Sen. Susan Collins, R-Me., has called on Sec. Andrew Cuomo to withdraw television Department of Housing and Urban Development -sponsored advertisement that blur the differences between appraisals and home inspections.

Sen. Collins, who heads the Senate Permanent Subcommittee on Investigations, also has asked the HUD secretary for an accounting of the government funds spent developing, producing and airing the commercials she and others believe border on being "deceptive."

In a letter to Cuomo, the Maine Republican said the spots "may cause home buyers to believe that a home inspection is not necessary to protect themselves from purchasing a home with serious flaws that could wind up costing thousands of dollars to repair."

The ads, which have been challenged by many appraisers and home inspectors alike, imply that a routine appraisal will disclose the same structural defects that would be discovered by a home inspection. But in fact, they are not the same things.

An appraisal is a tool used by the lender to assess the value of the property, which stands as collateral for a mortgage. If the borrower should default on the loan, the lender wants to be certain the house is worth at least what was lent.

On the other hand, a home inspection is a complete examination of the house. Whereas an appraiser might poke around the house for an hour or so, an inspector spends several hours taking an in-depth look, checking all the mechanical parts, roof, basement and everything in between.

In HUD's defense, HUD documents advise borrowers to have the house they are buying gone over thoroughly by an independent inspector. But the television spots suggest that the appraisal and home inspection are one in the same.

In one ad, for example, the announcer says: "With HUD's FHA Home Buyer Protection Plan, you get the right loan, a fair price and a thorough inspection. If any problems are found, you'll know about them before you close."

As far as Sen. Collins is concerned, such a statement "implies that the home buyer can blindly trust HUD to protect his or her interest, and that the appraisal process will disclose any and all problems with the house."

What's particularly worrisome, she added, is that HUD and the FHA deal mostly with uninitiated rookie home buyers with no previous experience and who might not know that that's not the case.

Sen. Collins also told Sec. Cuomo that she is "deeply troubled" that the misleading ads are running extensively on national television. "HUD should not be spending huge sums of public money to confuse American home buyers," she said.

Published: October 2, 2000

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When Lew Sichelman first started writing about housing in 1969, he was the youngest real estate writer in the country. Now, 37 years later, he's one of the oldest -- and most decorated. He has been rated the top housing columnist in the country by the National Association of Realtors as well as by his peers in the National Association of Real Estate Editors. Indeed, NAREE has recognized his work on numerous occasions. One year - due to his advancing age, he can't recall which one - he earned top honors in the annual NAREE Journalism Contest in three out of the four major writing categories. It was the first time one writer has won so many NAREE awards in a single year. Known for his ability to make even the most difficult topics understandable, Sichelman also has been honored by the National Association of Home Builders and the Mortgage Bankers Association. He began providing in-depth coverage of and consumer-oriented information about housing and housing finance at the Washington Daily News, where he was real estate editor. He held that same position for nine more years at the Washington Star, which purchased the News in 1972. The Star, a so-called "writer's newspaper" which also had the misfortune of being an evening paper, was put out of its misery in 1981, and Sichelman, who had begun self-syndicating his column in 1978, decided to become a full-time columnist. Today, his column, "The Housing Scene," is distributed by United Media to newspapers throughout the country. He also is on the staff of National Mortgage News, an independent newspaper which is considered the bible of the mortgage business. And he writes for numerous other publications, including MarketWatch.com, where he answers readers questions once a week, Sports Illustrated (don't ask), RealtyTimes.com, BigBuilder and others. Sichelman is married, the father of five and grandfather of eleven.