What is the role of the Federal Housing Administration (FHA) in appraisals?

The Federal Housing Administration (FHA) plays a crucial role in the appraisal process specifically for FHA-insured loans. This agency's primary responsibility is to ensure that appraisals meet certain standards that help protect both the borrower and the lender. By establishing these requirements, the FHA ensures that the properties being financed through their insurance are valued accurately and are suitable for mortgage lending.

FHA guidelines specify various criteria that appraisers must adhere to, including property condition, market value assessments, and compliance with local building codes. This oversight helps to maintain the integrity of the housing market and provides assurance to lenders that they are offering loans on properties that have been fairly appraised and are safe for occupancy.

Other choices do not accurately reflect the FHA's specific role in appraisals. Performing appraisals for all real estate transactions overstates their function; their focus is limited to FHA-insured loans. Similarly, creating market trends and approving properties for conventional loans are not part of the FHA's responsibilities, as those areas fall under different regulatory and financial bodies in the real estate market.