Single Family Housing Policy Handbook Update
The following is a summary of changes regarding the appraiser/appraisal report pulled from the 4000.1 FHA Single Family Housing Policy Handbook that goes IN EFFECT AS OF 09/14/2015.
Use And Wording Modifications
- 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 are the intended users of the appraisal report. The FHA Appraiser does not guarantee that the property is free from defects. The appraisal establishes the value of the property for mortgage insurance purposes only.
- Observation of subject site and improvements. Word observation changed from inspection.
- 203(K) “Streamline” program now called “Limited Rehabilitation” 203(K) program.
- The word “must” has been added where instructions used to state “should”
FHA Case Number
- Insert the FHA case number at the top of the upper right hand corner to correspond with the XML label /VALUATION_RESPONSE/REPORT/@AppraiserAdditionalFileIdentifier must be formatted as xxx-xxxxxxx.
On a 1004D Update
- If the appraiser does not concur with the original report or the property value has declined, the appraiser must indicate this on the form and a photo is not required.
Community Water System
- The appraiser must note the name of the water company in the appraisal report.
Power Lines
- Local distribution power lines may not pass directly over the dwelling or any structure or improvement, including pools. The residential service drop line may not pass directly over any pool, spa, or water feature.
- The prior “fall distance” requirement for power line towers has been removed. Handbook 4000.1 states that if a property or improvements appear to be located within an “unacceptable distance of any power line or tower and appear to be a safety issue” the appraiser must notify the mortgagee before completing the report.
Excess and Surplus Land
- Excess land; If the subject contains two or more legally conforming platted lots under one legal description and one ownership, and the second lot is capable of being divided and/or developed, the second lot is treated as excess land and the value of the second lot must be excluded from the final value conclusion of the appraisal. In this situation, the appraiser must provide a value of only the principal site and improvements under a hypothetical condition.
- If there is surplus land, the appraiser must include it in the valuation.
Zoning
- Legal non-conforming uses (grandfathered uses) are eligible, as long as the appraiser provides a brief explanation of its non-conforming status and states whether the property may be legally rebuilt if destroyed.
Methamphetamine Contaminated Properties
- Appraiser must render the appraisal “subject to the property being certified safe for habitation”
- Must analyze and report any long-term stigma caused by the property’s contamination by meth and the impact on value/marketability.
New Construction is 90% or More Complete
- The Appraiser must document a list of components to be installed or completed after the date of appraisal.
Crawl
- If moisture problems are evident in the crawl space, a vapor barrier and/or prevention of water infiltration must be required.
- Crawl space must be free of debris and trash, now MPR repair item.
- The Appraiser must visually observe all areas of the crawl space.
Attic
- The Appraiser must observe the interiors of all attic spaces.
- The Appraiser is not required to disturb insulation, move personal items, furniture, equipment or debris that obstructs access or visibility. If unable to view the area safely in their entirety, the Appraiser must contact the Mortgagee and reschedule a time when a complete visual observation can be performed, or complete the appraisal subject to inspection by a qualified third party. In cases where access through a scuttle is limited and the Appraiser cannot fully enter the attic, the insertion of at least the head and shoulders of the Appraiser will suffice.
Appliances
- FHA requires that cabinets and built-in appliances that are considered real property must be present and operational. Enter an “X” in the box only if the item was considered part of the real estate and is included in the value. The appraiser must note appliances that are present in the dwelling at the time of observation and indicate whether the appliance is considered personal property or real property. This means the appraiser must run certain appliances through an entire cycle.
Infestation, Including a Prior Treatment
- Appraiser must mark the “Evidence of Infestation” box on the appraisal report form and make the appraisal subject to inspection by a qualified pest control specialist.
Accessory Dwelling Units
- Appraisers will be responsible for determining whether to classify the subject as a single unit with an ADU or a two unit dwelling as part of the highest and best use analysis.
- The Appraiser must not include the living area of the ADU in the calculation of the Gross Living Area (GLA) of the primary dwelling.
Sales Comparison Approach
- The Appraiser must clearly state how and to what extent the comparable sales were verified. If the sale cannot be verified with someone who has first-hand knowledge of the transaction (i.e., buyers, sellers or one of their representatives), the Appraiser must report the lack of verification.
- FHA requires an appraiser to research and analyze prior sales of the comparables that occurred within three years prior to the effective date of the appraisal. Even in a non-disclosure state.
- Adjustments must not Exceed 10% for line items, 15% for net adjustments, and 25% for gross adjustments.” If adjustments exceed these stated guidelines, an explanation must be provided. (This is no longer required for FNMA).
Allowing Value of a Special Energy-Efficient Improvement
(Cannot include rented equipment)
- The Handbook states that estimating the contributory value of a special energy efficient improvement can be accomplished by applying one or more of the three traditional approaches to value – sales comparison, cost, and income. When reconciling the approaches to value for a special energy- efficient property, the appraiser is responsible for providing a credible analysis and for explaining the method- ology and support for the adjustment.
Cost Approach
- The cost approach must be performed “if the subject property is proposed or new construction.
- If the cost approach is not developed, FHA does not require appraiser to provide an estimate of site value.
- The cost approach is only required in the appraisal of new construction manufactured homes.
Exhibits and Maps
- All maps must be legible.
- The building sketch must show the Gross Living Area (GLA) and all exterior
dimensions of the dwelling. - The sketch must also show all dimensions of patios, porches, decks,
garages, breezeways, and all outbuildings that contribute value. For porches,
decks, and patios, the sketch must indicate “covered” or “uncovered.” - Attic & Crawl, must include photo.
- If new construction, photos that depict the subject’s grade and drainage.
- For proposed construction, a photo showing the grade of the vacant lot.
- For 2-4 family properties, photos of common areas, hallways, etc..
- Photos of common areas and shared amenities of the condo project.
- The appraiser must provide a photograph of any potential problem or issue,
including externalities.
The Handbook states “Regardless of the Appraiser’s suggested repairs, the Mortgagee will determine which repairs are required.” Lender may require additional information to be included in the report that FHA does not require.
Disclaimer: Any information included in this document is intended solely for the purposes of summarizing our views and opinions of the changes. This document should not be relied upon, nor shall it be utilized as an exhaustive list of all FHA Appraisal changes. Independent Fee Appraisers should always read the full guidelines and be prepared for all updates.