Appraiser Forum

The Appraisal Rumors Are True!

HUD/FHA are requiring all appraisals to be submitted through their new EAD (Electronic Appraisal Delivery) portal. This portal functions very much like Fannie Mae’s Collateral Underwriter, and requires appraisals submitted to the portal to be EAD compliant. Submission process will begin on June 27, 2016 and can be referenced on mortgagee letter 2015-08

For your benefit I will try and boil down the pertinent information contained in the FHA report and delivery guide for June of 2015.

Firstly, this is not required for Native American Loans, loans for determining listing prices for HUD REO listing, FHA claims without conveyance of title properties, or pre foreclosure properties.

This list is not exhaustive but represents the major differences from standard UAD practice. To review the document in its entirety visit:
http://portal.hud.gov/hudportal/documents/huddoc?id=SFH_POLI_APPR_RPT_FIN.PDF

SUBJECT PROPERTY

Market conditions report (FNM 1004mc/FRE71) is required on every FHA/HUD report.
FHA Case number should be at the top right of each report.
FHA appraisals may not be submitted without a case number.
Property address must conform to the Mailing standards of the USPS, if the property is also known as a different address it must be explained.
If seller is not the owner of record it must be explained.
If the subject is a PUD, the subdivision name must be referenced.
If vacant a statement about utilities must be included with a condition for verification, a statement that the utilities were off, or an extraordinary assumption that the mechanicals are functional.
Whole dollars must be used for HOA/PUD fees.
The intended user statement must be included: “The intended use of the appraisal is solely to assign FHA is assessing the risk of the property securing the FHA-insured mortgage (24 CFR 200.145 (b)) FHA and the mortgagee are the intended users of the appraisal report. The FHA appraiser does not guarantee the property is free from defects. The appraisal establishes the value of the property for mortgage insurance purposes only.”
If a sale the following statement must be included: “I have researched, verified and analyzed on any current agreement of sale of the subject property, any offering for sale of the subject property in the twelve months prior to the effect date of the appraisal.”
FHA requires the appraiser to be provided with a complete contract.
Analysis of appraisal should include a reference to the number of pages in the contract.
Properties may not be eligible property flipping is involved. (Defined as a re-sale in under 90 days)
List all dimensions of the site beginning with the frontage.
If Irregular show the boundary dimensions (ex. 85x150x195x250) or attach a property survey, site plan or plat or legal description with a comment “see attached”.
Do not list site area on dimensions line.
Site area is to be reported in square feet if under one acre, in acres if over one acre.
Describe view of the property, “None” is not acceptable.
Photos are required of a negative or positive view.
Enter specific zoning, DO NOT GUESS OR ASSUME, if no zoning exists enter “none exist”
Describe specific zoning and what it permits.
If the property is legal non-conforming provide an explanation and a statement if it can be rebuilt if destroyed.
If the use is not legal the property is no eligible for FHA mortgage insurance.
Public utilities are government supplied and regulated. Public does not include any community systems sponsored, owned, or operated by the developer or a private company not subject to government regulation or financial assistance.
Note if there are mechanical chlorinators or if water flow decreases when multiple plumbing systems are operating.
Visually inspect septic system and surrounding fields.
Any obvious signs of system failure require an inspection.
If well and septic are used it must be indicated if public water and sewer are available to the site.
If available and costs are reasonable connection must be made to public utilities. Mortgagee is to determine feasibility
Public street refer to improvement dedicated to and accepted by a unit of government.
FEMA flood map to be included with its hazard area; A and V require insurance, B, C and X do not.
Adverse conditions must be noted. (slide areas, overhead and underground easements, zoning issues, brownfield sites, etc.) Explain, comment and adjust if required.
Stories is required in a numeric format, not verbal to two decimal places (2.25, 2.5, 2)
Do not use builder’s name for design style.
For under construction or proposed construction enter the current year (new FHA specific requirement)
Effective age is to be reported in numbers, range is also acceptable, no text.
Any significant differences between effective age and actual age must be commented on.
Appraisers are required to inspect the attic.
Appraisers are to inspect the crawlspace. Distance from bottom of floor joists to ground must be noted; space must be adequate for ventilation and repair. Check for insulation, ventilation and for structural problems. Check to make sure the supports beams are intact and are structurally sound.
For dirt basement floors, determine whether a property is typical area and is readily marketable. If it is common for the area then a concrete basement floor is not required, but all mechanicals must be mounted on a concrete pad.
Check for signs of water damage, (efflorescence, mold, mildew, or staining) Basement crawlspaces cannot have ponding of water and must be corrected by a qualified professional.
“Other” in utilities must be described.
Check for signs or damage or note any odors during operation of heating and cooling.
Note roof condition and look for missing tiles, flashing or shingles, if roof is obstructed look for signs of damage in the interior. If a section cannot be observed it must be noted.
Bedroom windows must be equipped with quick release latches; they must be operational as well, condition for correction if they are not present and operational.
Tandem car storage must be noted and marketability demonstrated.
If an appliance is noted it is considered part of the real property and included in the value reported.
Room count and design should reflect marketability, to determine if one or two rooms should be counted; “hypothetically” insert a wall to separate the two areas, if the occupants can use the two rooms with the same or more utility count the room as two.
If this wall results in a lack of utility treat the room as one.
Do not include finished basement rooms or unfinished attic space in the gross living area.
Dimensions of a pool should be included and or sketched.
If the property is completed subject to repair, the reported condition and valuation should be “as repaired”
If the house is built before 1978 appraiser must address lead-base paint hazards.

COMPARABLE SALES

Comparables must adhere to the USPS mailing standard.
Proximity must be entered in a straight line distance. If the comparable is outside the neighborhood boundaries an explanation is required.
MLS by itself is not considered a verification source.
Do not use unverified sales.
Small differences in lot sizes may not require an adjustment if it is within a market accepted range.
Consider “Excess vs Surplus” land and provide comments.
View must be adjusted for and photo of view provided to support adjustment.
Differences in quality where adjusted for must be explained. “Based on MLS description” is not sufficient.
If the appraisal is subject to repairs the condition rating and adjustments should correspond to the condition as completed.
If there is no basement enter a value of 0
If the appraiser does not have a credible data source for the quantity of finished basement area, enter “1” and explain in the addendum.
FHA is still using 10% line, 15% net and 25% gross, (Fannie and Freddie do not, I expect this to change) If exceeded an explanation must be provided.
Being located in a non-disclosure state does not remove the obligation to research report and analyze prior sales history of the comparables.
Houses built of recycled materials can be considered new, if the materials are recycled into a new product and the house is on a completely new foundation.
REPORT THE DATE OF SALES OR TRANSFERS OF THE COMPARABLES THAT HAVE OCCURRED WITHIN THREE YEARS (FHA SPECIFIC REQUIREMENT)
In non-disclosure states appraiser is responsible for reporting information that is reasonably obtainable.
All transfers must be reported regardless of consideration or type.
Analysis of transfers must be provided, simply stating the transfer is not sufficient.
Explanation of thought process for valuation and comparable weighting is required.

COST APPROACH:

If a cost approach is not developed “NA”, “ND” or “Not Dev.” For not developed is required.
Appraisal should be rendered “as is” if:
No repairs are required
Establishing an as is value for a 203k when requested on a separate form by lender.
Property is being recommended for rejection.
Intended use is pre foreclosure, foreclosure or REO.
Appraisal should be rendered “subject to completion per plans and specs…” If:
Subject is proposed construction and construction hasn’t started.
Subject is under construction but not complete.
Mortgage type is standard or limited 203k
Appraisal should be rendered “subject to the follow repairs…” if:
The health and safety of the occupants are an issue
The Security of the property is at risk
The correction of conditions that affect structural integrity are required.
Buyer preference items for new housing are to be installed
Complete repairs noted in work order or contractor estimate for 203k
The property must be corrected to meet minimum FHA property rating.
Appraisal should be rendered “subject to a required inspection…”
If required inspections by licensed professionals are required.
All required completion, repair, alteration and inspection items must be noted.
Cost approaches are a recognized method of valuation and can be useful in new construction or if it is market appropriate. It is not required on every assignment if the appraiser deems it is not pertinent.
Remaining economic life must be stated as a number or a range.
Support for site value must be provided in the cost approach, land sales should be listed and analyzed.
If another method is used, extraction, allocation, land residual or ground rent capitalization method must be described and reported.
Reproduction or replacement cost should be indicated.
Source of cost data is to be noted.
Describe how physical depreciation was calculated
Describe physical or functional obsolescence.
Enter GLA calculations or refer to sketch.
Enter remaining economic life, REQUIRED ON ALL FHA ASSIGNMENTS.
Marketing costs and impact fees should be considered on the blank line.

INCOME APPROACH

Income approach must be developed if relevant.
Gross rent multiplier must be market derived, supported and applied to the subject’s market rent.
If not developed it must be explained as to why.

PUD INFORMATION

A PUD is a project that includes common property and improvements;
owned and maintained by an owner’s association for the use and benefits of the residents.
Provide the following information if the developer is in charge of the HOA or the subject is an Attached Dwelling Unit.
Fill in fields as applicable.

MANUFACTURED HOME APPRAISAL

FHA Case number must be reported in the top right of the appraisal.
Transmission to a mortgagee without a case number is prohibited.
Property address must conform to the Mailing standards of the USPS, if the property is also known as a different address it must be explained.
If seller is not the owner of record it must be explained.
Properties may not be eligible property flipping is involved. (defined by re-sale in under 90 days)
If subject is a PUD or manufactured housing park provide the name of development
Enter dollar amount of HOA fees and mark “yearly” or “monthly”
The intended user statement must be included; “The intended use of the appraisal is solely to assign FHA is assessing the risk of the property securing the FHA-insured mortgage (24 CFR 200.145 (b)) FHA and the mortgagee are the intended users of the appraisal report. The FHA appraiser does not guarantee the property is free from defects. The appraisal establishes the value of the property for mortgage insurance purposes only.”
If the transaction is a sale the following statement must be included: “I have researched, verified and analyzed on any current agreement of sale of the subject property, any offering for sale of the subject property in the twelve months prior to the effect date of the appraisal.”
FHA requires a contract be provided with a complete contract.
Analysis of appraisal should include a reference to the number of pages in the contract.
Manufacturer’s invoice must be included if it is new construction
Appraiser is to note if invoice of sale is not available.
Retailer name is to be included on new construction.
List all dimensions of the site beginning with the frontage.
If Irregular show the boundary dimensions (ex. 85x150x195x250) or attached a property survey, site plan or plat or legal description with a comment “see attached”.
Do not list site area on dimensions line.
Site area is to be reported in Square feet if under one acre, in acres if over one acre
Describe view of the subject property; “None” is not acceptable.
Photos are required of a negative or positive view.
Enter specific zoning, DO NOT GUESS OR ASSUME;if no zoning exists enter “none exist”
Describe specific zoning and what it permits.
If the property is legal non-conforming provide and explanation and statement if it can be rebuilt if destroyed.
If the use is not legal the property is no eligible for FHA mortgage insurance.
Public utilities are government supplied and regulated. Public does not include any community systems sponsored, owned, or operated by the developer or a private company not subject to government regulation or financial assistance.
Note if there are mechanical chlorinators or if water flow decreases when multiple plumbing systems are operating.
Visually inspect septic system and surrounding fields.
Any obvious signs of system failure require an inspection.
If well and septic are used it must be indicated if public water and sewer are available to the site.
Appraiser to note if there is adequate vehicular access
Appraiser to note if the street is properly maintained, and describe the condition of the street (note if it has or does not have an all-weather surface)
Public streets refer to improvement dedicated to and accepted by a unit of government.
FEMA flood map to be included with its hazard area; A and V require insurance, B, C and X do not.
Adverse conditions must be noted. (slide areas, overhead and underground easements, zoning issues, brownfield sites, etc. Explain and comment and adjust if required.
Stories is required in a numeric format; not verbal, to two decimal places (2.25, 2.5, 2)
Do not use builder’s name for design style.
For under construction or proposed construction enter the current year (new FHA specific requirement)
Effective age is to be reported in numbers, range is also acceptable, no text.
Any significant differences between effective age and actual age must be commented on.
Appraisers are required to inspect the attic.
Appraisers are to inspect the crawlspace. Distance from bottom of floor joists to ground must be noted; space must be adequate for ventilation and repair. Check for insulation and ventilation or for structural problems. Check to make sure the support beams are intact and for structural soundness.
Check for signs of water damage, (efflorescence, mold, mildew, or staining) Basement crawlspaces cannot have ponding of water and must be corrected by a qualified professional.
“Other” in utilities must be described. Check for signs or damage or note any odors during operation of heating and cooling.
Note roof condition and look for missing tiles, flashing or shingles, if roof is obstructed look for signs of damage in the interior. If a section cannot be observed it must be noted.
Bedroom windows must be equipped with quick release latches; they must be operational as well, condition for correction if they are not operable.
Tandem car storage must be noted and marketability demonstrated.
If an appliance is noted it is considered part of the real property and in the estimated value reported.
Room count and design should reflect marketability, to determine if one or two rooms should be counted ”hypothetically” insert a wall to separate the two areas, if the occupants can use the two rooms with the same or more utility count the room as two.
If this wall results in a lack of utility treat the room as one.
Dimensions of a pool should be included and or sketched.
If the property is completed subject to repair, the reported condition and valuation should be “as repaired”
If the house is built before 1978 appraiser must address lead-base paint hazards.
HUD data plate should be noted as if attached or missing
IF HUD SEAL IS UNAVAIALBE APPRAISER MUST REPORT THIS FACT
Enter the manufacturer’s serial number found on the HUD data plate or stamped on the foremost cross member of the hitch end.
Provide manufacturer name, date of manufacture, and model name of the subject
HUD data plate contains wind, roof load and thermal zone maps; mark appropriate box.
Mark if home meets zone requirements for its location.
Mark “No” if manufactured home was produced for a different geographical area.
Mark “No” if plate is missing, and note that appraiser is unable to determine compliance for geographic zone.
Skirting material must be noted.
Crawlspace must be properly enclosed with a permanent foundation type construction.
Describe any additions or modifications made to the manufactured home since its placement.
Structural changes or modifications may put the home at risk.
If appraiser observes structural changes to the original home, an inspection by the state administrative agency must be required.
If no state agency exists, HUD will accept certification from a state licensed structural or civil engineer to insure the structure has not been compromised. Otherwise the home may be ineligible for insurance.
If available appraiser to indicate the name and company of the installer and date of installation, if this information is not available appraiser to make a note.
Permanent foundations must comply with FHA criteria as evidenced by an engineer’s certificate.
Appraiser is to indicate if copy of required certification of design of foundation was provided.
Appraiser is to inspect the underside of the home to determine if hitch and running gear have been removed.
If not removed or if the appraiser is unable to determine the home is not eligible for FHA insured financing.
Appraiser is to note if the home is permanently connected to utilities, if “no” is marked the house is not eligible for FHA insured financing.

The FHA appraisal report and delivery guide is 72 pages long, I recommend reading it at your leisure. The list provided is not complete, but it represents the major departures from standard appraisal practice.

Norman Hubbard

Nationwide Appraisals

Norman Hubbard Nationwide was founded in 1991, since that time we have been dedicated to providing the finest customer service in the industry. At Norman Hubbard, we strive to insure that every single call is answered live. We treat each client with the respect and consideration they deserve. All while providing an appraisal service that is timely, accurate, and efficient.
Our easy to use appraisal tracking system allows you to track your order as it progresses from inception to delivery. In addition, there are dedicated staff available to answer questions at every point, and we strive to accommodate any special requests for availability.
Our appraisers are hand selected and pass through a rigorous vetting process to ensure you are getting the quality reports your business deserves. Our commitment to Appraiser Education insures that our field personnel are properly prepared for the continually changing appraisal landscape.
We use a two tiered quality control system; with an automated system that checks each appraisal for the majority of Fannie Mae/Freddie Mac Collateral Underwriter hard stops. In addition each appraisal is reviewed by our quality control department which collectively has over 100 years of appraisal field work experience.


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914-997-1484

914-760-0666

914-997-1866

president*normanhubbard.com

690 N. Broadway, Suite 102

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James Norman, President