"Bad State of Repair": Legal Definition in Property Assessment (FHA Context)

"Bad state of repair" describes a property condition that renders it unsuitable for intended use or poses safety risks to occupants, neighbors, or the public.

Regulatory Source

Defined in FHA Mortgagee Letter 07-03 (now archived; principles persist in HUD Handbook 4000.1). Used in FHA appraisal/inspection to flag health/safety deficiencies requiring repair before loan endorsement.

Examples

• Structural: Foundation cracks, roof collapse risk, floor rot.
• Systems: Non-functional heating (winter), plumbing leaks, exposed wiring.
• Environmental: Lead paint deterioration, mold, asbestos damage.
• Egress: Blocked exits, missing handrails, broken stairs.

Key Distinction

May not violate a specific code but still fails "decent, safe, sanitary" standard. Appraiser's professional judgment governs.

Remediation

Lender requires licensed contractor repair, re-inspection, and clearance before closing.