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FHA Inspection - A Sham?

By - 2011

In order for a home buyer to get an FHA loan guarantee, the seller must submit his house to an FHA inspection. This much I understood when we received an offer on our old house. I also knew that this was not always an easy process. I had heard the stories...

In theory the FHA inspection does a couple things. By looking for problems and then requiring they be corrected, the inspector assures a lender that the home provides safe collateral for the loan. The process is also supposed to protect the buyer. Since buyers who use low-down-payment FHA loans often have little in the way of savings, they don't want to have any big expensive repairs to do after buying a house.

Our house was inspected, and the report came back, along with the actions we had to take to pass the next inspection. Ignored were the sagging floors of the 111-year-old house. Ignored too, was the lack of proper wiring in half of the home. The old heater that radiated heat out from the center of the home without ducts was not a problem, even though it won't be long before insurance companies refuse to insure homes with these ancient units. The lack of an exhaust fan in the bathroom was okay because of the window--even though that opened into another room (old houses are funny that way). Multiple layers of old shingles on the roof pass the inspection.

What was listed as in need of correction was a lack of venting for what passed as a crawl space under the home. It was a $40 fix with the help of a neighbor. All exterior trim with loose paint needed to be touched up too--another $40. The biggest item was the white picket fence, which had to be painted.

Now, it's worth noting here that an old wooden fence with some peeling paint is not a safety issue, nor an immediate concern for the new buyer. In fact, as our real estate agent pointed out, we could just tear the fence down, since a fence is not required for an FHA loan. If there is a fence, though, it can have no peeling paint. We paid to have it painted.

The second inspection was done and a new problem came up. The paint that was scraped off the old fence was scattered in the dirt and grass, and had to all be cleaned up. There was no suggestion that the old white paint chips were dangerous, but I was starting to see that the process was more about making it look like there is a process than about safety issues or even financial concern for the buyer.

We dug out hundreds of pounds of dirt. We raked. We dug more. The house finally passed the FHA inspection and the deal was done.

Looking back on this it occurred to me that this is all "real estate theater." Everyone is working to make it look like they are doing something important, but in the end they don't want to actually get in the way of the deal. We spent only a couple hundred dollars to meet the requirements. The lender was no safer for the new paint on an old rotting fence. The buyer is going to face a major roofing job soon and will likely not have the money. But we all went through the motions and closed the deal.

What good is an FHA inspection? I have no idea. It seems like an incredible waste of time and money.


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Houses Under Fifty Thousand | FHA Inspection - A Sham?