ASHI pressed forward with its already substantial and growing government relations agenda on September 23, meeting with senior level federal policy-makers at the U.S. Department of Housing and Urban Development (HUD) and with housing policy investigators at the General Accounting Office (GAO).
ASHI and the Appraisal Institute (AI) requested the HUD meeting jointly. The organizations have partnered to tell HUD that some of the housing agency’s current documents, namely the Valuation Condition (VC) Sheet, inadvertently blur the distinction between the appraisals and home inspections – to the detriment of all concerned, but mostly the purchasing public. ASHI and AI took the opportunity to offer detailed critiques of the documents, and to offer suggestions as to how they could be redrafted to state the distinctions more clearly, and to communicate these concepts in a quick and unavoidable manner.
By all accounts, the meeting with HUD staff was cordial, businesslike and productive. HUD staff recognized that the VC Sheet documents, which are so critical in educating homebuyers as to how they should protect their realty interests, should be improved. HUD has asked ASHI for further commentary on specific ways to improve its communication of home inspection facts and benefits to prospective homebuyers. ASHI appreciates the invitation and will offer proposals, which the agency will consider.
In a separate discussion, HUD staff answered ASHI’s question of whether existing federal policy allows homebuyers to “finance” home inspection fees in the manner of a closing cost. At ASHI’s request, HUD staff provided the following statement of the policy:
“FHA does not finance closing costs of any sort into the mortgage amount and has no statutory authority to include any such costs into the loan. However, borrower-paid closing costs, and that would include the home inspection if paid by the homebuyer, may be used to meet the three percent minimum cash investment required on all purchase transactions. This will not result in a reduction of the total amount to close the transaction, but will allow for some or all of the closing costs to be considered part of the downpayment and meet the statutory requirements.”
Thus, homebuyers seeking FHA financing may apply the cost of the home inspection toward their initial down payment requirement. This factor should have a strong pro-home-inspection impact on FHA homebuyers who may feel they cannot afford a home inspection. ASHI strongly recommends that members ensure that their customers and real estate colleagues fully understand this policy opportunity improving the economic availability of home inspections.
ASHI’s subsequent meeting with the GAO, scheduled at GAO’s request, continues the federal study of home inspection and how it affects the performance of FHA-backed loans. The participants focused on specific details of the home inspection profession, the ASHI Standards of Practice and Code of Ethics, and practical issues surrounding home inspections. The GAO plans to complete development of its first-of-its-kind questionnaire targeting recent homebuyers so they can relate their personal experiences being informed about home inspections during recent home purchases. The GAO plans to issue a full report on its findings to Congress in the spring of 2004.