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Raising awareness of the lead paint issue is a priority with HUD if the number of awareness campaigns the agency has run over the years is any indication. FHA assumes that homes built before the 1978 lead paint ban went into effect are presumed to be contaminated.

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News and Updates for Homeowners

FHA Loan Appraisal Issues: Cosmetic or Health Hazard?

FHA Loan Appraisal Issues: Cosmetic or Health Hazard?
November 2, 2019 - The Department of Housing and Urban Development issued a press release announcing National Lead Poisoning Prevention Week. According to the release, more than three million families with children reside in homes “contaminated with lead-based paint hazards.” 

Raising awareness of the lead paint issue is a priority with HUD if the number of awareness campaigns the agency has run over the years is any indication.

And the lead paint issue is a great example of something that some house hunters might consider a cosmetic issue (at least at first) versus being a genuine health hazard.

Why?

Because some real estate transactions include an appraisal that comes back with a requirement that peeling paint be dealt with as a condition of loan approval.

You can almost hear the buyer say, “Peeling paint? Isn’t that a cosmetic problem? Why is this holding up my closing date?”

The answer depends on when the home was built. FHA appraisal rules state that homes built before the lead paint ban went into effect in American housing are presumed to be contaminated with lead paint. If the appraisal includes detection of peeling paint in such homes, that paint is further presumed to be a lead-based health hazard.

The FHA lender’s handbook states, “If the Property was built before 1978, the seller must disclose any information known about lead-based paint and lead-based paint hazards before selling the house”, but also the following guidance to the FHA appraiser:

“If the Property was built before 1978, paint mitigation must be in compliance with EPA’s Renovation, Repair, and Painting Rule and HUD’s lead-based paint regulations regarding paint mitigation at 24 CFR 200.810(c). Some states may require more specific treatment.”

Some appraisal issues are clearly NOT cosmetic; homes that have a high voltage or high pressure easement on the property may not be suitable for an FHA mortgage, and a house located within certain coastal barrier areas may not qualify depending on circumstances.

Where paint is concerned, the age of the home is a major factor. And remember that FHA appraisal requirements are not the only guidelines that must be followed; state and local ordinances must also be satisfied.
 
In cases where a seemingly cosmetic issue is a sticking point, be sure to ask whether it’s an FHA, state, local, or lender guideline that is the issue. Knowing may not change the situation, but it’s a good detail to know when trying to meet the requirements.

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