Issue: 92 February 22, 2004
New
HUD Requirements
New
lawsuits waiting in the wings?
Is it possible that a
new requirement by HUD may mean even more liability
for your involvement, as a Realtor, in home
inspections and radon testing? I
confess, Home Inspectors and Radon related
associations had a lot to do with this,
well, to be honest you could claim that we
forced it to happen. Sorry, but you had
better pay attention to this one before it
bites you.
As a
Realtor you may or may not deal with FHA
loans, but it is very important that you are
aware of changes in FHA requirements. New
FHA requirements are often the beginning of precedence
for the mortgage industry. You had better
think about your position on home
inspections and radon testing. Your government has come out with some very
strong language encouraging both. I strongly
recommend that you not only encourage home
inspections and radon testing, but get a
clear written release from your clients who
choose to ignore the issues. You should
consider adding verbiage in any release
forms you may be using which states: that
the clients decision was not unduly
influenced by any party to the transaction
in their choice not to have a home
inspection or radon test. Not
only should you get this signed, but you
better come across to your client as being
pro home inspection and radon testing on
every deal you handle. The
problem is that with the acceptance of home
inspections and radon testing as the norm
and acknowledgement of their importance by
federal agencies, it is becoming much easier
for an attorney to argue that any right
declined was improperly influenced by the
agent. Can you visualize the court room now?
"Mr. Home Buyer, just what did this
agent sitting in this court say to you about
having your new home inspected? What about
radon testing." Then you walk
slowly to the stand with your head hanging
low. "Is it true that you, by your
words and actions shared in this court by
the claimant, discouraged this
Buyer from having a home inspection and
radon test?"
On
February 21, 2004, thirty days after their
January announcement, the U.S. Department of
Housing and Urban Development began
requiring a new document to be distributed
and signed by every applicant before they
can receive an FHA mortgage. The revised HUD
Form 92564-CN (click on it to see
it) is entitled, "For Your
Protection: Get a Home Inspection."
In addition to explaining
why a buyer needs a home inspection and
clarifying the distinction between a home
inspection and an appraisal, this form now
clearly discloses that "The U.S.
Environmental Protection Agency and the Surgeon
General have recommended that ALL houses
should be tested for radon"
At the bottom of the document, the Mortgagee
must initial whether he has chosen or not
chosen to have a home inspection performed
and provide date and signature documenting
that he has carefully read the notice,
understands the importance of an independent
inspection and that the FHA will not perform
a home inspection nor guarantee the price or
condition of the property.
As
if the form by itself were not enough, pay
close attention to HUD
Mortgagee Letter 2004-04 (click
on it to see it). In this letter HUD fully
explains that all mortgages will be required
to submit the signed form and proudly
proclaims, "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 Surgeon General's recommendation
for radon testing. The revised form
incorporates radon testing as one of the
components of a home inspection. The
letter goes on to reiterate that the signed
form MUST be submitted to FHA with the
lender's request for insurance endorsement.
You should note also that the form:
"must be signed on or before the date
the sales contract is executed (the sales
contract must be re-executed if necessary)".
You did get one signed as part of your last
contract, didn't you? Do you think your
government has some concerns about
litigation? Should you?
Take
a look at these documents by clicking on the
links in the text above. If you missed them,
here they are again:
