Section 1.07 – Appraisal Guidelines In This Section This section contains the following topics. Overview ........................................................................................................................ 3 Introduction ................................................................................................................ 3 Guideline Summary ................................................................................................... 3 Related Bulletins ............................................................................................................ 6 Appraisers ...................................................................................................................... 7 Appraiser Selection Criteria ....................................................................................... 7 Supervisory or Review Appraiser Update ................................................................. 8 Ineligible Appraisers .................................................................................................. 9 Government Appraisal Approved Lists ...................................................................... 9 Appraiser Independence Requirements ...................................................................... 10 Scope of the Code ................................................................................................... 10 Appraiser Engagement ............................................................................................ 10 Appraiser Requirements .......................................................................................... 10 In-house Staff Appraisers ........................................................................................ 10 Appraiser Compensation ......................................................................................... 11 Settlement Services Provider .................................................................................. 11 Prohibited Activities ................................................................................................. 11 Misconduct .............................................................................................................. 12 Review of Appraised Values ........................................................................................ 13 General .................................................................................................................... 13 Ineligible Appraisal Reports ..................................................................................... 13 Exceptions to Ineligible Appraisal Reports .............................................................. 14 Communication with the Appraiser.......................................................................... 14 Underwriter Responsibility ....................................................................................... 14 Borrower Receipt of Appraisal ..................................................................................... 15 Second Appraisals ....................................................................................................... 16 Determining Equity on Previous Home ........................................................................ 17 Non-Arm’s Length/Conflict-of-Interest Transactions .................................................... 17 Property-Flipping Guidelines ....................................................................................... 18 Agency Loan Programs ........................................................................................... 18 Non-Agency Loan Programs ................................................................................... 22 Declining Market Index ................................................................................................ 25 Appraisal Report Forms and Exhibits: Agency Loan Programs .................................. 26 Appraisal Report Forms and Exhibits: Non-Agency Loan Programs .......................... 27 Overview .................................................................................................................. 27 Uniform Residential Appraisal Report (Fannie Mae 1004/Freddie Mac Form 70) (UAD) .................................................................................................................. 28 Market Conditions Addendum to the Appraisal Report (Fannie Mae 1004MC/ Freddie Mac Form 71) ........................................................................................ 30 Individual Condominium Unit (Fannie Mae 1073/ Freddie Mac 465) (UAD) ........... 32 Small Residential Income Property (Fannie Mae 1025/Freddie Mac 72) ............... 35 Exterior Only Inspection Residential Appraisal Report (Freddie Mac 2055 (UAD) . 36 Exterior-Only Inspection Condominium Unit Appraisal Report (Freddie Mac 466) (UAD) .................................................................................................................. 36 One-Unit Residential Appraisal Desk Review Report (Freddie Mac 1033) ............ 37 Appraisal Update and/or Completion Report (Fannie Mae 1004D/Freddie Mac Form 442) ........................................................................................................... 37 One-Unit Residential Appraisal Field Review Report (Fannie Mae Form 2000/Freddie Mac Form 1032 ............................................................................ 38 Section 1.07 January 15, 2021 Appraisal Guidelines Page 1 of 151 Correspondent Seller Guide Broker Seller Guide Two- to Four-Unit Residential Appraisal Field Review Report (Fannie Mae Form 2000A/ Freddie Mac Form 1072) ....................................................................... 38 Single-Family Comparable Rent Schedule (Fannie Mae Form 1007/Freddie Mac Form 1000) ......................................................................................................... 39 Appraiser Certification to the Appraisal Report ....................................................... 39 Appraisal Upgrades ................................................................................................. 39 Appraisal Analysis: Agency Loan Programs ............................................................... 40 Uniform Appraisal Dataset (UAD) and the Uniform Collateral Data Portal (UCDP) 40 Review of the Appraisal Report ............................................................................... 45 Subject and Contract Sections of the Appraisal Report .......................................... 47 Neighborhood Section of the Appraisal Report ....................................................... 50 Site Section of the Appraisal Report ....................................................................... 57 Improvements Section of the Appraisal Report ....................................................... 63 Property Condition and Quality of Construction of the Improvements .................... 75 Sales Comparison Approach Section of the Appraisal Report ............................... 84 Comparable Sales ................................................................................................... 88 Adjustments to Comparable Sales .......................................................................... 95 Cost and Income Approach to Value .................................................................... 100 Valuation Analysis and Reconciliation .................................................................. 102 Quality Assurance ................................................................................................. 103 Environmental Hazards Appraisal Requirements ................................................. 106 Appraisal Analysis: Non-Agency Loan Programs ..................................................... 108 General Information ............................................................................................... 108 FHA Electronic Appraisal Delivery (EAD) Portal ................................................... 108 Uniform Appraisal Dataset (UAD) ......................................................................... 109 Appraisal Types Required to be UAD Compliant and Submitted to the FHA EAD Portal ................................................................................................................ 110 VA UAD Compliance ............................................................................................. 111 Subject Property .................................................................................................... 112 Contract ................................................................................................................. 114 Neighborhood Analysis ......................................................................................... 115 Site Analysis .......................................................................................................... 120 Improvement Analysis ........................................................................................... 123 Property Condition and Appraiser Comments ....................................................... 128 Valuation Analysis ................................................................................................. 130 Cost Approach ....................................................................................................... 131 Comparable Rent Data .......................................................................................... 132