I just closed my first FHA transaction. I represented the sellers – the buyers used an FHA loan to buy the house. All I can say is …. Whew – glad that is over! The process is flawed….as they say, “Hell is paved with good intentions” I think the idea behind the FHA product is a good one, but in application it can really hurt the buyer and seller.
One of the biggest issues in closing an FHA loan/transaction has to do with the condition of the house. Things that would not be an issue in a conventional loan situation can be called out by the FHA inspector/appraiser and require a hold on funding and a reinspection. Even though the buyer pays for an independent inspection an FHA lender sends in an FHA inspector/appraiser to appraise and inspect the property. They turn on the water, check the windows, check for a gas leak in the oven, look for cracks in the wall, cracks in the trim, cracks in the stucco – and then make findings. Their findings can hurt the sellers and make the transaction more costly than a conventional transaction for the sellers.
In our case, things that were not brought up in the buyers home inspection came up in the FHA inspector/appraisers report requiring my sellers to replace a good percentage of their block wall, repair wood trim, cracks in stucco, and a hole that a door knob made where it touches the wall when opened too hard. After the repairs were made the reinspection took a few days so we had to extend the escrow period.
There was nothing that a conventional lender would have seen and been