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50 Most Common Appraisal Review Deficiencies Webinar 9:00 AM Mountain Time

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Important Things to Know

Archive Version (POP-UP)

http://www.hud.gov/offices/hsg/sfh/talk/parc/phiarch.cfm

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The Most Common Errors Found in FHA Appraisal Reports (URAR)

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FHA- Serving the American Homebuyer Since 1934

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Presenters

Don Pearsall Karl Kaufmann

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Purpose

The purpose of this presentation is to acquaint the audience with the most common errors that FHA finds when reviewing appraisal reports. It introduces and explains, rather than supplants, official policy issued in Handbooks and Mortgagee Letters. If you find a discrepancy between the presentation and Handbooks, Mortgagee Letters, etc., the official policies prevail. Please note the information provided in this training is subject to change.

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Energy Efficient Mortgages

• What is an EEM?
• Allows homeowners to improve the energy efficiency of their home by financing the cost of the

improvements into their loan.

• If the savings in utility costs will more than pay for the costs of the improvement, borrower does not have

to qualify for the extra costs of the energy improvements.

• Who is eligible?
• New and existing 1-4 units including condominiums and manufactured homes
• Purchases, streamline refinances, no cash-out refinances, 203(h) disaster loans, and 203(k) rehabilitation

mortgages

• Homeowners
• How do you apply?
• Find a EEM lender
• Purchase a HERS report from an acceptable source (utility company, local state or federal agency or

nonprofit)

• Qualify for the base mortgage before the energy efficient improvements are added
• No second appraisal is needed to support added costs

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Energy Efficient Mortgages

• Want More Information?
• EEM Webinar is Archived
• See Mortgagee Letters;
• ML 2009-18 ML 1995-46
• ML 2005-21 ML 1993-13
• See HUD Handbook 4155.1 6.D.1
• Department of Energy’s website:

http://www.energystar.gov/index.cfm?c=home_improvement.hm _improvement_contractors#s1

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Poll Question

• What section of HUD Manual 4150.2 pertains to

Valuation Protocol?

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Homeownership Centers

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Santa Ana Denver Atlanta Philadelphia

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Objectives

• To illustrate the most common errors found in

FHA appraisal reports

• Provide an understanding of FHA guidelines
• To change your mindset from “Form Filler” to

“Analytical Appraiser”

• Answer your questions

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Resources

Resource Center: www.HUD.gov 800-CALLFHA (800-225-5342) E-Mail: answers@hud.gov Knowledge Base: www.hud.gov/answers

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Resources

Handbooks:

• 4150.2 (6/99) Valuation Analysis, with emphasis on

Appendix D

• 4150.1 REV 1 (3/90) Valuation Analysis
• 4145.1 REV 2 (12/91) Architectural Processing &

Inspections

• 4905.1 REV 1 (3/91) Requirements for existing 1-4

family units

• 4910.1(7/94) Appendix K, MPS
• Proposed construction – 1-4 family

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FHA- Serving the American Homebuyer Since 1934

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FHA- Serving the American Homebuyer Since 1934

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Appraiser’s Certification on

the FHA Roster Application

I certify that I have read and fully understand and will comply with HUD Handbook 4150.2, “Valuation Analysis for Home Mortgage Insurance for Single Family One- to- Four Unit Dwellings” (with particular emphasis on Appendix D, “Valuation Protocol”), any updates to the Handbook, Mortgagee Letters, and all other instructions and standards, in performing all appraisals on properties that will be security for HUD/FHA insured mortgages.

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FHA Appraiser Oversight

FHA oversight is based on the following risk factors, as established in Mortgagee Letter 2009-41:

• High default rate on loans
• High volume of FHA loans
• Complaints
• Referrals
• Previous administrative appraiser roster actions

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Review Process

How does the FHA review process work?

• Appraisal reports are randomly selected
• Desk Review
• Risk Assessment (value and property condition)
• Identify possible deviation from HUD/USPAP
• Field review (if necessary)
• Completed by contract appraisers or FHA staff appraisers
• Rating
• Action or Sanction Letter

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Disciplinary Actions

• Notice of Deficiency
• Education
• FHA Roster Removal
• Limited Denial of Participation (LDP)
• National Debarment
• Civil Money Penalties
• Civil & Criminal Actions

Multiple sanctions may be pursued concurrently

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Disciplinary Actions

Removal or Removal w/Education:

• Value
• Fraud
• Repairs
• Prior actions/sanctions and other factors

These deficiencies have a direct impact on value and marketability and represent the highest level of risk.

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Disciplinary Actions

Education:

• Environmental
• Legal compliance
• Data collection & reporting
• Support for adjustments
• Prior actions/sanctions and other factors

These deficiencies may impact the quality of the report; but generally do not affect value.

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Disciplinary Actions

Notice of Deficiency (NOD)

• Inaccurate reporting
• Omission of information
• Flawed data interpretation
• Prior actions/sanctions and other factors

These deficiencies are considered gaps in due diligence and professionalism.

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Appraiser’s Rights Regarding

Disciplinary Action

• Notice of Deficiency and Education cannot be

appealed

• Roster Removal – may request informal conference
• Limited Denial of Participation (LDP), National

Debarment

• Civil, Criminal sanctions - remedy through

Civil/Criminal Court systems

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FHA- Serving the American Homebuyer Since 1934

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FHA Appraisal Requirements and the Most Common Errors

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Subject Section

FHA- Serving the American Homebuyer Since 1934

URAR (FNMA 1004)

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#1 – Neighborhood Name

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FHA- Serving the American Homebuyer Since 1934

4150.2, 2, D-14 14

Report the name of the subdivision, the commonly known neighborhood name or the name of the PUD

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#2 – Intended User

Intended Users must be identified

• Lender/Client
• HUD/FHA – must be included as Intended User

It is also acceptable to add the phrase “and its successors or assigns” after the Lender/Client name.

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#3 – Analyze the Listing

Failure to analyze the subject’s current or previous listing within the past 12 months

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#3 Analyze the Listing

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Subject Listing History

USPAP Standard Rule 1-5(a): Requires the appraiser to “analyze all agreements of sale, options, and listings of the subject property current as of the effective date

• f the appraisal”

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Uspap Standards ds 1-5(a) 5(a)

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#3 Analyze the Listing

FHA- Serving the American Homebuyer Since 1934

Definition of Analysis?

The act or process of providing information, recommendations, and/or conclusions on diversified problems in real estate other than estimating value (The Dictionary of Real Estate Appraisal, Third Edition, Appraisal Institute)

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#3 Analyze the Listing

FHA- Serving the American Homebuyer Since 1934

Twelve Month Listing History

Examples:

• The subject is listed in the MLS
• DOM150; Subject property was offered for sale 03/01/2012 for

$150,000; price change to $140,000 on 04/01/2012. Data source is IRIS#12345678.

• DOMUnk; Subject property listed as FSBO on 03/01/2012 for

$145,000.

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Not Acceptable

• Don’t forget to check for FSBO listings -

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#4 – Analyze the Sale

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Discuss and analyze the terms of the sale and any seller concessions that may have had an effect on the sales price of the subject property.

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#4 – Analyze the Sale

Mortgagee Letter 2005-02, states the following under “Appraisal Requirements”:

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5) “The appraiser must provide an analysis of the current agreement of sale, contract, option or listing for the subject property and an analysis of all prior transfers of the subject property that occurred within three (3) years prior to the effective date of the appraisal. If the contract of sale for the subject property is not provided to the appraiser, the appraiser must report the steps or efforts taken to obtain the current agreement

• f sale”

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#4 - Analyze the Sale

FHA- Serving the American Homebuyer Since 1934

Examples:

∙Contract provided ∙Purchase contract arms-length and typical for market ∙Arms-length sale. Contract submitted 01/03/12 for $135,000,

countered by seller on 01/03/12 for $145,000, and accepted by buyer on 01/04/12. Seller paying $2,500 in closing costs, and down payment assistance

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Not Acceptable Mortgagee ee Letter r 2005-02 02

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#5 - Analyze Concessions

FHA- Serving the American Homebuyer Since 1934

Sales Concessions

• The appraiser is to report any financial assistance (loan

charges, sales concessions, gift or down payment assistance, etc.) paid by any party on behalf of the borrower

• If the sale involves personal property (e.g. above ground

pool, lawn mower, furniture, etc.) it should be identified and excluded from the valuation

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Mortgagee ee Letter er 2005-02 02

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#5 – Analyze Concessions

FHA- Serving the American Homebuyer Since 1934

Ask yourself… What would the property have sold for if there were no concessions, down payment assistance or discounts?

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#6 – Contract Price

FHA- Serving the American Homebuyer Since 1934

Contract Price

• Enter the final agreed upon contract price

Contract Date

• The date of contract is the date all parties execute the sales

agreement

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Date of Contract Enter the date of the contract. This is the date when all parties have agreed to the terms of, and signed the contract.

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Neighborhood

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Neighborhood

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The appraiser must observe neighborhood characteristics and surrounding properties to make determinations that will be incorporated into the valuation of the subject property. Omission of conditions that may adversely affect the value of the property is poor appraisal practice and violates the Uniform Standards of Professional Appraisal Practice.

4150.2.

• 2. D-16

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#7- Neighborhood

Boundaries

• Neighborhood boundaries

and characteristics – N, S, E, & W characteristics

• Market conditions in the subject neighborhood
• Prevalence of seller and financial concessions

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#7 – Neighborhood Boundaries

Describe the Neighborhood Boundaries and characteristics.

The appraiser must clearly define the boundaries – north, south, east and west – of the subject’s neighborhood. Providing a description of neighborhood boundaries by physical features such as streets, rail lines, other man-made barriers or well defined natural barriers (i.e. rivers, lakes, etc.) details the make up and understanding regarding neighborhood composition.

FHA- Serving the American Homebuyer Since 1934

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#7 – Neighborhood Boundaries

Unacceptable Neighborhood Boundaries

• “The neighborhood boundaries include the city limits
• f Fort Morgan.”
• “The neighborhood boundaries consist of the city of

Ephraim and the neighboring city of Manti.”

• Be specific in the description

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#8 – Marketability of the Neighborhood

Discuss factors that would attract residents or cause them to reject the neighborhood. Some typical factors important to discuss include:

• Level of maintenance and condition of homes
• Housing styles, ages, sizes, etc.
• Land uses
• Proximity to employment and amenities, including travel distance and time to

local employment sources and community amenities

• Employment stability, in terms of variety of employment opportunities and

industries

• Overall appeal of the neighborhood as compared to competitive neighborhoods

in the same market

• Convenience to schools and shopping with respect to distance, time and

required means of transportation

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#9 – Market Conditions

Discuss the market conditions in the subject neighborhood and the prevalence of seller and financial concessions

Provide relevant information in support of conclusions relating to trends in property values, demand/supply and marketing time Provide a description of the prevalence and impact of sales and financing concessions and/or down payment assistance in the subject’s market area Other areas of discussion may include days on market, list to sale price ratios, and/or financing availability

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#10 – Declining Markets

Appraiser Responsibilities in a Declining Market

• Provide relevant information and specific data to

support a “declining” conclusion including:

• research of local trends in property values
• demand/supply
• marketing time
• list-to-sale ratios
• Provide the data source for your information, such as

MLS, standard pricing services, local and national studies, etc

FHA- Serving the American Homebuyer Since 1934

1-800-CALL FHA

Mortgagee ee Letter er 09-09 09

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#11 – Built-up versus Present Land Use

FHA- Serving the American Homebuyer Since 1934

1-800-CALL FHA

Inaccurate or incomplete assessment of the make-up of the Neighborhood Characteristics and the Present Land Use.

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#12 – Inappropriate Land Use

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Inaccurate and misleading estimates of Present Land Use %

If a portion of the land use consists of parks or other unspecified classifications, the appraiser is required to estimate the percentages as “Other” and provide explanation for any noted “other” land use (i.e. parks, undeveloped, vacant, etc.).

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#13 – Exposure Time

Exposure time is a component of the definition for the value opinion being developed. The appraiser must also develop and state the opinion of reasonable exposure time linked to that value opinion.

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2012 - 2013 Uspap standards 1-2(c)(iv) iv), , 2-2(b)(v) & Statemen ent #6

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#13 Exposure Time

Exposure Time is the estimated length of time that the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value

• n the effective date of the appraisal.

Exposure time is a retrospective opinion based on an analysis of past events assuming a competitive and open market. Marketing Time happens after the date of the appraisal. Marketing Time is an estimate because it is in the future.

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Uspap definit ition ions

• pg. u3

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#14 - SITE

FHA- Serving the American Homebuyer Since 1934

Site dimensions are not included or there are erroneous references to county records or plat maps that are not included in the appraisal.

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#14 - Site

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Dimensions List all dimensions of the site beginning with the

• frontage. If the shape of the site is irregular, show

the boundary dimensions (85' X 150' X 195' X 250'), or attach a property survey, site plan or plat

• r legal description with the comment, “see

attached.” Do not list site area on the dimensions line.

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Actual Appraiser Quotes

“The land fill has an impact on the dwelling (improvements on the land). The land value is the land value” “No current market data exits for the

• externality. However past experience suggests a

10% reduction in the improvements due to this

• factor. It is noted that the information supporting

this adjustment is not in our office files, but in memory.”

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#15 – Zoning Information

Zoning is missing and/or zoning description is not adequate.

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FHA- Serving the American Homebuyer Since 1934

The appraiser is required to report the specific zoning used by the local municipality or jurisdiction.

• Include a general statement describing what the zoning

permits

• Zoning descriptions such as “Single Family” or “Residential” are

not adequate

• Describe the dominant factor for the zoning code such as site

size, density, frontage, etc

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#16 – Well & Septic

Individual Water Supply & Sewage Systems

• Report availability of connection to public or

community water/sewer system

• Appraiser must identify noncompliance

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#16 – Well & Septic

Individual Water Supply & Sewage Systems

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Utilities The appraiser shall indicate whether a public water

• r sewage disposal system is available to the site. If

available, connection must be made to public or community water/sewage disposal system if connection costs are reasonable. The lender will determine whether connection is feasible.

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#16 – Well & Septic

Question:

The appraiser is required to sketch well, septic, and property line distances.

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#17 – FEMA Maps

• If the property is within a Special Flood Hazard Area,

mark "YES". Otherwise, mark “NO”

• Attach a copy of the flood map panel for properties

located within an identified flood hazard area

• Enter the FEMA Zone designation
• Enter the FEMA Map number and map date. If it is not

shown on any map, enter “Not Mapped.”

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#18 – Design (Style)

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The appraiser is required to enter the appropriate architectural design (style) descriptor that best describes the subject property. Valid descriptions include, but are not limited to, ‘Colonial’, ‘Rambler’, ‘Georgian’, ‘Farmhouse’.

Descriptors such as ‘brick’, ‘average’, ‘conventional’, ‘traditional, or ‘typical’ are not architectural styles.

Design (Style) Enter a brief description of the house design style using historical or contemporary fashion. For example: Cape Cod, bi-level, split level, split foyer, colonial, town house, rowhouse, etc. Do not use builder„s model name. Do not use generic descriptions such as Traditional

• r Conventional.

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#19 – Year Built - New Construction

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For existing properties less than one year old

• The appraiser is required to provide both the month

and year completed

• Provide comments and photographs pertaining to the

grading and drainage for the subject

• To remain compliant, the appraiser is required to

report this information in an alternate section of the appraisal

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#19 - New Construction

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FHA- Serving the American Homebuyer Since 1934

“Final inspection report must provide a specific statement on acceptance of grading and drainage. Inadequate grading and drainage is the biggest complaint

• f homebuyers and should be carefully reviewed.”

No comments about grading and drainage. HUD Handbook 4145.1, paragraph 4-2 (B)(2)(b) - Compliance Inspections states:

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#20 – GLA Adjustments

Adjustments for GLA are not consistent

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• The dollar per square foot adjustment is not

consistent from comparable to comparable

• This is usually the result of cloning previous

reports with residual data

• Use of generic canned comments in

addendums do not agree with the actual adjustments

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#21 - Sketch

The building sketch must reflect all exterior dimensions of the improvements. This includes patios, porches, garages, breezeways, and offsets.

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FHA- Serving the American Homebuyer Since 1934

Sketch Include a building sketch showing the Gross Living Area Above Grade, including all exterior dimensions of the house. Include patios, porches, garages, breezeways and other offsets. State “covered” or “uncovered” to indicate a roof or no roof (such as

• ver a patio).

Show calculations used to arrive at the estimated gross living area. An interior sketch or floor plan is required for properties exhibiting functional obsolescence attributable to the lay out.

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#21 - Sketch

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Sketch

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#22 – Subject Photos

Photographs are to:

• Show front and rear at opposite angles to show all

sides of subject property and all improvements

• Show street scene
• Be at least a single photo of each comparable

property

• Show the grade of the vacant lot for proposed

construction

• Be taken by appraiser (no people in photos)

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#23 – Photos of Improvements

Provide photographs of improvements with contributory value that are not captured in either the front or rear photograph. Examples: Pool, shed, sunroom, barn, shop and detached garages.

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#24 – Reporting the Room Count

Inconsistency in the subject’s room count, as compared to the building sketch, results in confusing the reader.

• Room count includes living room, dining room,

kitchen, den, recreation room and one or more bedrooms

• Typically, the foyer, bath and laundry rooms

are not counted as rooms

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#25 – Location Map

The appraiser is required to include a legible street map.

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FHA- Serving the American Homebuyer Since 1934

Street Map Include a legible street map showing the location

• f the subject and each of the comparable sales
• utilized. If substantial distance exists between the

subject and comparable sales, additional legible maps should be submitted to show the location of the comparable sales.

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# 25 – Location Map

Maps

• Local street

map showing subject location & each comparable sale

• Show

roadways and street names

FHA- Serving the American Homebuyer Since 1934

Location Map

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#26 – MPR & MPS

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Minimum Property Requirements (MPR) and Minimum Property Standards (MPS)

4150.2, 2, D-2

For new construction to be eligible for FHA insurance:

• It must comply with HUD’s Minimum Property

Standards HUD Handbook 4910.1 Appendix K, (including 24 CFR 200.926d)

• Existing construction must comply with HUD’s

Minimum Property Requirements (HUD Handbook 4905.1)

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#26 - MPR & MPS

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FHA- Serving the American Homebuyer Since 1934

Minimum Property Requirements (MPR) and Minimum Property Standards (MPS)

4150.2, 2, D-2

In the performance of an FHA appraisal:

• The appraiser must denote any deficiency in the appropriate

section(s) (site issues in the site section, improvement issues in the improvements section) of the appraisal report

• The appraiser is to note those repairs necessary to make the

property comply with FHA’s Minimum Property Requirements (MPR) or Minimum Property Standards (MPS) together with the estimated cost to cure

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#27 – Comparable Selection

The appraiser is required to report:

• The number of comparable sales in the subject

neighborhood within 12 months of the effective date of the appraisal and

• The number of comparable properties currently offered

for sale as of the effective date of the appraisal Unlike the neighborhood price data, which includes all sales, this section focuses only on those properties that are comparable to the subject, not the universe of sales.

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#27 - Comparable Selection

Comparable Listings

Enter the number of comparable properties currently offered for sale, including those under contract, within the subject neighborhood together with the price range

Comparable Sales

Enter the number of comparable sales that occurred within the 12-month period preceding the effective date of the appraisal, and within the subject neighborhood, together with the price range

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#27 – Comparable Selection

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#27 - Comparable Selection

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#28 - Bracketing

Bracketing the sales price and dwelling size

In selecting comparable properties, the appraiser is required to use the bracketing method, as defined in The Dictionary of Real Estate Appraisal, Fourth Edition, Appraisal Institute. It is advisable to bracket the subject property with sales using both dwelling size and sales price whenever possible. If bracketing is not possible, the appraiser should explain why.

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Poll Question

Which of the following is a verification source(s)

• a. MLS
• b. Listing Agent
• c. Zillow
• d. a. and c.

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#29 – Verification of Data

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Know the difference between a data source and a verification source.

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#29 – Verification of Data

Data Sources versus Verification Sources

Examples of Data Sources

• Multiple Listing

Services

• Appraisal Files
• County (Public)

Records Examples of Verification Sources

• Broker
• Listing Agent
• Buyer
• Seller

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#29 - Verification of Data

Verification Source(s) Enter verification source(s), the document or party from which the additional proof was obtained. MLS by itself is not considered a verification source. Contacting someone with first-hand knowledge of the transaction (agent, broker, buyer, seller, etc.), especially where it involves confirmation of seller concessions, is the preferred method of verification. A single source may be used if the quality of data is such that sales data are confirmed and verified by settled transactions. Information provided should permit the reader of the report to locate the data from the sources cited.

Failure to verify the sales data with a third party to the transaction in accordance with HUD requirements.

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#30 - Verification and Analysis

• f Concessions

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#30 – Verification and Analysis

• f Concessions

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Sales or Financing Concessions Report the type of financing such as Conventional, FHA or VA, etc. Report the type and amount of sales concession for each comparable sale listed. If no concessions exist, the appraiser must note “none.” The appraiser is required to make market-based adjustments to the comparable sales for any sales or financing concessions that may have affected the sales price. The adjustment for such affected comparable sales must reflect the difference between the sales price with the sales concessions and what the property would have sold for without the concessions.

4150.2, 2, D-29, 29, Mortgag agee ee Letter er 2005-02 02

Complete an analysis to determine whether or not the concessions had an effect upon the sales price

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#31 – Use of comparables 6 and 12 months old

Only closed (settled) sales may be used as comparable sales 1, 2 or 3.

• If a sale over six months is used, an explanation must

be provided

• In general, sales over one year old should be identified

as comparable sale(s) 4, 5 or 6 with an explanation as to why they are included

• If your best comparable is over 12 months old, include

it and provide an explanation why it was necessary

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#32 – Quality & Condition

The appraiser must indicate the Quality rating that best describes the Quality and Condition of the subject property and each comparable property. These ratings must be UAD compliant.

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#33 – Age

Actual age of the subject and comparables

The appraiser is required to enter only the actual age of the subject and each comparable property. If the actual age is estimated, an explanation must be provided.

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Actual Age Enter only the actual age of the subject and each comparable sale.

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#34 - Adjustments

HUD requires the appraiser to:

• Report specific data pertaining to the comparable

properties

• Make adjustments to them that reflect the market’s

reaction to the differences between the subject property and the comparable properties Make adjustments to them that reflect the market’s reaction to the differences.

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#34 - Adjustments

Adjustments must be supportable and reasonable

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Adjustments to Comparable Sales I have reported adjustments to the comparable sales that reflect the market's reaction to the differences between the subject property and the comparable sales.

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#35 – Adjustment Guidelines

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#35 – Adjustment Guidelines

Adjustments exceeding recommended guidelines

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Adjusted Sale Price of Comparables Total all of the adjustments and add them to or subtract them from the sales price of each

• comparable. Generally, adjustments should not

exceed 10% for line items, 15% for net adjustments and 25% for gross adjustments. If any adjustments exceed stated guidelines an explanation must be provided including reasons for not using more similar comparable sales.

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#36 – List-to-Sale Price Ratios

HUD requires the appraiser to:

• Reconcile the adjusted values of active listings or pending

sales with the adjusted values of the settled sales provided

• If the adjusted values of the settled comparables are

higher than the adjusted values of the active listings or pending sales, the appraiser must determine if a market condition adjustment is appropriate

• The list-to-sale price ratio adjustments must be consistent

with the data entered in the Market Conditions Addendum to the Appraisal Report (Fannie Mae Form 1004MC)

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#36 – List Price to Sale Price Ratios

Consistent list-to-sale price ratio adjustments

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Each listing or pending comparable sale must be adjusted consistently with the current Median Sale Price as a percentage of List Price data in the 1004MC.

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#37 - Weighting

The appraiser is required to weight the comparable sales in the sales comparison approach

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Summary of Sales Comparison Approach Explain comparable selection and any necessary explanation of adjustments. Explain any adjustments exceeding guidelines. Explain which comparable sale or sales is/are given most weight or consideration and why.

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#38 - Photos

MLS photos are not allowed as primary photos

• Photos depicting the front view of each comparable sale

used must be those taken by the appraiser

• The photos taken by the appraiser are considered evidence
• f compliance with the Scope of Work of having inspected

each comparable sale from the street

• Use of MLS photos to exhibit comparable condition at the

time of sale is acceptable; however, the appraiser must include their photos as well to document compliance

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#38 – Photos

• Photos reflecting

silhouettes or “Black Blobs” are unacceptable

• Imaged photos and

documents must also be clear

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#39 - Reconciliation

The appraiser is required to reconcile all three approaches to value, or provide explanation for exclusion of an approach.

USPAP, Standard 2-2(b)(viii), states, in relevant part:

“summarize the information analyzed, the appraisal

methods and techniques employed, and the reasoning that supports the analyses, opinions, and conclusions; exclusion of the sales comparison approach, cost approach, or income approach must be explained”.

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#40 – Appraisal Conditions

The appraiser is required to select the appropriate appraisal condition(s) and if necessary, provide a cost to cure for appraisals made “subject to repair”.

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Mark this box “as is”

when: There is/are no repair(s), alteration(s) or required inspection condition(s) noted. Establishing the “as is” value for a regular 203(k) when needed. The property is ineligible for FHA insurance and is being rejected. The property is an REO or Pre-Foreclosure sale 4150.2, 2, D-33 33

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#40 Appraisal Conditions

Selecting the appropriate appraisal condition(s)

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Mark this box “per plans & specs” when the appraisal involves: Proposed construction, or Under construction, less than 90% complete, or A 203(k) with a Plan Review and Specification

• f Repairs prepared by a 203(k) Consultant.

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#40 – Appraisal Conditions

Selecting the appropriate appraisal condition(s)

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Mark this box “subject to repairs or alterations” When the appraisal involves existing housing, or new construction more than 90% complete with only buyer preference items remaining (floor coverings, appliances, landscaping packages (soil must be stabilized to prevent erosion)), requiring repairs or alterations to:

• Protect the health and safety of the occupants
• Protect the security of the property
• Correct physical deficiencies or conditions affecting structural

integrity

• Complete buyer preference items for new homes, or to
• Complete repairs/improvements noted in work order or contractor

estimates for the Streamline K

• Meet FHA Minimum Property Requirements

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#40 – Appraisal Conditions

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Mark this box “subject to a required inspection” when the appraisal calls for a required inspection to:

• Certify the condition and/or status of a mechanical or

structural element of the property

• Protect the health and safety of the occupants
• Protect the security of the property
• Meet FHA Minimum Property Requirements or

Minimum Property Standards

Selecting the appropriate appraisal condition(s)

Indicate the reasoning for any required inspections and note this in the appropriate section of the appraisal report listing the required inspections. 4150.2, 2, D-34 34

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Cost Approach

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#41 – Site Value

Provide support for site value

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Support for

• pinion of site

value Provide a summary of the comparable land sales or other methods (abstraction, allocation, land residual, extraction) of estimating site value in support of the opinion of site value.

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#42 – Cost Data

The appraiser is required to provide the name of the cost service and reference page numbers of cost tables or factors, as the user must be able to replicate the cost conclusions.

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Source of Cost Data Provide the name of the cost service and reference page numbers of cost tables or

• factors. Reviewer or reader must be able to

replicate.

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#43 – Economic Life

Remaining Economic Life

State the Remaining Economic Life as a single number or as a range. This line must be completed for every FHA appraisal whether or not the cost approach is completed. An explanation is required if the remaining economic life is less than 30 years.

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#44 – Roster Appraiser Must Inspect

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The assigned appraiser must inspect the property

Mortgagee Letter 94-54, section VII states: “HUD policy requires the appraiser who is assigned the appraisal to perform the site inspection of the subject property, all the comparables and to sign the appraisal” Appraiser’s Certification #2 states: “I performed a complete visual inspection of the interior and exterior areas of the subject property…”

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#45 – Professional Assistance

The appraiser must identify the specific work performed by an assistant.

Pursuant to Appraiser’s Certification No. 19, if the appraiser relied on significant assistance from any individual in the performance of the appraisal, that individual should be named as such and the specific tasks performed reported.

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APPRAISER’S CERTIFICATION #19

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#45 – Professional Assistance

Example of Specific Professional Assistance

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APPRAISER’S CERTIFICATION #19

Not Appropriate: “Kathy Jones provided significant assistance in the performance of this appraisal.” Appropriate: “Kathy Jones provided the following assistance in the performance of this appraisal:

• 1. Research of comparable sales.
• 2. Filling out portions of the URAR
• 3. Drawing the sketch from my notes.”

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#46 - Modifying the Limiting Conditions

Modifications, additions, or deletions to the intended use, intended user, definition of market value, or assumptions and limiting conditions are not permitted. The appraiser may expand the scope of work to include any additional research or analysis necessary based on the complexity of the appraisal assignment. Limiting an appraiser’s liability is in direct conflict with the Appraiser’s Certification No. 25.

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4150.2, 2, D-7, APPRAISER’S CERTIFICATION #15 & 25

NOTE: Statements such as “The appraiser’s liability shall be limited to the fee paid” constitute modifying the Limiting Conditions and are not allowed.

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#47 - Services performed within 3 years

An appraiser must disclose any services regarding the subject property performed by the appraiser within the three year period immediately preceding acceptance of the assignment, as an appraiser or in any other capacity.

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#48 – Conflicting Statements

Statements in the appraisal addendums conflict with other information.

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Inclusion of “boilerplate” addendums often have information and data that conflicts with the information in other parts of the report. Including generic statements in addendums that would apply to any appraisal often result in a misleading report.

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#49 – Name

Enter the appraiser’s name as it appears on the license

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If your appraiser’s license states “John J. Jones”, you must type your name correctly, and not “John Jones” or “Jack Jones.”

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#50 – USPAP Compliant Report

FHA requires appraisers to produce a credible, non-misleading report

The appraiser is required to not render an appraisal service in a careless or negligent manner, such as by making a series of errors that, although individually might not significantly affect the results of the appraisal, in the aggregate affects the credibility of those results.

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#50 - USPAP Compliant Report

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Appraiser’s certification #15

Knowingly Withholding Information

The appraiser must not knowingly withhold any significant information from the appraisal report and to the best of their knowledge, all statements and information in this appraisal report are true and correct.

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Top 10 Reasons to be an FHA Appraiser

• 8. You’ll become an expert at being invisible while

driving through bad neighborhoods.

• 9. You’ll see that some people really do hang those

black velveteen pictures of Elvis on their living room walls.

• 10. Your juggling skills will improve as you balance

clipboard, tape, pens, camera, and other gadgets while inspecting homes and slowly backing away from Fido.

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Top 10 Reasons to be an FHA Appraiser

• 5. You’ll get inside homes that will make you feel

much better about yours.

• 6. You’ll see some of the most wonderful homes

you’ll never be able to afford.

• 7. You’ll know where the cleanest public bathrooms

in the county are.

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Top 10 Reasons to be an FHA Appraiser

• 2. You’ll dazzle your friends with your knowledge of

external obsolescence.

• 3. You’ll be really good at showing no fear when

that pit-bull “who has never bitten anyone" bares his teeth and heads your way.

• 4. You’ll become a well-rounded individual from all

the part-time jobs you have to take to pay the bills.

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Top 10 Reasons to be an FHA Appraiser

And the number one reason to be an FHA appraiser is….

• 1. You’ll see places in people's homes that usually

require a search warrant.

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Have your expectations been met?

www.HUD.gov 800-CALLFHA (800-225-5342) E-Mail: answers@hud.gov Knowledge Base: www.hud.gov/answers

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FHA- Serving the American Homebuyer Since 1934

Watch For Changes

Check Mortgagee Letters and Message Boards for the Latest Information on www.hud.gov. Get on the FHA E-Mail List by sending an email to: jerrold.h.mayer@hud.gov

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Do not hesitate to call

1-800-Call FHA (1-800-225-5342)

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