Must the appraiser determine if the property's mechanical systems are operable?

The Appraiser must notify the Mortgagee if mechanical systems do not appear:
  • to have reasonable future utility, durability, and economy;
  • to be safe to operate;
  • to be protected from destructive elements; nor
  • to have adequate capacity.
 The Appraiser must observe the physical condition of the plumbing, heating and electrical systems. The Appraiser must operate the applicable systems and observe their performance.
 
If the systems appear to be damaged or do not appear to function properly, the Appraiser must condition the appraisal for repair or further inspection. 
 
If the property is vacant, the Appraiser must note in the report whether the utilities were on or off at the time of the appraisal.
 
If the utilities are not on at the time of observation and the systems could not be operated, the Appraiser must:
  • render the appraisal as subject to re-observation;
  • condition the appraisal upon further observation to determine if the systems are in proper working order once the utilities are restored; and
  • complete the appraisal under the extraordinary assumption that utilities and mechanical systems, and appliances are in working order. 
The Appraiser must note that the re-observation may result in additional repair requirements once all the utilities are on and fully functional. 
 
If systems could not be operated due to weather conditions, the Appraiser must clearly note this in the report.
 
The Appraiser should not operate the systems if doing so may damage equipment or when outside temperatures will not allow the system to operate.  Electrical, plumbing, or heating/cooling certifications may be required when the Appraiser cannot determine if one or all of these systems are working properly. 
 
Instructions detailing specific requirements for reporting the results of the appraisal are found in the FHA Single Family Housing Appraisal Report and Data Delivery Guide at https://www.hud.gov/program_offices/housing/sfh/handbook_references
 
For additional information see Handbook 4000.1 II.D.3.g at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh

All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.


Topic Number: KA-04137