Appraisals that are completed for a mortgage transaction will sometimes require repairs.  When a repair is listed on an appraisal report, the repair(s) will need to be completed before closing.  If there are repairs listed on the appraisal report – the report is marked as ‘Subject To.”

What is Subject To on an Appraisal Report?

For a mortgage transaction, the preferred appraisal report is ‘As-Is’.  The ‘As-Is’ title means that there are no repairs required by the lender.  This demarcation is different than an ‘As-Is’ real estate listing.  When purchasing a property that is listed ‘As-Is’ means the seller is aware of the required repairs and going to leave those repairs to the buyer.

A ‘Subject To’ mark on an appraisal report means the lender requires the repairs to be completed before releasing funds.

What are the 3 Most Common Required Repairs on an FHA Appraisal?

For an FHA mortgage to be saleable on the secondary market, the lender has to comply with FHA appraisal standards.  Most of these standards revolve around the safety and soundness of the property.  The most common safety repairs are:

1.   Railings and handrails  –                                                                                                                                                      Railings and handrails are always required on FHA appraisals.  Any interior or exterior stairs require railings and handrails to comply with safety guidelines.  The most commonly sighted infractions on appraisal reports are stairs going to a basement with no handrails.  We also see decks with just a few steps but no handrail.  A handrail needs to be on at least one side of any set of steps.

2 Steps-                                                                                                                                                                                       A repair for steps comes up less often than handrails.  This is one of those repairs that always surprises me and comes up more than expected.  Occasionally, we see a back door that is blocked off but no steps leading outside.  The owner may have started a new deck job or means to get it in a few months when the weather warms.  The issue is that the lender can not close on a property with safety issues.  The lender is not able to assume that the new buyer will complete the repairs once the weather warms.  Therefore they require the seller to complete the repairs before closing.

3. Chipped Paint –                                                                                                                                                                       On an FHA appraisal it is not uncommon for a chipped paint repair to be listed.  Generally, we see this in older garages and sheds.  The reason that chipped paint is considered a safety repair is due to the potential for lead paint.  Again, we generally only see this on older properties.

The good news is that the chipped paint repair is easy to take care of and often would not require a contractor.  The requirement is that any chipped paint is scrapped, sanded, and repainted.  Usually, this is taken care of in an afternoon with a little sandpaper and half a gallon of paint.

The stair and handrail repairs may require a contractor unless the seller has carpentry expertise.  These repairs are often not too costly and can be completed in a day.

After the repairs are completed, the appraiser just needs to come back out to the property.  The appraiser comes back out to confirm that the repairs have been completed and are satisfactory.  The appraiser will need to take pictures of the completed repairs.  For the chipped paint and any exterior stair or handrail repairs – the appraiser does not need to come into the property.