Question:  What are the differences between an FHA appraisal and a FNMA appraisal?

 

Answer:  Depending on the property type, the FNMA 1004, 1073, 1025, or a 1004C form is used when doing an FHA appraisal.  The first few pages of the FHA Appendix D describe the inspection process which is more thorough than a typical residential appraisal.  The only difference in an FHA appraisal report and a typical residential appraisal report are the intended use and intended user statements, the client's name, and the presence of the mandatory case number.

 

The VC form and Homebuyer Summary were eliminated January 1, 2006.  No automatic inspections are required except when specific conditions are observed.   A VC sheet is still a good inspection check list but may not be included in the report.  An FHA appraisal can be done "as is", "subject to completion per plans and specifications", "subject to repairs", and "subject to required inspections".

 

Mortgagee Letter 2005-34 introduces FHA's new policies.   Mortgagee Letter 2005-48 expands on the policies.   Appendix D and the HOC National Guide are the finalized policy manuals.

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Some other considerations when doing an FHA appraisal:

 

1.   The appraisal is done "subject to repairs" if the house is under construction and more than 90% complete with only minor finish work remaining (buyer preference items i.e., floor coverings, appliances, fixtures, landscaping, etc.).  This eliminates the need for construction exhibits.  (Appendix D, Page 1)

 

2.   Cosmetic repairs are not required; however, they are to be considered in the overall condition rating and valuation of the property.  (Appendix D, Page 2)

 

3.   Operate a representative number of lighting fixtures, switches and receptacles inside the house, garage and on the exterior walls and note any deficiencies.  (Appendix D, Page 5)

 

4.   Flush the toilets and turn on a representative number of faucets to determine that the plumbing system is intact, that it does not emit foul odors, that faucets function appropriately, that both cold and hot water run and that there is no readily observable evidence of leaks or structural damage under fixtures.  (Appendix D, Page 5)

 

5.   For any home built prior to 1978, the appraiser must check for evidence of defective paint surfaces, including: peeling, scaling or chipping paint.  For all FHA insured properties, correction is required to all defective paint surfaces in or on structures and/or property improvements built before January 1, 1978.  (Appendix D, Page 6)

 

6.   FHA requires photos of the front and rear at opposite angles to show all sides of the dwelling.  (Appendix D, Page 13)

 

7.   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 over a patio).  (Appendix D, Page 13)

 

8.   An interior sketch or floor plan is required for properties exhibiting functional obsolescence attributable to the lay out.  (Appendix D, Page 13)

 

9.   FHA requires that the client be identified in the appraisal as the "lender/client and its successors or assigns".  (Appendix D, Page 15)

 

10. Termite Inspections are necessary whenever there is evidence of decay, pest infestation, suspicious damage or when it is customary to the area or required by state law.  (Appendix D, Page 23)

 

11. The appraiser must note in the appraisal that he/she could not adequately observe the entire roof area (state which area(s) were unobservable).  Based on the information reported by the appraiser, the underwriter will determine whether or not a roofing inspection is required.  (Appendix D, Page 23)

 

12. The appraiser may complete the Cost Approach; however, it is not required for an FHA appraisal. If, however, the subject is a unique property, has specialized improvements, is manufactured housing, or the client requests the Cost Approach be completed, then the Cost Approach is required and must be completed  (Appendix D, Page 35)

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