What if the Purchase contract is amended after the appraisal is completed?
If the contract is amended after the appraisal is completed, the lender must provide an updated contract to the appraiser if it is amended in a way that affects the description of the real property used by the appraiser. However, minor updates to the contract, such as changes to seller-paid closing costs or changes to the contract price, do not require an updated appraisal. Contract amendments that could affect the description of the property include: Amendments due to revised plans/specs for new construction or remodeling Changes in the legal description, acreage and/or number of parcels conveyed Renegotiated seller concessions or sale price as a result of a home inspection revealing property damage or deferred maintenance
Why does Fannie Mae require the lender to provide the sales contract to the appraiser?
Fannie Mae’s policy is intended to help ensure that the appraiser is aware of all relevant aspects of the transaction. The sales contract provides important sales and financing data, including whether there are any concessions as part of the transaction.
If the subject property features an unpermitted addition, can the square footage of the unpermitted addition be included in the total gross living area reported on the appraisal report?
If the appraiser has identified an addition(s) that does not have the required permit, the appraiser must comment on the quality and appearance of the work and assess the impact, if any, on the market value of the subject.
What is expected with regard to the appraiser’s inspection of a property?
Fannie Mae requires that the appraiser conduct a complete visual inspection of the accessible areas of the interior and exterior of the property. The appraiser is responsible for noting in his/her report any adverse conditions (such as, but not limited to, needed repairs; deterioration; or the presence of hazardous wastes, toxic substances, or adverse environmental conditions) that were apparent during the inspection of the property or that he/she became aware of during the research involved in performing the appraisal. The appraiser is expected to consider and describe the overall condition and quality of the property and identify items that require immediate repair as well as items where maintenance may have been deferred and which may not require immediate repair. On the other hand, an appraiser is not responsible for hidden or unapparent conditions. In addition, Fannie Mae does not consider the appraiser to be an expert in all fields, such as environmental hazards. In situations where an adverse property condition may be observed by the appraiser but the appraiser is not qualified to decide whether that condition requires immediate repair (such as the presence of mold, an active roof leak, settlement in the foundation, etc.), the property must be appraised subject to an inspection by a qualified professional. In such cases, the lender may need to ask the appraiser to update his or her appraisal based on the results of the inspection, in which case the appraiser would incorporate the results of the inspection and measure the impact, if any, on his or her final opinion of market value.
What is the expectation of appraisers when the subject has missing or no appliances?
It is common for appliances to be considered personal property and not given any contributory value if they are not permanently attached to a property’s structure. However, it is at the appraiser’s discretion to determine if the appliances are considered personal property or permanently attached to or built-in to the property structure. The appraiser should determine which appliances are common in the subject’s market area and, if any appliances are missing, analyze the impact on value and/or marketability.
In what situations should a property be appraised “as-is” versus “as-repaired”?
Fannie Mae permits an appraisal to be based on the “as-is” condition of the property as long as any minor conditions, such as deferred maintenance, do not affect the safety, soundness, or structural integrity of the property, and the appraiser’s opinion of value reflects the existence of these conditions. Minor conditions and deferred maintenance items include worn floor finishes or carpet, minor plumbing leaks, holes in window screens, or cracked window glass. Minor conditions and deferred maintenance typically © 2018 Fannie Mae. Trademarks of Fannie Mae. Updated December 2018 8 of 9 are due to normal wear and tear from the aging process and the occupancy of the property. Such conditions generally do not rise to the level of a “required repair.” Nevertheless, they must be reported. The appraiser must identify physical deficiencies that could affect the safety, soundness, or structural integrity of the property as part of his or her description of the physical condition of the property. These may include cracks or settlement in the foundation, water seepage, active roof leaks, curled or cupped roof shingles, inadequate electrical service or plumbing fixtures, etc. If the appraiser has identified any of these deficiencies, the property must be appraised subject to completion of the specific repairs or alterations. In these instances, the property condition and quality ratings must reflect the condition and quality of the property based on the hypothetical condition that the repairs or alterations have been completed
In originating a loan with a property located on a leasehold estate, does the lease need to be submitted to Fannie Mae for review and approval?
No. The lender must review the lease to ensure that it complies with the lease requirements as described in Selling Guide section B2-3-03, Special Property Eligibility and Underwriting Considerations: Leasehold Estates.
Is it acceptable for an appraiser to obtain and provide the required interior photographs at the time of the inspection for the Appraisal Update and/or Completion Report (Form 1004D)?
Yes. If the property being appraised is proposed or at a stage of construction where the required photographs cannot be obtained, they may be obtained at the time of the inspection for the Certification of Completion and provided with the Form 1004D.
If an appraiser provides an Appraisal Update and reports an increased value, can the lender utilize the value increase to underwrite the loan in process?
No. The purpose of the Appraisal Update portion of the Form 1004D is to indicate whether the value has remained the same or decreased. If the value has increased, the lender would need to obtain a new appraisal that reflects the increase in value in order to utilize the higher appraised value in underwriting the loan.
Can a previous appraisal be used for a subsequent limited cash-out refinance transaction when the borrower is refinancing to buy out another borrower’s interest?
Yes. In this scenario, a previously completed appraisal may be utilized; however, the lender must ensure the requirements identified in Selling Guide section B4-1.2-02, Appraisal Age and Use Requirements, have been met. The one acceptable variation to the policy is that the borrowers identified on the appraisal will not all be borrowers on the refinance transaction, given that one borrower is buying out the other borrower(s) on the refinance transaction
****Resources: Appraisal Conditions and guidelines are subject to change. For additional information about Fannie Mae’s appraisal policies, refer to the Selling Guide. Other resources are available on the Appraisers page on Fannie Mae’s website, including tutorials, forms, FAQs on the Uniform Appraisal Dataset (UAD), the Appraiser Independence Requirements (AIR), and more.
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