🤔 What's New with FHA Appraisals in 2025? Here's What Every Buyer and Seller Should Know
What’s changed in FHA appraisal rules—and why should you care?
Whether you're buying or selling a home with FHA financing, Mortgagee Letter 2025-18 just shook things up in a big way. HUD has rescinded several outdated and expensive requirements for FHA appraisals, making them faster, and more in line with the rest of the industry. Hopefully these changes will result in less cost to you!
Why now? Many of the rescinded requirements were originally created for a different era—before advances in data modeling, property tech, and appraisal standards. As HUD explained, the old rules no longer match the broader lending industry and have become unnecessarily burdensome. These updates are part of a wider federal effort to modernize policy, reduce costs, and improve access to homeownership..
Click here to read the full Mortgagee Letter 2025-18 from HUD.
📊 Key Takeaways
- Outdated FHA appraisal requirements have been eliminated effective immediately.
- Less paperwork and fewer photo requirements mean lower appraisal costs.
- Buyers and sellers will benefit from faster closing timelines.
- These changes align FHA more closely with conventional loan standards.
- The updates apply to both FHA forward mortgages and reverse mortgages (HECM).
🏛️ Why Do Appraisals Matter in Real Estate?
Appraisals play a critical role in protecting both the buyer and the lender. They provide an independent opinion of value to ensure the home isn’t overpriced. But appraisals can come in at, above, or below the contract price:
| Scenario | What Happens |
|---|---|
| Appraisal matches contract price | Loan proceeds and terms stay the same. All parties move forward. |
| Appraisal comes in over contract price | Great news for the buyer—they’re buying with instant equity.Note when the value comes in over the sales price, the amount is not typically shared with the seller. |
| Appraisal comes in under contract price | The loan is based on the appraised value. Buyer can renegotiate, pay the difference, or walk away. |
If the appraisal comes in low, the buyer isn’t required to proceed with the purchase. That’s when negotiations begin. As your agent, I step in to advocate for a price adjustment based on the appraised value. Most sellers are open to this, since the next buyer’s appraisal will likely reflect the same result.
🚀 Major FHA Appraisal Changes You Need to Know
HUD eliminated several long-standing requirements that were driving up time and cost. Here are the biggest updates:
| Old Requirement | What's Changed |
|---|---|
| Appraiser had to estimate "remaining economic life" | This requirement is gone. Underwriters no longer need to use it for loan decisions. |
| Redundant photo requirements | Appraisers no longer have to take subject photos from opposite angles to show all sides. Photos of the attic, crawl space, and common areas in 2–4-unit properties and condos are no longer mandatory. Most notably, appraisers are no longer required to include their own original photos of comparable sales—MLS photos alone are now sufficient. |
| Additional comps in changing markets | This extra burden has been lifted, simplifying appraisals in volatile markets. |
| Extra reporting for 223(e) Mortgages | No longer required. FHA is removing special appraisal protocols for properties in older, urban areas. |
In short, HUD is acknowledging that appraisal technology and practices have evolved—and FHA buyers shouldn’t be stuck with outdated processes.
🛍️ What This Means for Buyers and Sellers
For buyers, these updates could mean lower appraisal fees, less delay, and fewer surprises. Especially in competitive markets, streamlining the process can make your offer more attractive.
For sellers, faster closings and fewer hurdles can lead to smoother transactions—especially when dealing with FHA-financed buyers.
Bottom line: Real estate is constantly evolving and the loan process along with it but it's important to note that while FHA has simplified requirements for appraisals, the originating lender may still require some or all of old requirements. If you're applying for a loan, you can ask your loan officer what they require.
🤔 FHA Appraisal Changes: Frequently Asked Questions
- Are FHA appraisals still stricter than conventional ones?
No. These new updates bring FHA much closer to conventional appraisal norms. - How long does an FHA appraisal usually take?
Typically 5–10 business days, but it depends on the market and property. The recent changes may speed up turnaround times by reducing documentation and photo requirements. - Will this affect home values?
No. Appraisers still determine value using market data and industry standards. The updates only affect how appraisals are documented, not how values are determined. - Are these changes permanent?
Yes, they are effective immediately and will be incorporated into the FHA Handbook 4000.1 as part of a broader modernization effort by HUD. - Who pays for appraisal-required repairs?
In the Hampton Roads real estate market, our contracts include a negotiable CAP—typically a percentage of the purchase price (e.g., 1%)—that covers certain costs the seller is required to pay, including appraisal-required repairs. If the total exceeds the CAP, the buyer and seller must negotiate who covers the difference.
🌟 Final Thoughts: Let’s Talk Strategy
If you are interested in buying or selling a home and want up to date information on the Hampton Roads real estate market and want to know how to best position yourself whether buying or selling, book a discovery call with me . Let's plan your next move with confidence!
📞 Let’s Talk Real Estate Goals
Have questions about your next move? Whether you're buying, selling, or just exploring your options, I'm here to help you create a clear, confident game plan.
Thanks for Reading,
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