Shirley Kroot, a Federal Housing Authority appraiser, e-mailed last month asking for help in “setting the public straight” about what has become a controversial television advertisment aired by her employer.
“I am concerned that the current ads run on TV for FHA loans gives potential FHA borrowers the wrong idea about what the appraiser does and does not do.
“The ad shows the homeowner dreaming about a burst pipe in the basement, and then the appraiser grabbing onto the same overhead pipes in a basement. It implies that if ANYTHING is wrong the appraiser will find it,” she wrote.
“Our job is to note anything that is `readily observable’ during the typical site visit. We do not move furniture or equipment.
“This ad gives homeowners the idea that an FHA appraiser is the same as a home inspector. It does not say it in so many words, but this is the idea that I get when I watch this commercial. Do you agree?”
I did see the ad in question, which was on the air until early September. And I figured it would cause trouble.
It’s not so much that I agree with the premise that the ad would confuse people over the roles of appraisers and inspectors.
Only about half of all home buyers use an inspector anyway, which tells me they don’t know much to begin with. And the appraisal — which is most often ordered by a lender, conducted by someone the owner never meets and producing results rarely shared with the borrower who pays for it — is no doubt going to be misunderstood.
No, I figured the ad would cause trouble because neither appraisers nor home inspectors, nor their respective professional trade groups, would like it.
The American Society of Home Inspectors was prompted to produce a press release “underscoring the difference between home inspectors and appraisers.”
Among them: Appraisers estimate market value for use in making real estate decisions, while inspectors identify visible, existing conditions of a home, its systems and components.
The Appraisal Institute found itself defending the ad in testimony before a Senate subcommittee which has been investigating the problem of “property flipping” and agreed that both appraisers and inspectors were an integral part of the real estate transaction.
In fact, the FHA ad was part of an effort by the agency and its parent, the Department of Housing and Urban Development, to increase protections for FHA home buyers. FHA properties in Chicago and across the country are prime targets for “flippers,” unscrupulous contractors or other realty investors who purchase bargain government properties and resell them to unsuspecting first-time buyers at a hefty profit — often covering up major structural problems with purely cosmetic repairs.
HUD was quick to defend the ad and pointed out that both the Appraisal Institute and the Appraisal Foundation helped develop the agency’s revamped home buyer protection plan in the first place.
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“These ads were designed to inform the public of the substantial consumer protections provided in HUD’s Homebuyer Protection Plan. This plan provides consumers with important information about the physical condition of the home and promotes the importance of getting a home inspection. It also holds appraisers accountable,” HUD said in a statement.
The plan requires FHA appraisers to fill out a comprehensive four-page form noting physical deficiencies in the home and requires buyers to be given a “Home Buyer Summary” that clearly identifies those deficiencies. The plan also includes mandatory appraiser testing and a requirement that buyers be urged in writing to obtain a home inspection.”FHA is the only mortgage insurer that has such stringent protection for home buyers,” HUD noted. And it said the FHA plans to go back on the air this fall with a new campaign that may include similar messages promoting consumer protections.
Whatever they come up with, I hope it doesn’t include another nightmare sequence. We homeowners see plenty of that for real after we move in. And about the only protection plan I’ve found that works is plenty of reserve cash.
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