and underwriter after the appraisal is completed to make sure you know exactly what needs to be addressed during the final inspection. This will cut down on the time and money involved and make everyone happier.


Do you have any other questions about the rules of a final inspection or requirements that are noted in an appraisal? If so leave you comments below and if you know of anyone that would benefit from the information contained in my blog please pass it along to them.

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  1. Casey lauterborn says

    I’ve recently had a Final Inspection accomplished that came back with the appraiser wanting a garage safety switch not only fixed but now wants the electric opener repaired as well. Not a big deal at all honestly. He also added in repairs he wanted done to the pool to get it to functioning condition as it is right now not functioning and will require work to get it back up and running. This was never in the original appraisal as one of the items that required repair. There was a addendum for it but the bank and my lawyer both said I just needed to get a addendum to the contract stating the sellers credits was towards closing not towards the unfinished pool. Again the pool was never in the list of things needing to be repaired. Can he just add additional things during final inspection that were not required the first time around? this is for a FHA loan also and the bank did not list the pool as one of the required repairs either. any help is greatly appreciated, Thank you!

    • It is quite possible that this is required. It’s hard to make comments on a property I know nothing about but if there were new items or items not considered on the original appraisal, and they are FHA requirements, then they would need to add that to the things that need to be done.

  2. A lender has asked me to complete a final inspection 1004D for someone who can’t or doesn’t want to complete a final inspection. This appraiser just put punch list items. No specifics. Also this appraiser lives pretty far away and I personally believe they just don’t want to drive that far. As stated, I looked through the appraisal to see about what was not completed and there was nothing noted. Also this appraisal is not even close to the quality of my company and sales are all the same builder sales within the neighborhood. I am truly not just wanting to stick it to this appraiser, but feel I am exposing myself to needless liability if (high likelihood nothing will come of it) this goes south. Thoughts or advice?

    • I personally would not complete a 1004D (Appraisal Update/Completion Report) on a property that I did not personally appraise. There may be some specifics of the property that you are not familiar with which could expose you to increased liability.


    I have a question for you in regards to a final inspection for a new construction home. The appraisal is made subject to completion. How do you treat a final inspection on new construction if say such items like touch up paint, or a piece of trim, etc. need installed? A few small items. The builders contract has a clause stating ” closing will take place after Substantial Completion(obtaining a Certificate of Occupancy).” So, with this statement in the builders contract and the buyer has signed this contract and agreed to it, how would you treat the above items : like touch up paint, or a piece of trim need installed or similar small detail items for a final inspection if they are not yet complete? Scenario two: What if the builder now has a certificate of occupancy, and the items are still not complete. Would you mark the final inspection report complete since that is all the contract requires, substantial completion and a certificate of occupancy? appreciate the input.

    • Thanks for the question, Shane. Whenever I have done a final inspection and there is this type of scenario I state that there are some “minor punch list items” that still need to be complete but the original value is recertified. The bank wants to know if the subject is complete and if the value has changed. Minor items like you mentioned will not typically have a significant negative effect on the value of the home, however, I like to make the lender aware that they exist and they can make the final call.

  4. Sherri Zimmerman says

    I did an appraisal for a home as is. Noted there were items to be repaired after closing per the contract. The home has closed, and the bank wants me to do a final, which includes roof repairs which I don’t feel is within the scope of an appraisal or my expertise. They have provided lien waivers. Shouldn’t this be enough to prove the work has been completed? Thanks.

    • You are correct, appraisers are not roofers. I would require a statement from the roofer, on their letterhead, that states the repairs are complete. I’m not sure if lien waivers provide all the necessary information but that would be your call. Good luck!

  5. Danielle Scipione says

    We were told we were not allowed to do any other peojects in the house, but we got excited and did some. How much trouble will we get into during the final inspection?

  6. We have an appraiser that is refusing to do a final inspection on a “subject to” appraisal because he put in the addendum that an invoice to the lender showing the work was completed is all that is needed. In my experience there are 2 choices for appraisals, either as is, or subject to with a final inspection once the work is completed. Is there ever a case that a final inspection is not required. This is a conventional loan. The electrical box needed to be replaced.

    • I have seen where information provided by another party can suffice as proof that the work was done. I think it would be up to the lender/underwriter as to what would be acceptable. If the lender wants the appraiser to go out then they should or maybe another appraiser could do the final to verify that the work was done.

  7. Rudy Duplissis says

    Does the appraiser have to do the inspection if it’s outside paint. Can the appraiser send out an assistant to take pictures

    • It will depend on what the lender requires. They may want to the original appraiser to look at it, but if they do not have a preference then I would think that an assistant should be adequate as long as they know what to look for.

  8. Great post topic Tom. I’m speaking in a real estate office tomorrow and this is a topic that often comes up. I’m thinking I should add a segment on repairs rather than just waiting for questions. Thanks for keeping my brain working.

    • Glad I could provide some value for you Gary and good luck with your talk. I wish more appraisers would take time to educate agents and consumers about what we do.

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