HUD Adopts ASHI-Proposed Changes in Key Homebuyer Notice

(Washington) The Department of Housing and Urban Development (HUD) has released a new and vastly improved version of the main document it uses to inform homebuyers about home inspections.  

The action is a direct result of a meeting among ASHI representatives, senior HUD staff and Appraisal Institute staff held at HUD headquarters in Washington, D.C., on September 23, 2003. 

“ASHI applauds HUD’s major modifications, and we congratulate the HUD staff for listening to our concerns and moving quickly to address them,” said ASHI’s President Stephen Gladstone. “HUD’s revised notice does a much better job of educating homebuyers about the importance of home inspections, and better explains the distinction between appraisals and home inspections.

“Without question, this will benefit homebuyers across the nation in making intelligent purchasing decisions,” he added.

The face-to-face meeting with HUD staff and its positive results are an immediate outgrowth of ASHI’s commitment to directly engage policy-makers in the federal agencies and on Capitol Hill. ASHI’s efforts to establish itself as the face and voice of the home inspection profession in the nation’s capitol are continuing to bear fruit for the ASHI membership. 

The September 23 meeting with HUD was attended by Gladstone, Rich Matzen, ASHI’s 2003 president, Rob Paterkiewicz, ASHI executive director, and Randall Pence of Capitol Hill Advocates, ASHI’s Washington lobbyist. The group presented several insightful critiques of the existing HUD notice, most notably that the document was too complicated, muddled and confusing to effectively convey usable information to homebuyers.

As a remedy, ASHI offered several improvements to streamline and focus the message on home inspection, to better distinguish home inspections and appraisals and, most importantly, to ensure that homebuyers actually read, absorb and act on the information quickly. HUD staff listened intently to ASHI’s message and indicated they believed the comments had merit.

The revised document (see page 13) was released in Mortgagee Letter 2004-04 and is titled “For Your Protection: Get a Home Inspection.” In line with ASHI’s recommendations, the new version is simpler, shorter, easier to read, with a harder-hitting message.

• “Why a Buyer Needs a Home Inspection” is now the first topic addressed on the page. There are new headings such as “Appraisals are Different from Home Inspections” and “FHA Does Not Guarantee the Value or Condition of your Potential New Home” that quickly convey decisive concepts, even if homebuyers don’t have enough time to read the entire notice. Brevity is vital to ensure that time-pressed and overwhelmed homebuyers see, understand and absorb the home inspection information as quickly as possible.

• Radon gas testing is a new issue addressed in the document with its own heading, an important message that may well impact the overall decision to obtain a home inspection. What’s more, importantly, new signature lines appear at the bottom of the sheet that require homebuyers to clearly affirm that they do or do not chose to obtain a home inspection, followed by a signature and date. The first choice offered is to obtain a home inspection.

While HUD did not accept all the ASHI recommendations – the check-list appearance of the appraisal “Homebuyer Summary Sheet: Notice to the Homebuyer,” remains to be fixed – ASHI has let HUD know it is very pleased with the changes thus far. ASHI will communicate a similar assessment to its contacts on
Capitol Hill.

“Form HUD-92564-CN For Your Protection: Get a Home Inspection” must be signed on or before the date the sales contract is executed (the sales contract must be re-executed if necessary) for all transactions that will involve FHA mortgage insurance on existing property.  ASHI continues to monitor and to notify HUD when this has not taken place. 

“We believe it is essential that buyers have ample opportunity to consider the need and value of a professional home inspection as they are presenting a contract to purchase the property. Otherwise, there is little thought given to the need for an inspection,” said Paterkiewicz.

In the Mortgagee Letter announcement, John C. Weicher, Assistant Secretary for Housing, said:

“The Department of Housing and Urban Development through FHA continues to be responsive to public safety concerns by informing mortgagees and borrowers of the Environmental Protection Agency and the Surgeon General’s recommendation for radon testing.  The revised form incorporates radon testing as one of the components of a home inspection. HUD is not mandating a radon test for FHA insurance eligibility; however, use of “For Your Protection: Get a Home Inspection” remains mandatory. In addition, the form is revised to clarify the importance of and differences between an appraisal and a home inspection.”

ASHI is pleased to partner in this effort with the fine staff at the Appraisal Institute, which is equally concerned about homebuyer confusion regarding the difference be-tween appraisals and home inspections. Don Kelley and Bill Garber of AI’s Washington office attended the September 23 meeting as well. 

ASHI members will want to make sure their business contacts have the revised form. A downloadable version of the form is available in the Membership Extranet area of ASHI.org.