Federal Housing Administration (FHA) approved appraisers are responsible for judging the value of a property that is the subject of an FHA-insured mortgage application. The FHA assists people who may not be able to obtain a mortgage for credit or employment reasons with gaining a mortgage at a competitive rate of interest. Appraisers are also responsible for checking that a property is safe and habitable for the proposed buyer. Assessing the risk to the lender if the property falls into foreclosure is the main reason that a mortgage lender employs an appraiser before a mortgage is processed. An FHA appraiser should receive specific education and training in order to receive both a license and certification.
Mortgages are insured by the FHA in order to provide protection for the lender when providing funds to purchase a property to a buyer whose credit may not reach the levels required for a non-FHA mortgage. Each lender employs an appraiser to find the value of the property based upon factors including the size, location, and condition of the property. FHA-approved appraisers typically value a property by finding an average price based on the sale prices of three comparable properties in the same area (often referred to as "comps") of comparable size and condition. All three properties have usually been sold within the previous 12 months to provide a median value of the property to be mortgaged.
The safety and condition of the property being appraised are not the main priority of the FHA appraiser, though the FHA guidelines do allow an appraiser to make basic judgments on the condition of the property. Appraisers can decide if a property is uninhabitable and recommend that an FHA property sale should not proceed. Lenders are then provided with a list of repairs that must be completed to make the property safe for habitation. Repairs recommended by the appraiser can be required by the lender for the mortgage to proceed.
Lenders are responsible for finding and employing an FHA appraiser to make sure that the possible losses associated with foreclosure are not larger than the value of the property. Appraisers determine if the proposed purchase price of a property is reasonable and reflects market value. Property value should be high enough to ensure that the lender can reclaim the majority of the mortgage and costs associated with a possible foreclosure.
Each FHA appraiser should be state licensed or certified following the completion of relevant education courses. Specialized education courses are completed by appraisers wishing to be accepted by the FHA as an approved appraiser. Each lender often employs its own appraisers who are approved to appraise properties to FHA guidelines.