Introduction
APPENDIX D: VALUATION PROTOCOL
FHA RESIDENTIAL APPRAISAL REQUIREMENTS
FHA Quick Tips
Unacceptable Locations
Site Hazards and Nuisances
Soil Contamination
Grading and Drainage
Individual Water Supply and Sewage Systems
Wood Destroying Insects/Organisms
Private Road Access and Maintenance
Structural Conditions
Foundation
Roofing
Mechanical Systems
Mechanical Systems
Plumbing System
Other Health and Safety Deficiencies
Lead Based Paint Hazards
Comparable Selection
Intended Use of Appraisal
FHA Appraisals
Contractual Responsibility of Appraisers
For HUD/FHA purposes
Statement of Assumptions and Limiting Conditions
Appraiser's Certification
Appraiser /Client Information
D–1 FNMA 1004 (URAR)
Section 1 – Subject
Section 2 – Contract
Section 3 – Neighborhood
Section 4 – Site
Section 5 – Improvements
Accessory Unit / Accessory Dwelling Unit
FHA Criteria
Utility Service Requirements
Foundation
Basement
Mechanical Systems
Exterior Materials/Condition
Interior Materials/Condition
Car Storage
Appliances
Gross Living Area
Room Count and Gross Living Area
Narrative Comments Section
Section 6 – Sales Comparison Analysis
Comparable Data Pool
Value Adjustments
Section 7 – Reconciliation
Section 8 – Additional Comments
Section 9 – Cost Approach
Section 10 – Income Approach
Section 11 – PUD Information
D–2 FNMA 1004C
Section 1 – Subject
Section 2 – Contract
Section 3 – Neighborhood
Section 4 – Site
Section 5 – HUD Data Plate
Section 6 – Improvements
Foundation
Basement
Mechanical Systems
Exterior Materials/Condition
Interior Materials/Condition
Car Storage
Appliances
Gross Living Area
Room Count and Gross Living Area
Narrative Comments Section
Section 7 – Cost Approach
Comparable Data Pool
Value Adjustments
Section 9 – Reconciliation
Section 10 – Additional Comments
Section 11 – Income Approach
Section 12 – PUD Information
D–3 FNMA 1073
Section 1 – Subject
Section 2 – Contract
Section 3 – Neighborhood
Section 4 – Project Site
Section 5 – Project Information
Section 6 – Project Analysis
Section 7 – Unit Description
Interior Materials/Condition
Appliances
Car Storage
Gross Living Area
Room Count, Gross Living Area and Heating and Cooling separately metered
Narrative Comments Section
Section 8 – Prior Sale History
Section 9 – Sales Comparison Approach
Value Adjustments
Section 10 – Income Approach
Section 11 – Reconciliation
Additional Comments - Addendum
D–4 FNMA 1025
Section 1 – Subject
Section 2 – Contract
Section 3 – Neighborhood
Section 4 – Site
Section 5 – Improvements
Gross Living Area
Gross Building Area
Narrative Comments Section
Section 6 – Comparable Rental Data
Section 7 – Subject Rent Schedule
Section 8 – Prior Sale History
Section 9 – Sales Comparison Approach
Value Adjustments
Section 10 – Income
Section 11 – Reconciliation
Section 12– Additional Comments
Section 13 – Cost Approach
Section 14 – PUD Information
1 Selection of Appraiser
1-1 FHA Register
1-1A Appraiser Credentials
1-1B Register Application Process
1-1C Applicant Review
1-1D Designation to the FHA Register
1-2 Lender Selection of the Appraiser
1-2A Non-Discrimination Policy
1-2B Contractual Responsibility of Appraisers
1-2C Communication with Appraisers
1-2D Appraisal Fees
2 Site Analysis
2-1 Site Requirements
2-1A Neighborhood Definition
2-1B Competitive Sites
2-1C Definitions - Construction Status
2-1D Economic Trends
2-1E Land Use Restrictions
2-1E.1 Zoning
2-1E.2 Protective Easements/Covenants
2-1E.3 Inharmonious Land Uses
2-1E.4 Natural Physical Features
2-1E.5 Attractiveness of Neighborhood Buildings
2-1E.6 Neighborhood Character
2-1E.7 Character of Neighborhood Structures
2-1F Community Services
2-1G Transportation
2-1H Utilities and Services
2-1I Neighborhood Change Considerations
2-1J Marketability
2-1K Small Community Market Preferences
2-1L Outlying Sites and Isolated Sites
2-1M Study of Future Utility
2-1N Consideration of General Taxes and Special Assessments
2-2 Special Neighborhood Hazards and Nuisances
2-2A Unacceptable Sites
2-2B Topography
2-2C Subsidence
2-2D Operating and Abandoned Oil or Gas Wells
2-2D.1 Existing Construction
2-2D.2 New or Proposed Construction
2-2D.3 Abandoned Well
2-2D.4 Special Case - Proposed, Existing or Abandoned Wells
2-2E Slush Pits
2-2F Heavy Traffic
2-2G Airport Noise and Hazards
2-2H Special Airport Hazards
2-2H.1 New and Proposed Construction
2-2H.2 Existing Construction
2-2I Proximity to High Pressure Gas
2-2J Overhead High-Voltage Transmission Lines
2-2K Smoke, Fumes, Offensive Noises and Odors
2-2L Flood Hazard Areas
2-2L.1 New and Proposed Construction
2-2L.2 Existing Construction
2-2L.3 Condominium
2-2M Stationary Storage Tanks
3 Property Analysis
3-1 Appraisal Requirements
3-2 Analysis of Site
3-2A Topography
3-2B Suitability of Soil
3-2C Off-Site Improvements
3-2D Easements, Restrictions, and Encroachments
3-2E Encroachments
3-3 Analysis of Physical Improvements
3-3A Gross Living Area
3-3B Basement Bedrooms, Basement Apartments
3-3C Design
3-3D Conformity of Property to Neighborhood
3-4 Remaining Economic Life of Building Improvements
3-4A Economic Life vs. Physical Life
3-4B Estimation of Remaining Economic Life
3-4C End of Useful Life of Building Improvements
3-5 Code Enforcement for Existing Properties
3-6 General Acceptability Criteria for FHA-Insured Properties
3-6A General Acceptability Criteria
3-6A.1 Subject Property
3-6A.2 Hazards
3-6A.3 Soil Contamination
3-6A.4 Drainage
3-6A.5 Water Supply and Sewage Systems
3-6A.5a Individual Water Supply and Sewage Disposal Systems
3-6A.5b Unacceptable Conditions
3-6A.6 Wood Structural Components: Termites
3-6A.7 Streets
3-6A.8 Defective Conditions
3-6A.9 Ventilation
3-6A.10 Foundations
3-6A.11 Crawl Space
3-6A.12 Roof
3-6A.13 Mechanical Systems
3-6A.14 Heating
3-6A.15 Electricity
3-6A.16 Other Health and Safety Deficiencies
3-6A.17 Lead-Based Paint and Other Hazards
3-6B Other Criteria
3-6B.1 Party or Lot Line Wall
3-6B.2 Service and Facilities
3-6B.3 Non-Residential Use Design Limitations
3-6B.4 Access on to Property
3-6B.5 Space Requirements
3-6B.6 Bedroom Egress
3-6B.7 Energy Efficiency
3-6C Conditions Not Requiring Repairs
3-6D Repair Conditions for New/Proposed Construction
4 The Valuation Process
4-1 Market Value Estimates
4-1A Definition of Market Value
4-1B Property Rights Appraised
4-1C Purpose
4-1D Intended Use of Appraisal/Function
4-1E Use of the Appraisal
4-1F Effective Date of the Appraisal
4-1G Scope
4-1H Special Limiting Conditions and Assumptions
4-2 HUD/FHA Requirements
4-3 New and Proposed Construction Requirements
4-3A New Construction
4-3B Proposed Construction
4-4 Unique Property Appraisals
4-5 Cost Approach
4-5A Cost Approach Methodology
4-5A.1 Land Value Estimate
4-5A.2 Excess Land
4-5A.3 Sales Comparison Approach For Land Value
4-5A.4 Allocation
4-5A.5 Extraction
4-5B Improvement Cost Estimate
4-5C Typical Replacement Cost
4-5D Unusual and Non-Typical Costs
4-5E Recommended Methodologies
4-5F Remaining Economic Life
4-6 Sales Comparison Approach
4-6A Data Requirements
4-6A.1 Sales Data vs. Comparable Sale
4-6A.2 Selection of Comparable Sales for Analysis
4-6A.3 Excluded Sales Transactions
4-6A.4 Current Offerings and Listings Analysis
4-6A.5 Sales in Escrow
4-6A.6 Distressed Sales
4-6A.7 Relocation Sales
4-6A.8 Confirmation of Sales and Transaction Information
4-6B Adjustment Process
4-6B.1 Support for Adjustments
4-6B.2 Explanation of Adjustments
4-6B.3 Reconciliation of Adjusted Sale Prices
4-7 Income Approach
4-7A Data Requirements
4-7A.1 Confirmation of Leases and Transaction Information
4-7A.2 Adjustment Process
4-7A.3 The Income Projection
4.7B Development of Rates
4-8 Final Reconciliation
4-9 Reconsideration of Appraised Value
5 Reporting the Appraisal
5-1 Reporting the Appraisal
5-1A Part 1: Uniform Residential Appraisal Report (URAR)
5-1A.1 Departure from HUD Requirements
5-1A.2 Certification
5-1A.3 Statement of Limiting Conditions
5-1B Part 2: Valuation Conditions Form
5-1C Part 3: Homebuyer Summary
5-2 Access to Forms
5-3 Record Keeping
5-3A Minimum Term for Record Keeping
5-3B Documentation File Requirements
5-3C Sample Documentation File
6 Appraisal and Appraisal Monitoring
6-0 Introduction
6-1 Monitoring and Statistical Analysis
6-2 Performance Categories
6-3 Appraisal Review Process
7 Regulatory Environment, Enforcement, and Sanctions
7-1A Financial Institutions Reform, Recovery, Enforcement Act of 1989 ("FIRREA")
7-1B Federal Financial Institution Regulatory Agencies
7-1D False, Fictitious or Fraudulent Claims on HUD
7-1E Federal False Claims Act (31 U.S.C. 3_729) - Civil Fraud
7-1F 24 CFR Part 28 - Program Fraud Civil Remedies Act (PFCRA)
7-1G 24 CFR Part 30 - Civil Money Penalties
7-1H 24 CFR Part 24 - Administrative Sanctions
7-1I State Laws and Professional Organizations
7-1I.1 State Certifications
7-1I.2 Professional Organizations
7-2 Enforcement
7-2A State Certification Boards
7-2B Professional Organizations
7-3 Applicable Remedies and Sanctions
7-3A Notice of Appraisal Deficiencies and Remedial Education
7-3B Administrative Sanctions
7-3C Civil Sanctions
7-3D Criminal
7-3E Performance Violations and Level of Sanction
7-4 Performance And Sanction Matrix
8 Manufactured Homes
8-1 Property Standards for Title II Mortgage Insurance
8-2 Property Description
8-3 Appraiser Qualifications for Manufactured Homes Classified as Personal Property
8-4 Manufactured Home Lot Appraisals
8-4A Manufactured Home Lot Sites
8-4B How to Perform a Manufactured Home Lot Appraisal
9 PUDs and Condominiums
9-0A Approach to Value
9-0B Estimate of Market Price
9-1 Condominiums
9-1A Definitions
9-1B Approach to Value
9-1B.1 Sales Comparison Approach
Appendix A: Valuation of Other Properties
A – 1 Real Estate Owned
A – 2 Sales Comparison Approach
A – 3 Reporting Requirements
Appendix B: Special Programs
B-1 203(K) Rehabilitation Home Mortgage Insurance
B-1A Eligible Improvements