Confused? Who's Confused?

Peter G. Miller
OurBroker®

A new concept has emerged in Washington. When a government policy doesn't fly, the only possible explanation is not that the federal program is flawed, but rather that the problem is "confusion." We've heard this twice in the past few weeks, and in both cases the assessment is wrong.

First we have HUD and its efforts to license appraisers, something never contemplated by Congress. The logic goes like this: not all homes financed with FHA loans are in pristine condition. Since an appraisal is required to obtain an FHA loan, why not require appraisers to perform home inspections so that innocent FHA home buyers are not bilked?

Given this simple concept, it then becomes necessary to create standards, test appraisers, audit their performance, plus maybe fine and jail those who fail. In effect, appraisers now face national licensing, HUD gets a new way to spend taxpayer dollars, and home buyers get, well, who knows what they get.

The problem, of course, is that the premise is wrong. Appraisers do appraisals. That's a valued service and done right protects lenders and buyers alike. But appraisers are not home inspectors. They don't spend several hours at a home checking the structure and systems for condition. Poll a thousand brokers and you can be sure that not one has ever seen an appraiser open an electrical service box, undo a furnace, or climb on a roof.

So what happened when HUD imposed its new standards? Faced with greater liability, more paperwork, and more requirements appraisers did what normal people do -- they began to charge more for FHA appraisals, if they would do them at all.

Under the new program, says HUD, appraisers are supposed to check a property for "problems with plumbing, walls, ceilings, roofs, foundations, basements, electrical systems, and heating and air-conditioning systems; soil contamination; the presence of wood-destroying insects; hazards and nuisances near homes (such as oil and gas wells); lead-based paint hazards; and other health and safety problems." The new program, says HUD, also "requires the appraiser to complete a new three-page form describing the physical condition of a home in unprecedented detail."

But unlike HUD, VA does not require appraisers to act as home inspectors. Appraisers who perform valuations for farm loans are not required to act as home inspectors. Conventional lenders have not adopted the HUD appraisal standard.

So why do we need new FHA appraisal rules?

To clarify matters, HUD issued a statement to "eliminate any confusion regarding the Home Buyer Protection Plan."

"The appraiser, in performing the appraisal of the property, does not act as a home inspector," HUD now says -- a contention disputed by a number of state regulatory agencies.

HUD explains that "it is not the responsibility of the appraiser to guarantee the condition of the house, its equipment, appliances, or to certify that the property is free from defects."

Folks, there is no confusion here, no complexity, and no bewilderment. HUD's program plainly requires appraisers to conduct home inspections and present buyers with something that most people will regard as the same report they would get from a home inspector.

HUD needs to look at what happened with the Occupational Safety & Health Administration (OSHA) in the past few days -- and take the same action.

In November, OSHA sent out a letter stating that the Occupational Safety & Health Act "applies to work performed by an employee in any workplace within the United States, including a workplace located in the employee's home. All employers, including those which have entered into "work at home" agreements with employees, are responsible for complying with the OSH Act and with safety and health standards."

Once published on the front page of The Washington Post, it took about two days for the rule to be withdrawn. Why? Well, said Labor Secreatry Alexis M. Herman, the letter "has caused widespread confusion and unintended consequences for others. Therefore OSHA is withdrawing the letter today."

See, "confusion" is the problem. Not the absurdity of a rule that would essentially require employers to approve home offices, make employers liable for accidents on property where they have no real control, deprive people of any sense of privacy, and create a pretext for OSHA inspectors to rummage through your closets. The only assertion of power missing in the OSHA letter is the right of the British to quarter troops in your house.

But give Ms. Herman credit. She tried to expand the power of her department, failed, and did the right thing. HUD should learn from her example.

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Question Of The Week

Q My father entered a nursing home and has now expressed a desire to give his house to a maid. Can he do this?

A That someone is in a nursing home does not necessarily mean they are incompetent and cannot bestow a gift, even a large one. If you are opposed to this gift, then you need to contact an attorney immediately. Some questions to ask include: Do you have standing to stop the gift? Is the prospective donor competent? If no, what evidence do you have? Can you obtain a guardianship to protect your father's assets? Etc.

Weekly Resource

Almost daily there is a need to look at economic data, the measures and forecasts which influence mortgage rates, home buying, and related matters. An excellent source for such data is the The Dismal Scientist, a wonderfully-named site and an excellent source for numbers, studies, reports, news, and forecasts.

Published: January 11, 2000

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Editor's Note: This article reflects the opinions of Peter G. Miller only and not necessarily the views of this or any other publication, organization or Website owner.

Peter G. Miller, also known as OurBroker®, is the author of six real estate books -- including The Common-Sense Mortgage -- and is the original creator and host of America Online's Real Estate Center. Peter's weekly columns appear in more than 100 newspapers nationwide, he is also published in a variety of other media outlets and he is a frequent speaker at national events and conventions. Peter welcomes your questions, comments, and news releases via e-mail at .