Q: I always thought that Veterans Administration appraisers were supposed be more thorough than regular bank appraisers, but that wasn’t the case when we bought our house with a VA loan. The real estate agent who listed the home for sale hired a professional building inspector to go through the house because the previous owner had really neglected it. The inspector found dry rot in the bathroom, a flooded crawl space, etc. The real estate agent had the owner fix all of the problems before putting the house on the market. After the work was done, we decided to buy the house. Next came the VA appraiser. He was in and out in less than ten minutes. The only thing he found wrong was a new post that the seller had installed on the front porch but not painted. The post was painted and we moved in. Two months later, we decided to have the gas furnace serviced because we had no idea what shape it was in, or what the previous owner had done to it. The gas company came out, took one look at the furnace and "red tagged" it. It was completely rusted out and carbon monoxide fumes were spreading through the house. It cost us almost $2,000 for a new furnace, vacuuming all the vents, etc. This was quite a jolt after putting out all the money for closing costs, loan origination fees, etc. Neither the professional inspector nor the VA appraiser bothered to check the furnace. To me, the furnace is a major part of the house and definitely should have been checked. We were never made aware of what the VA appraiser checked for. Shouldn’t the VA appraiser have checked to furnace?
— K.B., Kenmore
A: As you found out, VA appraisers do not inspect homes.
That is a common misunderstanding among government loan (FHA and VA) home buyers. In fact, home buyers often refer to the VA inspector or FHA inspector when they really mean appraiser.
The appraiser’s primary job is to determine whether the buyer is paying a fair price for the home.
Granted, government loan appraisers do take a closer look at such things as the amount of insulation in the home, etc. But the appraiser’s primary purpose is to protect the government’s interest in the house.
The VA does not want to loan $190,000 on a house that’s actually worth only $160,000, and it wants to make sure the home is structurally sound, because that is the collateral for the loan. Appraisers are not required to check a home’s furnace to make sure it is in working order, so you really have no quarrel with the VA appraiser.
However, I believe the professional building inspector hired by the real estate agent may have been negligent.
According to the standards of practice of the American Society of Home Inspectors (ASHI), the furnace should be examined to make sure it is in proper working order, and the inspector should carry a carbon monoxide meter to check for leaks and cracks in the furnace heat exchanger.
This is a serious matter. Carbon monoxide is a poisonous gas. It’s the same deadly gas that comes out of your car’s exhaust pipe. The existence of rust in the heat exchanger should have been visible with even a cursory examination of the furnace by the home inspector.
One of the problems with relying on a real estate agent to hire or recommend a home inspector is that the agent’s goals are often at cross-purposes with the homebuyer’s goals.
The buyers want the inspector to find every single defect in the house, no matter how tiny, so that they can make an informed purchase decision. The real estate agent’s main concern is closing the deal and earning a commission, so he or she may consider an extremely thorough building inspector to be a deal killer.
That’s why some agents keep a list of approved inspectors who are known to pass over all but the most glaring home defects. In the trade, these inspectors are called agent friendly.
Now, let me make it clear that good real estate agents don’t play this game. They know that it’s in their best interests to reveal all known home defects at the time of the sale, or they may later find themselves facing a lawsuit from the disgruntled buyers.
I suggest that you contact the inspector and the real estate company that recommended him or her and ask them to pay for your furnace replacement. If you can’t reach a satisfactory settlement, you may want to take them to small claims court. You can sue for up to $2,500 in damages without an attorney.
Mail your real estate questions to Steve Tytler, The Herald, P.O. Box 930, Everett, WA 98206. Fax questions to Tytler at 425-339-3435, or e-mail him at economy@heraldnet.com
Steve Tytler is a licensed real estate broker and owner of Best Mortgage, Inc. You can visit the Best Mortage Web site at www.bestmortgage.com.
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