New FHA Appraisal Changes

  • Intended Use/Intended Users:

    The appraiser’s intended use statement should now read “The intended use of the appraisal is solely to assist FHA in assessing the risk of the Property securing the FHA‐insured Mortgage (24 CFR 200.145(b)).” FHA and the Mortgagee must be listed as the intended users of the appraisal report.

  • Cost to Cure of Repairs:

    If the appraiser determines repairs are required for the subject to meet minimum property requirements, the appraiser must provide an estimate of the cost to cure and complete the report “subject to the following repairs or alterations on the basis of the hypothetical condition that the repairs or alterations have been ”

  • Three Year Sales History for Comparables:

    The appraiser must report the date(s) of prior sale(s) or transfer(s) of each comparable that occurred within three years of the effective date of the In addition, the appraiser must provide an analysis of the prior sale or transfer history of the subject property and comparable properties in the report. Simply reporting a transaction is not a sufficient analysis or explanation to the reader.

  • Power Lines and Oil/Gas Wells:

    The appraiser no longer has an obligation to determine the fall distance of power lines, however, the location of the power lines should be described in the appraisal If any power line passes over the dwelling, structure, or any related improvement (including pools), the appraisal must be completed “subject to” the power line(s) being relocated. Additionally, the acceptable distance between the dwelling, and an active oil/gas well has been reduced to 75 feet.

  • Attics and Crawl Spaces:

    The appraiser is required to observe all areas of the attic and/or crawl spaces and must report any adverse conditions. Some of these include improper ventilation, dampness, evidence of water/fire damage, or evidence of vermin (more on this topic in Handbook 1, pages 488‐490). If access to the attic is limited or dangerous, the inspection should be rescheduled to a time where the full attic can be observed, or the appraisal report should be completed “subject to” inspection by a qualified third party. If access to the crawl space is limited or dangerous, a head and shoulders inspection will suffice (reinspection is not required). If access to the attic/crawl space does not exist at all, the appraiser must simply note this in the appraisal report.

  • Roofs:

    The appraiser must make a roof related comment on every report. The comment should note the remaining life, and if less than two years, the appraisal report must be completed “subject to” inspection by a qualified third party inspecto If the appraiser is unable to observe the roof in its entirety (ex: flat roof, built up), the appraiser must state what areas were not observable. Further, the appraiser must assess the condition based on the observable areas, the underside of the roof, and the interior of the attic (if accessible).

  • Cabinets & Appliances:

    Cabinets and built‐in appliances that are considered real property must be present and operational at the time of The appraiser must note all appliances that convey with the property, and each must be tested to ensure each turns on (full cycles do not need to be run). The appraisal report should be completed “subject to” the repair of any appliance/cabinets that are nonoperational.

  • Water Heater:

    The Appraiser must examine the water heater to ensure that it has a temperature and pressure‐relief valve with piping to safely divert escaping steam or hot

  • Utilities:

    As is standard, utilities must be on at the time of If utilities are not on, the appraisal report should be completed “subject to” the utilities being turned on so that mechanical systems and appliances can be tested. The appraiser must note that re‐observation may result in additional repair requirements once all the utilities are on and are fully functional.

  • Pools:

    The appraiser is no longer required to condition an appraisal report “subject to” cleaning when the water is observed to be green or However, the appraiser should make a comment on whether the pool poses health or safety issues. If the appraiser feels the pool does create a health/safety issue, the report should still be completed “subject to” repair/cleaning. If a pool has been winterized (or cannot otherwise be determined to be in working order), the appraiser must complete the appraisal report with the extraordinary assumption that the pool and its equipment can be restored to full operation condition at normal costs.

  • Additions and Conversions:

    The appraiser must include additions and conversions in subject GLA provided that the added/converted space is accessible from the interior of the main dwelling in a functional manner, has a sufficient/permanent heat source, and was built with similar design, appeal, and quality of construction of the main dwelling. In this case, comparable properties without added/converted areas must be analyzed for differences in functional However, if any of the criteria are not met, the area should be addressed as a separate line item (excluded from GLA), and the appraiser must comment on the marketability of the space.

Alternatively, the Appraiser may consider and analyze converted living spaces on a separate line within the sales comparison grid including the functional utility line in order to demonstrate market reaction.

  • Accessory Dwelling Units:

    Each accessory dwelling unit must be identified by the appraiser, and should be reported based on the appraiser’s highest and best use ADUs must not be included in subject GLA.

  • Non‐conforming Uses:

    If the subject property is a legal non‐conforming use according to its zoning, the appraiser must indicate whether or not the improvement can legally be rebuilt

  • Methamphetamine:

    If the appraiser has any reason to believe that a property has been contaminated with methamphetamine (either through use or production), the appraiser must obtain proof that the property is safe for If no certification is available, the appraisal report should be completed “subject to” a qualified third party certifying the property safe for habitation.

  • Active Listings/Pending Sales:

    The appraiser must include a minimum of two (2) active listings or pending sales in the sales comparison grid of every appraisal Many lenders will require more, but two is the minimum.

  • Sketch Requirements:

    The appraiser is now required to show porches and outbuildings that carry value on the The location of the pool should also be included on the sketch. Porches and decks must be labeled as “covered” or “uncovered” on the sketch.

  • Photo Requirements:

    The appraiser is now required to take front and back subject photos from opposite angles so that each also shows a separate side of the property as Comparable photos must also be taken from an angle such that the front and side can be captured in a single picture. All subject street photos must include a portion of the subject’s site. MLS photographs can only be utilized in conjunction with (not in lieu of) original photographs. All common areas in condo projects and multi‐ family properties must be photographed. Lastly, all repair items/deficiencies must be photographed.

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