Few topics spark more debate among appraisers than how to handle appliances in an FHA appraisal. When HUD Handbook 4000.1 was released in June of 2015, appraisers were initially confused about their obligations regarding appliances. This confusion was so great that it caused HUD to revise the Handbook only three months later. To assist appraisers who are still unclear on this issue, we are going to briefly examine the definitions and FHA requirements for appliances from the Handbook.
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How does the FHA define appliances?
In September of 2015, FHA revised Handbook 4000.1 to provide a specific definition, which includes:
- Refrigerators
- Ranges/ovens
- Dishwashers
- Garbage disposals
- Microwaves
- Washers and dryers
It’s important to note this does not include garage door openers, swimming pool pumps, intercoms, sound systems, and security systems.
How do appraisers consider appliances?
FHA Handbook 4000.1 also clarifies when appliances are required to be operational by stating, “Appliances that are to remain and that contribute to the market value opinion must be operational,” and, “The Appraiser must note all appliances that remain and contribute to the Market Value.”
Simply stated, FHA requires an appliance to be operational only if it remains with the property and it has value and is included in the appraisal. The good news for appraisers is that if the appliance is not included in the valuation, it is not required to be operational. For example, appraisers usually do not include free-standing refrigerators, stoves, washers, or dryers in FHA appraisals because they are considered personal property and lenders do not want them included.
The bottom line is if an appliance is real property (i.e., built-in) and it contributes value to the property, the appraiser is required to operate it when making their FHA property observations. Conversely, if the appliance is not real property, the appraiser is not required to operate it.
FHA requirements for appliances: Is a house required to have a stove?
Many appraisers believe FHA requires a dwelling unit to have an operating stove to meet minimum property requirements, but this is not the case. Under “Minimum Requirements for Living Unit,” Handbook 4000.1 states that a living unit must have a kitchen which includes, at a minimum, “a sink with potable running water and a stove utility hookup.” In other words, a stove is not necessary, but a stove hookup is.
Article by Daniel A. Bradley, SRA, CDEI.
Dan Bradley is a Course and Curriculum Manager for McKissock Learning. He has been a practicing real property appraiser since 1987 and has been instructing and authoring appraisal courses for over 30 years. He is a state certified general appraiser in Pennsylvania and holds an SRA designation from the Appraisal Institute. From 2004 until 2013, Dan was a member of the Pennsylvania State Board of Certified Real Estate Appraisers.
Learn more about FHA requirements for appraisers and Handbook 4000.1
If you want to learn more about how to successfully complete FHA appraisals, McKissock can help you get the knowledge you need. Check out the following appraisal courses and resources:
- The FHA Handbook 4000.1
- FHA Observation Checklist for Appraisers
- Appraisal of REO and Foreclosure Properties
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