***Valuation Analysis for Single Family One- to Four- Unit Dwellings***

Directive Number: 4150.2, CHG-1

[1 SELECTION OF APPRAISER 10](#selection-of-appraiser)

[1-0 INTRODUCTION 10](#introduction)

[1-1 FHA REGISTER 10](#__RefHeading___Toc167790690)

[A. APPRAISER CREDENTIALS 10](#a.-appraiser-credentials)

[B. REGISTER APPLICATION PROCESS 10](#b.-register-application-process)

[C. APPLICANT REVIEW 11](#c.-applicant-review)

[D. DESIGNATION TO THE FHA REGISTER
11](#d.-designation-to-the-fha-register)

[1-2 LENDER SELECTION OF THE APPRAISER 12](#__RefHeading___Toc167790695)

[C. COMMUNICATION WITH APPRAISERS 12](#c.-communication-with-appraisers)

[D. APPRAISAL FEES 13](#d.-appraisal-fees)

[2 SITE ANALYSIS 13](#site-analysis)

[2-0 INTRODUCTION 13](#__RefHeading___Toc167790699)

[2-1 SITE REQUIREMENTS 13](#__RefHeading___Toc167790700)

[D. ECONOMIC TRENDS 14](#d.-economic-trends)

[E.LAND USE RESTRICTIONS 14](#e.land-use-restrictions)

[H. UTILITIES AND SERVICES 16](#h.-utilities-and-services)

[2-2 SPECIAL NEIGHBORHOOD HAZARDS AND NUISANCES
17](#__RefHeading___Toc167790704)

[3 PROPERTY ANALYSIS 23](#property-analysis)

[3-0 INTRODUCTION 23](#__RefHeading___Toc167790706)

[3-1 APPRAISAL REQUIREMENTS 23](#__RefHeading___Toc167790707)

[3-2 ANALYSIS OF SITE 24](#__RefHeading___Toc167790708)

[3-3 ANALYSIS OF PHYSICAL IMPROVEMENTS 25](#__RefHeading___Toc167790709)

[3-4 REMAINING ECONOMIC LIFE OF BUILDING IMPROVEMENTS
27](#__RefHeading___Toc167790710)

[3-5 CODE ENFORCEMENT FOR EXISTING PROPERTIES
28](#__RefHeading___Toc167790711)

[3-6 GENERAL ACCEPTABILITY CRITERIA FOR FHA-INSURED MORTGAGES
28](#__RefHeading___Toc167790712)

[4 THE VALUATION PROCESS 40](#the-valuation-process)

[4-0 INTRODUCTION 40](#__RefHeading___Toc167790714)

[4-1 MARKET VALUE ESTIMATES 40](#__RefHeading___Toc167790715)

[4-2 HUD/FHA REQUIREMENTS 42](#__RefHeading___Toc167790716)

[4-3 NEW AND PROPOSED CONSTRUCTION REQUIREMENTS
43](#new-and-proposed-construction-requirements)

[4-4 UNIQUE PROPERTY APPRAISALS 44](#__RefHeading___Toc167790718)

[4-5 COST APPROACH 44](#__RefHeading___Toc167790719)

[4-6 SALES COMPARISON APPROACH 47](#__RefHeading___Toc167790720)

[4-7 INCOME APPROACH 50](#income-approach)

[4-8 FINAL RECONCILIATION 51](#__RefHeading___Toc167790722)

[4-9 RECONSIDERATION OF APPRAISED VALUE
52](#__RefHeading___Toc167790723)

[5 REPORTING THE APPRAISAL 52](#__RefHeading___Toc167790724)

[5-0 INTRODUCTION 52](#__RefHeading___Toc167790725)

[5-1 REPORTING THE APPRAISAL 52](#__RefHeading___Toc167790726)

[5-2 ACCESS TO FORMS 55](#__RefHeading___Toc167790727)

[5-3 RECORD KEEPING 55](#__RefHeading___Toc167790728)

[6 APPRAISAL AND APPRAISER MONITORING
56](#appraisal-and-appraiser-monitoring)

[6-0 INTRODUCTION 56](#__RefHeading___Toc167790730)

[6-1 MONITORING AND STATISTICAL ANALYSIS
56](#__RefHeading___Toc167790731)

[6-2 PERFORMANCE CATEGORIES 56](#__RefHeading___Toc167790732)

[6-3 APPRAISAL REVIEW PROCESS 57](#appraisal-review-process)

[7 REGULATORY ENVIRONMENT, ENFORCEMENT AND SANCTIONS
57](#regulatory-environment-enforcement-and-sanctions)

[7-0 INTRODUCTION 57](#__RefHeading___Toc167790735)

[7-1 REGULATORY ENVIRONMENT 58](#__RefHeading___Toc167790736)

[7-2 ENFORCEMENT 60](#__RefHeading___Toc167790737)

[7-3 APPLICABLE REMEDIES AND SANCTIONS 61](#__RefHeading___Toc167790738)

[7-4 PERFORMANCE AND SANCTION MATRIX 63](#__RefHeading___Toc167790739)

[8 MANUFACTURED HOMES 63](#manufactured-homes)

[8-0 DEFINITION 63](#definition)

[8-1 PROPERTY STANDARDS FOR TITLE II MORTGAGE INSURANCE
63](#__RefHeading___Toc167790742)

[8-2 PROPERTY DESCRIPTION 65](#__RefHeading___Toc167790743)

[8-3 APPRAISER QUALIFICATIONS FOR MANUFACTURED HOMES CLASSIFIED
65](#appraiser-qualifications-for-manufactured-homes-classified)

[AS PERSONAL PROPERTY 65](#as-personal-property)

[8-4 MANUFACTURED HOME LOT APPRAISALS 65](#__RefHeading___Toc167790746)

[9 PLANNED UNIT DEVELOPMENTS AND CONDOMINIUM
66](#__RefHeading___Toc167790747)

[9-0 PLANNED UNIT DEVELOPMENT (PUD) 66](#__RefHeading___Toc167790748)

[9-1 CONDOMINIUMS 67](#__RefHeading___Toc167790749)

[APPENDIX A: VALUATION OF REAL ESTATE OWNED PROPERTIES
69](#appendix-a-valuation-of-real-estate-owned-properties)

[APPENDIX B: SPECIAL PROGRAMS 73](#appendix-b-special-programs)

[APPENDIX C: APPRAISAL OF SINGLE FAMILY HOMES ON NATIVE AMERICAN LANDS
79](#appendix-c-appraisal-of-single-family-homes-on-native-american-lands)

[APPENDIX D: VALUATION PROTOCOL 84](#appendix-d-valuation-protocol)

**\<[Back to top](#_top)\>**

Directive Number: 4150.2

[Click Here to Download Updated
Handbook](http://www.hudclips.org/sub_nonhud/cgi/pdfforms/4150-2ch.exe)
Chapters

##### U.S. Department of Housing and Urban Development

Special Attention of: **Transmittal for Handbook No.: 4150.2, CHG-1**

Directors, Home Ownership Centers

Directors, Processing and Underwriting**Issued: July 1, 1999**

Division, Home Ownership Centers

Direct Endorsement Lenders

1\. This Transmits

Changes to Handbook 4150.2, Valuation Analysis for Single Family One- to
Four-Unit Dwellings, dated July 1999

2\. Explanation of Changes:

This handbook has been revised to correct several minor errors in this
new handbook. Specifically, the word \"location\" has been changed to
\"site\" on several pages noted below under Filing Instructions. On
pages 2-12 and D-25, the size of stationary storage tanks in determining
the eligibility of a site has been changed from 100 gallons to 1000
gallons. (The change has also been made to the Notice to Lender, [HUD
form
92564-VC](http://www.hudclips.org/sub_nonhud/cgi/pdfforms/92564-vc.doc),
referenced in Handbook 4150.2.) The ownership information requirements
of the appraisal protocol on page D-1 have been revised to account for
refinance transactions. In addition, in Section B-1, the percentage
floor area used for commercial purposes follows these standards:

\- One story building 25%

\- Two story building 49%

\- Three story building33%

This change corrects the reversal of the percentages for two- and
three-story buildings.

3\. Handbook Cancellations: None

4\. Filing Instructions:

**Remove: Insert:**

Pages i and ii, dated 5/99 Pages i and ii, dated 6/99

Pages v and vi, dated 5/99 Pages v and vi, dated 6/99

Pages 2-1 through 2-12, dated 5/99 Pages 2-1 through 2-12, dated 6/99

Pages 4-11 and 4-12, dated 5/99 Pages 4-11 and 4-12, dated 6/99

Pages 5-1 and 5-2, dated 5/99 Pages 5-1 and 5-2, dated 6/99

Pages 7-3 and 7-4, dated 5/99 Pages 7-3 and 7-4, dated 6/99

Pages 8-1 through 8-3, dated 5/99 Pages B-1 through 8-3, dated 6/99

Page 9-3, dated 5/99 Page 9-3, dated 6/99

Pages A-9 and A-10, dated 5/99 Pages A-9 and A-1 0, dated 6/99Pages B-1
and B-2, dated 5/99 Pages B-1 and B-2, dated 6/99

Pages D-1 and D-2, dated 5/99 Pages D-1 and D-2, dated 6/99

Pages D-23 through D-26, dated 5/99 Pages D-23 through D-26, dated 6/99

Pages D-33 through D-35, dated 5/99 Pages D-33 through D-35, dated 6/99

Distribution: W-3-1, R-1,R-2,R-3-1(H) (RC),R-3-2,R-3-3,R-6,
R-6-2,R-7,R-7-2,R-8,ASC

[Click Here to Download Complete
Handbook](http://www.hudclips.org/sub_nonhud/cgi/pdfforms/41502.exe)

U.S. Department of Housing and Urban Development

Special Attention of: TRANSMITTAL Handbook No. 4150.2

Directors, Home Ownership Centers

Directors, Processing and Underwriting Issued: June 24, 1999

Divisions, Home Ownership Centers

Direct Endorsement Lenders

1\. This Transmits:

Changes to Handbook 4150.2, Valuation Analysis for Single Family One- to
Four- Unit Dwellings, dated July 1999

2\. Explanation of Changes:

This handbook has been revised to correct several minor errors in this
new handbook. Specifically, the word \"location\" has been changed to
\"site\" on several pages noted below under Filing Instructions. In
addition, in Section B-1, the percentage floor area used for commercial
purposes follows these standards:

\- One story building 25 %

\- Two story building 49 %

\- Three story building 33 %

This change corrects the reversal of the percentages for two and three
story buildings.

3\. Handbook Cancellations: None

4\. Filing Instructions:

Change \"location\" to \"site\" on the following pages:

Page i Page 5-2

Page vPage 7-4

Page 2-1 Page 8-2

Page 2-2 Page 8-3

Page 2-4 Page 9-3

Page 2-5 Page A-9

Page 2-7 Page D-2

Page 2-8 Page D-24

Page 2-9 Page D-25

Page 2-12Page D-34

Page 4-11Page D-35

U.S. Department of Housing and Urban Development

Special Attention of: Transmittal for

Handbook No.: 4150.2

Directors, Homeownership Centers

Directors, Processing and Underwriting Issued: May 20, 1999

Divisions, Home Ownership Centers

Direct Endorsement Lenders

1\. This Transmits

A new Handbook, 4150.2, Valuation Analysis for Home Mortgage Insurance
for Single Family One- to Four- Unit Dwellings. This handbook replaces
and supercedes most of the provisions of Handbook 4150.1 REV-1,
identified below under the heading of \"HANDBOOKS\".

2\. Explanation of Materials Transmitted:

This handbook reflects policy clarifications and improvements since
March 15, 1990 on valuation requirements for existing, proposed and new
construction of one- to four-family units for mortgage insurance
purposes. The new Handbook incorporates and updates the sections of
Mortgagee Letters and other HUD Handbooks that are relevant to
appraisals. The following section identifies those Mortgagee Letters and
Handbooks.

MORTGAGEE LETTERS

These Mortgagee Letters have been incorporated in part or in full into
the Handbook:

97-46Appraisal Management Firms

97-41Clarification of 97-22 Regarding New Construction in Flood Plains

97-22FHA New Construction, Inspection and Appraisal Requirements
Sections: Cost Approach, Valuation Conditions, Appraisal Form

96-29Paperwork Reduction, Lead-Based Paint Disclosure

> Section: Lead-based Paint

96-26Appraiser Standards

96-5 Elimination of the Fee Panel and Mortgagee Staff Appraiser
Designations

95-40Revisions to the 203(k) Rehabilitation Mortgage Insurance Program

95-34Testing of and On-Site Well/Septic System Inspections (Web)

94-54Procedures for Lenders to Use to Select Their Own Appraisers
Sections III andIV

94-36Clarification of ML 92-18: Testing of Individual Wells

94-26HUD Reorganization

94-11Revisions to the 203k Rehabilitation Insurance Program Item 18

94-6 Processing Sec 248 - Indian Reservations Item 1-10

94-3 Revised Appraisal Report Forms,

92-18Single Family Loan Production - Acceptance of Individual
Residential Water Purification Equipment; Section 3.6.1.6

91-1 Implementation of Certain Provisions of the 1990 Housing
Legislation Section X

HANDBOOKS

The following chapters/paragraphs for the handbook identified below have
been incorporated into the new Handbook 4150.2. The information has been
updated to reflect the newest policies and procedures. Because these
Handbooks were written primarily for lenders, builders or HUD staff, the
instruction relevant to the appraiser has been extracted. The portions
of these documents relevant to lender requirements have not been
superceded.

Distribution: W-3-1, R-1, R-2, R-3-1 (H) (RC), R-3-2, R-3-3, R-

6\. R-6-2, R-7, R-7-2, R-8, ASC

4000.2 REV-2 Mortgagees\' Handbook Application through Insurance (Single
Family)

Paragraph 2\--General Acceptability Standards for Property

Paragraph 2-12\--The Appraisal Package

Paragraph 2-15\--Review of the Appraisal

Paragraph 2-18\--Compliance Inspection

Paragraph 2-19\--Satisfying Repair Requirements

Paragraph 2-20\--Section 223(e)

Paragraph 2-23\--Delivery of Statement of Appraised Value

Paragraph 4-3\--Reconsideration: Changes Involving Property

Paragraph 6-5\--Section 203(k)

4000.4 REV-1 Single Family Direct Endorsement Program

Paragraph l-6\--Minimum Property Standards

Paragraph 1-7\--Eligibility of Condominium Projects

Paragraph 3-3\--Property Valuation Procedures

Paragraph 3-14\--Lead-Based Paint Hazard

Paragraph 4-9 D\--Post-Endorsement Technical Review

4020.1 HUD-FHA Underwriting Analysis

Paragraph 1-8\--Instruction for the Selection and Approval of Fee
Personnel

Paragraph 1-11\--Training

Paragraph 3-6\--Differentiation between Valuation and Mortgage Risk
Analysis

Chapter 4\--Eligibility Requirements

4125.1 Underwriting - Technical Direction for Home Mortgage Insurance

Paragraph 1-13\--Field Review

4150.1 Valuation Analysis for Home Mortgage Insurance

All Chapters have been incorporated except for the following; they are
to remain in place for lender instructions as outstanding policy and
procedures for valuation

> analysis.

Paragraph 4-12\--Study Of Future Utility Of Property

Chapter 6, Section 4\--Modified Cost

Chapter 6, Section 5\--Leaseholds

Paragraph 8-4\--Reconsideration Of Appraised Value

Paragraph 10-5\--Processing Individual Lot Applications

Paragraph 10-6\--Undeveloped Lot

Paragraph 10-9\--Processing Foreclosed Manufactured Home Sites

Chapter 11\--Condominiums And Planned Unit Developments

Paragraph 12-3\--Claims Without Conveyance Of Title (CWCOT)

Paragraph 12-5\--Mortgage Credit Requests For Appraisal

Paragraph 12-6\--Existing Houses Being Moved To New Foundations

Paragraph 12-7\--HUD Acceptance Of VA Certification Of Reasonable Value
(CRV)

Paragraph 12-8\--Application For Operative-Builder Commitments

Paragraph 12-11\--Soil Treatment With Individual Water Systems

Paragraph 12-12\--Estimate Of Value Of Fragmental Properties

Paragraph 12-16\--Water And Sewage Systems

Paragraph 12-17\--Shared Wells

Paragraph 12-18\--Earth Sheltered Housing

Paragraph 12-19\--Dome Homes

4240.4 Rehabilitation Home Mortgage Insurance, Section 203(k)

Paragraph 3-2\--Step-by-step Procedures: Appraiser Responsibilities

Chapter 2\--Valuation Procedures

4260.1 Miscellaneous Type Home Mortgage Insurance, Sec. 223 (a), (e),
and (d)

Paragraph 3-1 e\--Administrative Instructions

Paragraph 4-4\--Insurance in Older Declining Urban Areas

4265.1 Home Mortgage Insurance Condominium Units

Paragraph 10-2 a\--Data Needed for Valuation

Paragraph 10-2 b\--Approach to Value

Paragraph 12-12 d\--Processing the Unit

4910.1 Minimum Property Standards for Housing, 1994 Edition

Appendix K\--Minimum Property Standards for property which is not
multifamily or care-type

3\. Effective Date: July 1, 1999

4\. Filing Instructions:

5\. Insert Handbook 4150.2, dated May 20, 1999

William C. Apgar

Assistant Secretary for Housing-Federal Housing Commissioner

**FORMS AND REPORTS REFERENCED IN HANDBOOK 4150.2**

HUD-92005:Description of Materials

[HUD-92541](../pdfforms/92541.pdf):Builder\'s Certification

[HUD-92544](../pdfforms/92544.pdf):Builder\'s Warranty

HUD-92563:Roster Appraiser Designation Application (to be updated)

HUD-92802:Application and Request for Manufactured Home Lot and/or Site
Preparation

Homebuyer Summary and Valuation Conditions Form

Marshall and Swift Form 1007

Freddie Mac 704 Form: Second Property Value Analysis and Report

R.S. Means & Company Repair and Modeling Cost Data Book or the Home-Tech
Remodeling and Renovation Cost Estimator

Use of Materials Bulletin No. 100, Subject: HUD Building Product
Standards & Certification Program for Solar Water Heating Systems-August
15, 1993

Marshall & Swift Cost Handbook - New & Proposed Construction

Marshall & Swift Guide to Construction Costs

Form FW 68: Land Appraisal Report

Uniform Standards of Professional Appraisal

Permanent Foundation Guide for Manufactured Housing

CABO Model Energy Code, 1992 Ed., Residential Buildings

vi 6/99

FORMS AND REPORTS REFERENCED IN HANDBOOK 4150.2

HUD-92005:

Description of Materials

[HUD-92541](../pdfforms/92541.pdf):

Builder\'s Certification

HUD-92544:

Builder\'s Warranty

HUD-92563:

Roster Appraiser Designation Application (to be updated)

HUD-92802:

Application and Request for Manufactured Home Lot and/or Site
Preparation

Homebuyer Summary and Valuation Conditions Form

Marshall and Swift Form 1007

Freddie Mac 704 Form: Second Property Value Analysis and Report

R.S. Means & Company Repair and Modeling Cost Data Book or the Home-Tech
Remodeling and Renovation Cost Estimator

Use of Materials Bulletin No. 100, Subject: HUD Building Product
Standards & Certification Program for Solar Water Heating Systems-August
15,1993

Marshall & Swift Cost Handbook - New & Proposed Construction

Marshall & Swift Guide to Construction Costs

Form FW 68: Land Appraisal Report

Uniform Standards of Professional Appraisal

Permanent Foundation Guide for Manufactured Housing

CABO Model Energy Code, 1992 Ed., Residential Buildings

vii

4150.2

FOREWORD

PURPOSES OF These are the purposes of this Handbook:

HANDBOOK

o Provide guidance for appraisers on how to appraise existing, proposed
and new construction of one- to four-family homes for which mortgages
are to be insured by FHA.

o Introduce appraisers to the environment of greater accountability
associated with recent HUD reforms.

HOME BUYER On June 1, 1998, HUD launched the HomeBuyer Protection Plan.
The

PROTECTION Plan reforms the appraisal process to ensure that home buyers
PLAN seeking FHA-insured mortgages receive accurate and complete
appraisals of the homes they seek to purchase. If homebuyers do not
receive adequate appraisals, they may have to make extensive repairs to
make their homes habitable. As a result of the additional financial
burden, they may default on their FHA-insured mortgages.

THE NEW HUD As part of the HomeBuyer Protection Plan, HUD has revised
the

VALUATION Valuation Conditions (VC) Form. This new form:

CONDITIONS

FORM o Requires submission of valuation condition information for all
appraisals

> o Transforms the former VC form into a series of \"yes-or-no
> questions\" based on readily observable physical conditions of the
> subject property
>
> o Summarizes the information on the physical condition of the property
> for the Homebuyer

THE Another significant change reflected in this

Handbook is the

PERFORMANCE introduction of performance measures for

appraisers. The

MEASUREMENT performance measurement framework is designed to

achieve

FRAMEWORK improvements in the performance and

professionalism of appraisers on the FHA

Register.

HUD will measure appraiser performance in the following five performance
categories:

o Appraisal process

o Appraisal reporting

o Valuation conditions

o Maintaining state licensure

o Responsiveness to field review

viii

As part of this new framework, HUD will develop statistical indicators
to identify poor appraisals and appraisers, and will inform appraisers
of its enforcement efforts.

ENFORCEMENT In addition to providing clear sanctions, HUD has enhanced

AND SANCTIONS enforcement efforts by creating an Enforcement Center. The
Enforcement Center will provide administrative support for the
management of the sanction process.

RESOURCES Questions and comments can be sent electronically to REAC\'s
Internet website at reacone@hud.gov

The Help Desk will be available be g on May 5, 1999 Monday through
Friday from 7:30 a.m. to 8:00 p.m. EST for questions. The telephone
number is (888) 245-4860.

# 1 SELECTION OF APPRAISER

## **1-0 INTRODUCTION** 

The success of the FHA insurance program and HUD\'s ability to protect
its financial interest begins with selecting qualified and knowledgeable
appraisers. This chapter presents the minimum requirements that
appraisers must meet to be placed on the FHA Register.

[]{#__RefHeading___Toc167790690 .anchor}**1-1 FHA REGISTER**
[\<TOP\>](#TableofContents)

The FHA Register lists appraisers who are eligible to perform FHA
single-family appraisals. To conduct an appraisal for FHA insurance
endorsement, the appraiser must be on the FHA Register.

Appraiser achieves necessary credentials

Appraiser applies to HUD

HUD reviews application

Appraiser placed on FHA Register

## A. APPRAISER CREDENTIALS

To be eligible for placement on the FHA Register, all appraisers must be
state-licensed or state-certified and must not be listed on any of
these:

-   GSA\'s Suspension and Debarment List (the government-wide list of
    parties excluded from federal procurement or non-procurement
    programs)

-   HUD\'s Limited Denial of Participation List

-   HUD\'s Credit Alert Interactive Voice Response System (CAIVRS)

To be eligible to perform appraisals for FHA, the appraiser must also
pass a HUD//FHA test on appraisal methods and reporting, which focuses
on applied knowledge of the new Handbook
[4150.2](../nph-brs.cgi%3Fd=HSGH&s1=4150.2%5Bno%5D&SECT1=TXT_HITS&SECT5=HSGH&u=./hudclips.cgi&p=1&r=0&f=S)
.

A uniform national examination will be available June 1, 1999. The
examination contains fifty questions in a multiple-choice format. The
test will be administered by a national provider and the cost paid by
the appraiser. Appraisers currently on the FHA Register will be
grandfathered until January 30, 2000.

## B. REGISTER APPLICATION PROCESS

The application process is the first screening of the appraiser\'s
qualifications to perform HUD/FHA appraisals. To apply, appraisers must
submit the following to FHA:

-   Updated form [HUD-92563](../pdfforms/92563.pdf) \"Register Appraiser
    Designation Application\"

-   A copy of a current valid appraisal license and/or certification
    verification that the appraiser has passed the FHA Examination

HUD will review this information to determine the appraiser\'s
eligibility for the FHA Register.

## C. APPLICANT REVIEW

To verify that the appraiser is eligible to perform HUD/FHA appraisals,
REAC performs a detailed review of the appraiser\'s professional
qualifications and checks for any negative information. The review does
the following:

-   verifies that the appraiser is state-licensed or state-certified
    under the Appraisal Qualifications Board (AQB) criteria

-   verifies that the appraiser has passed the FHA Appraisals Methods
    and Procedures test

-   pre-screens the appraiser\'s social security number in the HUD/FHA
    Credit Alert Interactive Voice Response System (CAIVRS)

-   reviews HUD records to ensure that the appraiser has no pending
    suspensions, disqualifications or debarments

-   verifies with the appraiser\'s signature that there are no actions
    or pending judgments against the appraiser for waste, fraud, abuse
    or breach of professional ethics or standards

-   reviews the previous period\'s performance, if applicable.

## D. DESIGNATION TO THE FHA REGISTER

When the review of the application is complete, the appraiser is
designated to the FHA Register. New appraisers recently added to the FHA
Register may be monitored and reviewed more frequently to ensure that
their performance is consistent with HUD/ FHA guidelines and to monitor
training needs.

Because the initial application to the FHA Register will occur after the
appraiser has become state-licensed or state-certified, the first term
will coincide with the remaining period of state licensing for the home
state. After this initial period, the FHA Register period will be
consistent with the home state license period.

Each period, every appraiser must re-apply to the FHA Register,
concurrent with the appraiser\'s application for state licensing and/or
re-certification. HUD reviews the appraiser\'s performance and
compliance with new testing requirements and verifies that the appraiser
is state- certified or state-licensed.

For more information on the review process, see Chapter 6 of this
Handbook.

[]{#__RefHeading___Toc167790695 .anchor}**1-2 LENDER SELECTION OF THE
APPRAISER** [\<TOP\>](#TableofContents)

**Lender LenderLender AppraiserLender**

**selects assigns transmitsperformsreviews**

**appraiserappraiser case #, if appraisalappraisal**

**available**

When the lender selects an appraiser from the FHA Register, the FHA
Connection processes a case number for the lender. The lender may assign
the appraiser before receiving the case number, but the case may not be
submitted for endorsement without the case number. The case number must
be placed on all copies of the URAR as well as the VC form and summary.
The mortgagee will give the appraiser:

-   the property address

-   type of construction

-   number of units

-   other information necessary for the assignment

If the property is a condominium or a Planned Unit Development (PUD),
the lender will verify that it is HUD-approved before ordering a case
number or having an appraisal performed. The lender will give the
appraiser the project name and ID number and all available property
information. If it is proposed construction for a PUD or Condominium, it
must be FHA-approved before ordering a case number. The name of the
Condominium or PUD must be given.

A.  **NON-DISCRIMINATION POLICY**

The Department\'s regulations on choosing appraisers state that there
shall be no discrimination on the basis of race, color, religion,
national origin, sex, age or disability.

HUD expects lenders to comply with anti-discrimination requirements and
affirmatively select female and minority appraisers for a fair share of
appraisals commensurate with their representation on the FHA Register.
HUD will monitor lenders\' choice of appraisers by their sex and race.

###### B. CONTRACTUAL RESPONSIBILITY OF APPRAISERS

The appraiser is hired by the lender, and therefore has a contractual
responsibility to the lender. However, the appraiser provides services
for HUD programs, and therefore, has an obligation to perform these
services commensurate with the standards and requirements of HUD. This
dual responsibility of the appraiser is recognized in the review and
reporting requirements of HUD. The lender and the appraiser must meet
their respective obligations as prescribed by HUD/FHA. Therefore, the
intended user of the appraisal report is also HUD. These contractual
obligations to the lender and HUD/FHA are in addition to the
appraiser\'s legal obligations to his or her credentialing state.

## C. COMMUNICATION WITH APPRAISERS

HUD/FHA mortgage insurance is initiated when a lender selects an
appraiser from the FHA Register. Once the appraiser agrees to perform
the appraisal, the appraiser is in a contractual relationship with the
lender. The appraiser will send the completed appraisal directly to the
lender. HUD advises the appraiser to discuss the appraisal only with the
underwriter. No other individual should contact the appraiser before the
appraisal has been completed. Real estate brokers and agents should
consider the lender their sole source of information on the appraisal
and all matters related to the appraisal.

## D. APPRAISAL FEES

The appraiser and the lender will negotiate the price and due date. HUD
does not establish fees or due dates. The fee is paid for market value
estimate based on guidelines consistent with HUD policy and procedure
established in this Handbook. The fee is not based on a requested
minimum valuation, a specific valuation or the approval of a loan.
Lenders may charge the borrower only what is customary and reasonable in
the area to obtain an appraisal.

Appraisal management firms may charge the mortgagor a fee for the
appraisal that may encompass fees for services performed by the firm as
well as fees for the appraisal itself. However, the total of these fees
is limited to the customary and reasonable fee for an appraisal in the
market area where the appraisal is performed. Such arrangements must
comply with all aspects of the Real Estate Settlement Procedures Act
(RESPA) and its implementing regulations, including restrictions
against:

-   kickbacks and referral fees

-   charges for settlement services that were not actually performed
    payments in affiliated business arrangements other than return on
    ownership

# 2 SITE ANALYSIS

[]{#__RefHeading___Toc167790699 .anchor}**2-0 INTRODUCTION**
[\<TOP\>](#TableofContents)

This Chapter addresses the site requirements for FHA-insured mortgages.
Before the valuation process can begin, subject properties must meet
specific site requirements. The appraisal process is the lender\'s tool
for determining if a property meets the minimum requirements and
eligibility standards for a FHA-insured mortgage. In addition, these
standards provide a context for the appraiser in performing the physical
inspection of the

property.

[]{#__RefHeading___Toc167790700 .anchor}**2-1 SITE REQUIREMENTS**
[\<TOP\>](#TableofContents)

The purpose of site analysis is to identify the various site
characteristics that affect the marketability and the value of the
subject property. Site analysis requires the following:

-   determining the desirability and utility of the site

-   determining the degree and extent to which the site, because of
    external influences, shares in the market for comparable and
    competitive sites in the community

```{=html}
<!-- -->
```
-   forecasting the likely changes at the site because of justifiable
    future trends

-   appraising the current situation and knowledge of the various trends
    that could affect the valuation of the real property

The principal of change is fundamental to appraising real estate and to
properly analyzing a site. Value is created and modified by economic,
social and governmental changes that occur outside the property.
Evaluate the direction of these trends and determine their effect, if
any, on the current value of the subject property.

**A. NEIGHBORHOOD DEFINITION**

The appraiser must clearly define the boundaries - north, south, east
and west - of the subject neighborhood. By defining the neighborhood,
the appraiser can extract pertinent information on which to base
valuation conclusions.

**B. COMPETITIVE SITES**

Sites are competitive when they are improved with, or appropriate for,
residential properties that are similar in accommodations and sales
price or rental range for similar residents or prospective occupants.
Compare features of the subject site with the same features of
competitive sites within the community. An acceptable site must be
related to the needs of the prospective occupants and to the
alternatives available to them in other competitive locations.

**C. DEFINITIONS - CONSTRUCTION STATUS**

**Proposed** - No concrete or permanent material has been placed.
Digging of footing and placement of re-bar is not considered permanent.

**Under Construction** - From the first placement of concrete (permanent
material) to 100% completion. Finalized and ready to occupy.

**Existing** - 100% complete and has occupancy permit.

**Existing less than one year** - Appraisal performed less than one year
since receipt of final occupancy permit issued. For model homes, age
begins with issuing of permit to use as a model.

For any home less than 2 years old, list month and year completed in the
age box on the URAR.

## D. ECONOMIC TRENDS

The appraiser must give consideration to, and include in the value
analysis, the economic trends of a neighborhood and the general area,
including:

-   price and wage levels (the purchasing power of community occupants)

```{=html}
<!-- -->
```
-   employment characteristics

-   the current supply and demand for residential dwellings, including
    projects under construction

-   taxation levels

-   building costs

-   population changes

-   activity of real estate sales market and mortgage

-   interest rates

## E.LAND USE RESTRICTIONS

Site analysis determines the effects of actual and potential
neighborhood land use on the subject site. The following factors form
patterns for present and future land uses:

**1. Zoning**

The appraiser should consider the effect on the value of appropriate and
well-drawn zoning ordinances. Land-use controls that receive public
approval and are strictly enforced protect residential sites from
adverse influences that diminish the desirability of sites. This must be
noted on the URAR, and its effect must be quantified in the valuation
analysis.

**2. Protective Easement/Covenants**

Properly drawn protective covenants have proven more effective than
zoning regulations in providing protection from adverse environmental
influences. When combined with proper zoning ordinances, these covenants
provide the maximum legal protection to ensure that a developed
residential area will maintain desirable characteristics or that a
proposed or partially built- up neighborhood will develop in a desirable
manner. Protective easements and covenants should be superior to any
mortgage and should be binding to all parties and all persons claiming
under them. These must be noted on the URAR and its effect must be
quantified in the Valuation Analysis.

**3. Inharmonious Land Uses**

The appraiser must identify all inharmonious land uses in a neighborhood
that affect value. Clearly define the current and long-term effect that
inharmonious uses will have on the market value and the economic life of
the subject property. If inharmonious land use represents a serious
detriment to either the health or safety of the occupants or to the
economic security of the property, clearly note safety of the occupants
or to the economic security of the property, clearly note this on the VC
and URAR. Recommend that the property be rejected by the Lender.

**4. Natural Physical Features**

The appraiser must consider favorable and underlying topography and site
features, including pleasing views, wood lots, broad vistas and climatic
advantages. Streets that are laid out with proper regard to drainage,
land contours and traffic flow show good design and increase the
desirability of the neighborhood. This must be noted on the URAR and its
effect must be quantified in the valuation analysis.

**5. Attractiveness of Neighborhood Buildings**

The overall appeal of a neighborhood is strengthened if the buildings in
a neighborhood harmonize with each other and their physical
surroundings. A pleasing variety that results in harmoniously blended
properties is desirable but not mandatory. The age of the structure is
not in itself an important consideration; however, the maintenance of
the structure over time has an important impact. Consider the amount of
rehabilitation that has taken place or is taking place in a
neighborhood. This must be noted on the URAR and its effect must be
quantified in the valuation analysis.

**6. Neighborhood Character**

Mobility and economic growth can alter neighborhood patterns. Shopping,
recreation, places of worship, schools and places of employment should
be easily accessible. This must be noted on the URAR and its effect must
be quantified in the valuation analysis.

**7. Character of Neighborhood Structures**

The appraiser must carefully analyze the age, quality, obsolescence and
appropriateness of typical properties in a neighborhood. Take into
account the attitude of

the user group as well as the alternative choices available to the
specific market under consideration. This must be noted on the URAR and
its effect must be quantified in the valuation analysis.

**F. COMMUNITY SERVICES**

Community services include commercial, civic and social centers. For a
neighborhood to remain stable and retain a high degree of desirability,
it should be adequately served by elementary and secondary schools,
neighborhood shopping centers, churches, playgrounds, parks, community
halls, libraries, hospitals and theaters. A lack of services in the
community should be noted and quantified in the valuation analysis. The
appraiser must note a change in these services and quantify the effect
on value.

**G. TRANSPORTATION**

Ready access to places of employment, shopping, civic centers, social
centers and adjacent neighborhoods is a requisite of neighborhood
stability. The appraiser must take into consideration the transportation
requirements of the typical family and quantify the effect on value.

## H. UTILITIES AND SERVICES

The appraiser must consider these utilities and neighborhood services:
police and fire protection, telephone services, electricity, natural
gas, garbage disposal, street lighting, water supply, sewage disposal,
drainage, street improvements and maintenance. Public services and
utilities can affect value and must be quantified. A lack of these
services should be noted and quantified in the valuation analysis.

**I.NEIGHBORHOOD CHANGE CONSIDERATIONS**

As time passes, desirability changes residential areas in any location.
Therefore, give special consideration to the following:

-   infiltration of commercial, industrial or nonconforming use

```{=html}
<!-- -->
```
-   positive and negative effect on value of gentrification

-   changes in the mobility of people (employment shifts)

-   weakly enforced zoning regulation or covenants

**J.MARKETABILITY**

The demand for home ownership in a neighborhood is directly related to
the marketability of the homes in the neighborhood or in competitive
neighborhoods. Home ownership rates, vacancies and the marketing time of
dwellings in a neighborhood help the appraiser determine the strength of
market demand and the extent of supply.

**K. SMALL COMMUNITY MARKET PREFERENCES**

A small town may have its own set of standards in architectural design,
livability, style of mechanical equipment, lot size, placement of
structures, nature street improvements and in all features of the
physical property and environment. Judge each in light of local
standards and preferences.

**L. OUTLYING SITES AND ISOLATED SITES**

The segment of the market interested in purchasing homes in these sites
compares the advantages and disadvantages of other outlying or isolated
locations.

**M. STUDY OF FUTURE UTILITY**

The study of future utility is typically covered in the appraiser\'s
Highest and Best Use Analysis and includes:

o selecting possible uses

o rejecting uses that are obviously lower or higher than

the most probable use

o analyzing differing motives of those buyers

The study of the future uses and utility of a particular property win
lead the appraiser to the property\'s Highest and Best Use.

**N. CONSIDERATION OF GENERAL TAXES AND SPECIAL ASSESSMENTS**

When estimating value, account for general taxes and special

o General real estate taxes related to specific sites are

a recurring periodic expense in the ownership of

taxable real property and must be accounted for in the

value estimate.

o Special assessments of various types are frequently an

additional expense of ownership and must similarly be accounted for in
the value estimate

Determine the relative effect of the real estate tax and/or special
assessment\'s burden on the desirability of the site. Enter this
information on the URAR.

**1. Assessment**

The real estate tax liability is computed by multiplying the assessed
value by the tax/millage rate, which is typically expressed in dollars
per hundred or dollars per thousand of assessed value. In the addendum
to the VC, state the assessment, real estate tax liability and tax year.
State the assessed market value of the subject property in the addenda.

If there is no method to relate the assessment to market value, such as
new construction where reasonable assessment may not exist, mark the
assessed market value response as \"N/ A\".

**2. Special Assessment**

A special assessment can be calculated in two ways:

-   the same way as real estate taxes, or

-   on a pro-rated basis

Determine how the special assessment is calculated and report the
special assessment liability on the URAR.

If the property does not have special assessment, mark the URAR \"N/A\".

For example: An organization that services a community creates an annual
operating budget. Each property becomes liable for its percentage of
that budget based on the percentage of front feet their property has
compared to the total amount of front feet as a special assessment in
this community.

[]{#__RefHeading___Toc167790704 .anchor}**2-2 SPECIAL NEIGHBORHOOD
HAZARDS AND NUISANCES** [\<TOP\>](#TableofContents)

Physical conditions in some neighborhoods are hazardous to the personal
health and safety of residents and may endanger physical improvements.
These conditions include unusual topography, subsidence, flood zones,
unstable soils, traffic hazards and various types of grossly offensive
nuisances.

When reporting the appraisal, consider site hazards and nuisances.

-   If site hazards exist and cannot be corrected but do not meet the
    level of unacceptability, the appraisal must be based upon the
    current state.

-   If the hazard and/or nuisance endangers the health and safety of the
    occupants or the marketability of the property, mark \"YES\" in VC-1
    and return the unfinished appraisal to the lender.

The lender, who is ultimately responsible for rejecting the site, relies
on the appraiser\'s site analysis to make this determination. Guidelines
for determining site acceptability follow. The appraiser is required to
note only those readily

observable conditions.

**A. UNACCEPTABLE SITES**

FHA guidelines require that a site be rejected if the property being
appraised is subject to hazards, environmental contaminants, noxious
odors, offensive sights or excessive noises to the point of endangering
the physical improvements or affecting the livability of the property,
its marketability or the health and safety of its occupants. Rejection
may also be appropriate if the future economic life of the property is
shortened by obvious and compelling pressure to a higher use, making a
long-term mortgage impractical.

These considerations for rejection apply on a case-by-case basis, taking
into account the needs and desires of the purchaser. For example, a site
should not be considered unacceptable simply because it abuts a
commercial use; some commercial uses may not appeal to a specific market
segment while other commercial uses may.

If the-condition is clearly a health and safety violation, reject the
appraisal and return it to the lender. If there is any doubt as to the
severity, report the condition and submit the completed report. The
lender must clear the condition and may require an inspection or reject
the property. For those conditions that cannot be repaired, such as site
factors, the appraised value is based upon the existing conditions.

**B. TOPOGRAPHY**

There are special hazards caused by unique topography. For example,
denuded slopes, soil erosion and landslides often adversely affect the
marketability of hillside areas. When evaluating the site, consider
earth and mud slides from adjoining properties, falling rocks and
avalanches. These occurrences are associated with steep grades and must
be considered in the site analysis.

**C. SUBSIDENCE**

Danger of subsidence is a special hazard that may be encountered under a
variety of circumstances:

-   where buildings are constructed on uncontrolled fill or unsuitable
    soil containing foreign matter such as organic material

```{=html}
<!-- -->
```
-   where the subsoil is unstable and subject to slippage or expansion

In mining areas, consider the depth or extent of mining operations and
the site of operating or abandoned shafts or tunnels to determine if the
danger is imminent, probable or negligible.

The appraiser must note any readily observable conditions, which
indicate potential problems. Signs include fissure or cracks in the
terrain, damaged foundations, sinkholes or settlement problems.

If there is a danger of subsidence, the specific site will be deemed
ineligible unless complete and satisfactory evidence can be secured to
establish that the probability of any threat is negligible.

If there is evidence of subsidence, the property is ineligible. Mark the
\"YES\" column in VC-1 under subsidence.

**D. OPERATING AND ABANDONED OIL OR GAS WELLS**

Operating and abandoned oil and gas wells pose potential hazards to
housing, including potential fire, explosion, spray and other pollution.

**1. Existing Construction**

No existing dwelling may be located closer than 300 feet from an active
or planned drilling site. Note that this applies to the site boundary,
not to the actual well site.

**2. New or Proposed Construction**

If an operating well is located in a single-family subdivision, no new
or proposed construction may be built within 75 feet of the operating
well unless mitigation measures are taken. This measure is designed to:

-   avoid nuisance during maintenance

-   diminish noise levels caused by pumping

-   reduce the likelihood of contamination by potential spills

The appraiser must examine the site for the existence of or any readily
observable evidence of a well.

**3. Abandoned Well**

A letter may be obtained from the responsible authority in the state
government stating that the subject well was safely and permanently
abandoned.

-   When such a letter is provided, a dwelling may be located no closer
    than 10 feet from the abandoned well.

```{=html}
<!-- -->
```
-   When a letter is not provided, the dwelling must be located at least
    300 feet from the abandoned well.

The lender is responsible for obtaining the letter; the appraiser must
note the location of the well and verify the existence of the letter.

**4. Special Case - Proposed, Existing or Abandoned Wells**

Hydrogen sulfide gas emitted from petroleum product wells is toxic and
extremely hazardous. Minimum clearance from sour gas wells may be
established only after a petroleum engineer has assessed the risk and
state authorities have concurred on clearance recommendations for
petroleum industry regulation and for public health and safety.

-   If there is readily observable evidence that the conditions exist,
    mark the \"YES\" column in VC-1 under operating and abandoned wells.

-   If an inspection by a qualified person verifies that the condition
    exists and is acceptable based on the standards defined above,
    account for the presence of wells in the valuation of the property.

**E. SLUSH PITS**

A slush pit is a basin in which drilling \"mud\" is mixed and circulated
during drilling to lubricate and cool the drill bit and to flush away
rock cuttings. Drilling mud normally contains large quantities of
bentonite - a very expansive soil material. This results in a site with
the potential for great soil volume change and, therefore, damage to
structures.

To be eligible for FHA mortgage insurance, all unstable and toxic
materials must be removed and the pit must be filled with compacted
selected materials.

\>If a property is proposed near an active or abandoned well, call for a
survey to locate the pits and their impact on the subject property.

\>If there is any readily observable evidence of slush pits, mark the
\"YES\" column in VC-1.

**F. HEAVY TRAFFIC**

Close proximity to heavily traveled roadways can have a negative effect
on the marketability and value of sites because of excess noise and
danger. Properties backing to freeways or other thoroughfares that are
heavily screened or where traffic is well below grade and at a
sufficient distance from the property may not affect value. For detailed
noise acceptance levels, reference 24 CFR 51.103.

\> If there is significant noise or unsafe traffic conditions that
endanger the occupants or affect the marketability of the property, mark
\"YES\" in VC-1.

Typically, traffic hazards cannot be corrected. Therefore, the appraiser
must quantify the effect on value if the property is marketable. This
adjustment should be supported by comparable transactions. This
condition could be the reason that a lender ultimately rejects the
property. Do not reject existing properties only because of heavy
traffic if there is evidence of acceptance within the market and if use
of the dwelling is expected to continue.

**G. AIRPORT NOISE AND HAZARDS**

(2-2) Sites near, an airport may be subjected to the noise and hazards
of low-flying aircraft. Appraisers must identify affected properties,
review airport contour maps and condition the appraisal accordingly.

Do not reject existing properties only because of airport influences if
there is evidence of acceptance within the market and if use of the
dwelling is expected to continue. HUD\'s position is that because the
properties are in use and are expected to be in use into the near
future, their marketability should be the strongest indicator of their
acceptability. Marketability should account for the following
considerations:

o plans for future expansion of airport facilities

o prospective increases in the number of planes or flights using the
field or specific runways

o the timing and frequency of the volume of flights

o any other factors that may increase the annoyance of having the
airport nearby excessive noise

If changes are likely, the appraiser must anticipate any adverse effect
that these changes are likely to have on the marketability of the
property. The appraiser should judge each situation on its merits.
Compare the effect of aircraft activity on the desirability of a
particular site with other sites that are:

o improved with similar structures

o considered competitive with those located in the subject neighborhood

**H. SPECIAL AIRPORT HAZARDS**

HUD requires that the buyer of a property located in a Runway Clear
Zone/Clear Zone is advised that the property is located in such a zone
and of the implications associated with that site. This includes the
possibility that the airport operator could acquire the property in the
future.

**1. New and Proposed Construction**

New and proposed construction within Runway Clear Zones (also known as
Runway Protection Zones) at civil airports or within Clear Zones at
military airfields are ineligible for home mortgage insurance.

Properties located in Accident Potential Zone I at military airfields
may be eligible for FHA insurance provided that the property is
compatible with Department of Defense guidelines. For more information,
see 24 CFR 51.303(b).

If new or proposed construction lies within these zones, mark \"YES\" in
VC-1.

**2. Existing Construction**

Existing dwellings more than one year old are eligible for FHA mortgage
insurance if the prospective purchaser acknowledges awareness that the
property is located in a Runway Clear Zone/Clear Zone. The lender will
furnish this disclosure form to the buyer. For a sample of the buyer\'s
acknowledgment certification, see HUD Handbook 4150.1, REV-1, Chapters
4-26 (a) and (b).

Note whether the property is in a Clear Zone and condition the appraisal
on the buyer\'s acknowledgment.

**I. PROXIMITY TO HIGH PRESSURE GAS**

A dwelling or related property improvement near high- pressure gas,
liquid petroleum pipelines or other volatile and explosive products -
both above ground and subsurface must be located outside of the outer
boundary of the pipeline easement.

\> If the property is less than ten feet away, mark \"YES\" in VC-1.

**J. OVERHEAD HIGH-VOLTAGE TRANSMISSION LINES**

No dwelling or related property improvement may be located within the
engineering (designed) fall distance of any pole, tower or support
structure of a high-voltage transmission line, radio/TV transmission
tower, microwave relay dish or tower or satellite dish (radio, TV cable,
etc.). For field analysis, the appraiser may use tower height as the
fall distance.

For the purpose of this Handbook, a High-Voltage Electric Transmission
Line is a power line that carries high voltage between a generating
plant and a substation. These lines are usually 60 Kilovolts (kV) and
greater, and are considered hazardous. Lines with capacity of 12-60 kV
and above are considered high voltage for the purpose of this Handbook.
High voltage lines do not include local distribution and service lines.

Low voltage power lines are distribution lines that commonly supply
power to housing developments and similar facilities. These lines are
usually 12 kV or less and are considered to be a minimum hazard. These
lines may not pass directly over any structure, including pools, on the
property being insured by HUD.

\> If the property is within the unacceptable distance, mark \"YES\" in
VC-1.

**K. SMOKE, FUMES, OFFENSIVE NOISES AND ODORS**

Excessive smoke, fog, chemical fumes, noxious odors, stagnant ponds or
marshes, poor surface drainage and excessive dampness are hazardous to
the health of neighborhood occupants and adversely affect the market
value of the subject property.

\>If these conditions threaten the health and safety of the occupants or
the marketability of the property, mark \"YES\" in VC-1. If, however,
the extent of the hazard is

not dangerous, account for its effect in the valuation of the property.

\>Include other factors that may affect valuation such as offensive
odors and unsightly neighborhood features such as stables or kennels.

**L. FLOOD HAZARD AREAS**

**Designation of Special Flood Hazard Areas**

(2-2) The Federal Emergency Management Agency (FEMA) determines Special
Flood Hazard Areas nationwide, (SFHA). FEMA issues Flood Hazard Boundary
Maps to designate these areas in a community. A special flood hazard may
be designated as Zone A, AO, AH, Al-30, AE, A99, VO or Vl-30, VE or V.

o Only those properties within zones \'A\' and \'V\' require flood
insurance.

o Zones \'B\' or \'C\' do not require flood insurance because FEMA
designates only zones \'A\' and \'V as \"Special Flood Hazard Areas.\"

An appraisal report with a positive indication in a Special Flood Hazard
Area (SFHA) activates a commitment requirement for flood insurance
coverage. The appraiser must quantify the effect on value, if any, for
properties within a designated flood map.

A lender shall reject a property in any of these circumstances:

o if the property is subject to frequently recurring flooding

o if there is any potential hazard to life or safety

o if escape to higher ground would not be feasible during severe
flooding conditions

[FEMA Maps]{.underline}

For copies of FEMA\'s Flood Hazard Boundary Maps and Flood Insurance
Rate Maps, contact:

Federal Emergency Management Agency (FEMA)

FEMA Map Service Center

P.O. Box 1038

Jessup, MD 20794-1038

Phone: 1-800-358-9616

Fax: 1-800-358-9620

**Eligibility of Properties for FHA Insurance**

The lender is responsible for determining the eligibility of properties
in Flood Zones, and relies on the appraiser\'s notation on the URAR.

**1. New and Proposed Construction**

If any part of the property improvements essential to the property value
and subject to flood damage are located within the 100-year floodplain,
then the entire property, improved and otherwise, is ineligible for FHA
mortgage insurance unless a Letter of Map Amendment (LOMA) or a Letter
of Map Revision (LOMR) is submitted with the case for endorsement.
Proposed construction where improvements are located, or to be located,
within a designated Special Flood Hazard Area (SFHA) is ineligible for
FHA insurance. This is true regardless of whether the property is
covered or will be covered by flood insurance unless the lender can
furnish evidence of a LOMA, a LOMR or evidence that the property is not
in a SFHA.

For existing properties located in a SFHA, make the appropriate notation
in the URAR.

\> If the proposed improvements are located in a SFHA and there is no
LOMA or LOMR mark \"YES\" in VC-1 and return the unfinished appraisal to
the lender until

these documents are retrieved.

**2. Existing Construction**

Market attitude and acceptance determine the eligibility of existing
properties located in a designated SFHA. Flood insurance is required for
properties accepted for mortgage insurance in a FEMA-designated SFHA.

**3. Condominium**

The Homeowners Association is responsible for maintaining flood
insurance on the project as a whole, not each individual unit. The
appraiser must verify the location of a condominium in the floodplain
and make the correct notation in the URAR.

**M. STATIONARY STORAGE TANKS**

Stationary Storage tanks containing flammable or explosive material pose
potential hazards to housing, including hazards from fire and
explosions.

\> If the property is within 300 feet of a stationary, storage tank
containing more than 1000 gallons of flammable or explosive material,
the site is ineligible. Mark \"YES\" in VC-1 and return the unfinished
appraisal to the lender.

# 3 PROPERTY ANALYSIS

[]{#__RefHeading___Toc167790706 .anchor}**3-0 INTRODUCTION**
[\<TOP\>](#TableofContents)

The FHA guidelines for property analysis include specific requirements
to which appraisers must adhere for the appraisal to reflect an accurate
valuation that win:

o denote any deficiencies in the subject property

o protect HUD\'s interest in that property

The property analysis includes General Acceptability Criteria for
conducting the appraisal to address FHA minimum property requirements.

[]{#__RefHeading___Toc167790707 .anchor}**3-1 APPRAISAL REQUIREMENTS**
[\<TOP\>](#TableofContents)

o The appraiser must make a complete visual inspection of the subject
property - interior and exterior - and complete the VC form.

o The appraiser must take photographs that show the sides, front and
rear of the subject property and all improvements on the subject
property with any contributory value. A photograph of the street
frontage is also required.

o The appraiser is required to submit a single photograph of each
comparable sale transaction in the addenda to the appraisal report.

o The map of proposed construction must clearly show proposed roadways.

o The appraiser must provide a copy of a local street map that shows the
location of the property and each comparable sale.

o If the subject property is proposed construction and the improvement
has not started, the appraiser should take a photograph that shows the
grade of the vacant lot.

[]{#__RefHeading___Toc167790708 .anchor}**3-2 ANALYSIS OF SITE**
[\<TOP\>](#TableofContents)

For both proposed and existing construction, the appraiser must
determine the present highest and best use for the site, disregarding
improvements that may exist or are proposed for the site. This
conclusion serves as the basis of comparison for estimating the market
price of the land and discloses the extent to which the existing or
proposed building improvements are appropriate or inappropriate for the
site. This also forms the basis for selecting comparable land sales.

The appraiser must analyze the site to:

o establish the basis for comparing the market estimates of sites in the
estimate of replacement cost of the property

o determine suitability for the existing or proposed use

Carefully consider the topography, suitability of soil, off-site
improvements, easements, restrictions or encroachments.

**A. TOPOGRAPHY**

Proper topography and site grading can be important elements in
preventing wet basements, damp crawl spaces, erosion of soils, and
overflowing sewage disposal systems. To ensure proper protection, the
appraiser must analyze the relationship of street grades, floor
elevations, and lot grades. If the foundation or its bearing soils may
be affected by seepage or frost, the dwelling is unacceptable unless the
surface and subsurface water is diverted from the structures to ensure
positive drainage away from the foundation.

**B. SUITABILITY OF SOIL**

Consider the readily observable soil and subsoil conditions of the site
including the type and permeability of the soil, the location of the
water table, surface drainage conditions, compaction, rock formations
and other physical features that affect the value of the site or its
suitability for development. Also observe the effects of the adverse
features of the adjoining land.

**C. OFF-SITE IMPROVEMENTS**

Consider the off-site improvements adjoining the subject property,
including street surface, curbs, sidewalks, curb cuts, driveways,
aprons, etc., that are not contained within the legal boundaries of the
site but enhance the market acceptance and the use and livability of the
property. Also consider these situations:

o Compare the subject property with the immediate neighborhood to
determine the dominant off-site improvements required by the market.
Note any necessary off-site improvements that are not in existence or
are proposed for the subject property and adjust for them in the market
value.

o Any proposals for installing off-site improvements and levying
assessments by the local governing body in the near future may affect
value. These proposals will necessitate a commitment condition that
requires the installation of improvements and the payment of the
assessment before or immediately after insurance endorsement.

D. EASEMENTS, RESTRICTIONS OR ENCROACHMENTS

Consider all easements, restrictions or encroachments and their impact
on the market value of the subject property and list them on the
appraisal. These factors are often discovered during the survey and
title report once the appraisal has begun. Perform limited due diligence
to verify the existence of these types of significant limiting factors.
Also record these items in the URAR which were considered in the value
estimate.

E. ENCROACHMENTS

As a general rule, an encroachment will cause a property to be
ineligible for FHA mortgage insurance. However, there are exceptions to
this rule and further information can be found by calling the lender.
The appraiser should identify any of these conditions:

o encroachment of a dwelling, garage, another physical structure or
other improvement onto an adjacent property, right-of-way or utility
easement

o encroachment of a dwelling, garage, another physical structure or
improvements on the subject property

o encroachment of a dwelling, garage or another physical structure into
the setback requirement

An encroachment may be acceptable if the adjoining landowner or the
local governing authority provides a perpetual encroachment easement
that is filed in the County Clerk and Recorder\'s Office. The Direct
Endorsement under-writer will handle this issue under the General Waiver
guidelines.

[]{#__RefHeading___Toc167790709 .anchor}**3-3 ANALYSIS OF PHYSICAL
IMPROVEMENTS** [\<TOP\>](#TableofContents)

Analysis of the physical improvements results in conclusions as to the
desirability, utility and appropriateness of the physical improvements
as factors in determining mortgage risk and the ultimate estimate of
value.

A. GROSS LIVING AREA

Gross Living Area is the total area of finished, above-grade residential
space. It is calculated by measuring the outside perimeter of the
structure and includes only finished, habitable, above-grade living
space. Finished basements and unfinished attic areas are not included in
total gross living area. The appraiser must match the measurement
techniques used for the subject to the comparable sales. It is important
to apply this measurement

technique and report the building dimensions consistently because
failure to do so can impair the quality of the appraisal report.

B. BASEMENT BEDROOMS, BASEMENT APARTMENTS

As a rule basement space does not count as habitable space. If the
bedroom does not have proper light and ventilation, the room can not be
included in the gross living area. The following requirements apply to
the valuation of below-grade rooms:

o The windowsill may not be higher than 44 inches from the floor.

o The windowsill must have a net clear opening (width x height) of at
least 24 inches by 36 inches.

o The window should be at ground level; however, compensating factors
may allow less.

In all cases, use reasonable care and judgment. If these standards are
not substantially met, the basement area cannot be counted as habitable
space.

C. DESIGN

Design is the cohesive element that blends the structural, functional
and decorative elements of a property into a whole. With good design,
the property\'s parts will be in harmony (each part with all the other
parts). The whole property,

in turn, will be in harmony with its immediate site and environment.

Because good design is recognized and desired, the economic life of
properties and neighborhoods will be extended and prices will typically
exceed those for properties offering

the same number of rooms and area but lacking good design. This
competitive advantage usually continues through the entire economic life
of the property.

The appraiser must recognize this demonstrable price differential and
reflect it in the comparative adjustments of market data and the final
finding of value.

D. CONFORMITY OF PROPERTY TO NEIGHBORHOOD

A residential property with good physical characteristics may not
necessarily be good security for a mortgage loan, even if it is situated
in a good location. The property may be entirely appropriate at another
location, but not in its actual location. The property may be
displeasing when viewed in relation to its surroundings, and it may not
conform in other respects to the most marketable use in the particular
neighborhood. When determining the effect of property-neighborhood
relationships to marketability, consider elements other than similarity
of physical characteristics.

Analysis of the Elements of Conformity. Analysis of Conformity requires
consideration of Suitability of Use-Type, Appropriateness of Functional
Characteristics, Harmony of Design and Relation of Expense of Ownership
to Family Income Levels.

o Suitability of Use-Type. The term Use-Type refers to the use for which
a dwelling is designed - single- family, two-family, etc. In most
neighborhoods only one use-type is suitable. In some neighborhoods,
however, because of their heterogeneous development, several use-types
may be found suitable.

o Appropriateness of Functional Characteristics. Functional
Characteristics refer to the living facilities provided in a residential
property. They relate to site use and to arrangement, number and size of
rooms. Usually well-defined neighborhood market preferences are
observable.

Nonconformity may exist because of the placement of the house on the
site. Carefully consider any deviation from the accustomed or accepted
placement to determine whether it adversely affects desirability.

If a site is substantially smaller than the size typical in the
neighborhood, marketability may be limited. The shape or topography of a
particular lot may make it less desirable than those typical of the
area.

The number, arrangement and size of rooms frequently conform to definite
preferences in given neighborhoods. In some localities where one-story
dwellings dominate, a two-story dwelling may meet considerable market
resistance.

o Harmony of Design. Conformity of the exterior design of a structure
with other structures in the immediate neighborhood is not important
unless it contrasts inharmoniously with them. There may be considerable
variety in the exterior design of dwellings in a neighborhood and yet
each may present a pleasing appearance when viewed in relation to its
surroundings. On the other hand, a dwelling may be without any
architectural faults and yet clash so violently with the design of
neighboring properties that marketability may be seriously limited.

o Relation of Ownership Expense to Family Incomes. Families usually
select homes in neighborhoods where typical occupants have financial
means similar to their own. A home that is too costly for these families
to purchase or maintain will have limited marketability.

[]{#__RefHeading___Toc167790710 .anchor}**3-4 REMAINING ECONOMIC LIFE OF
BUILDING IMPROVEMENTS** [\<TOP\>](#TableofContents)

Because a building is subject to physical deterioration and
obsolescence, its period of usefulness is limited. As a building
deteriorates or becomes obsolete, its ability to serve useful purposes
decreases and eventually ends. This may occur gradually or rapidly.

A. ECONOMIC LIFE VS. PHYSICAL LIFE

o The total physical life of a building is the period from the time of
completion until it is no longer fit or safe for use or when maintaining
the building in a safe, usable manner is no longer practicable.

o The total economic life of a building is the period of time from its
completion until it can no longer produce services or net returns over
and above a return on the land value.

Economic life can never be longer than the physical life, but may be and
frequently is shorter. A structure that is sound and in good physical
condition with many years of physical life remaining may have reached
the end of its economic life - if its remaining years of physical
usefulness will not be profitable.

B. ESTIMATION OF REMAINING ECONOMIC LIFE

In predicting the remaining economic life of a building, consider these
factors:

o the economic background of the community or region and the need for
accommodations of the type represented

o the relationship between the property and the immediate environment
the architectural design, style and utility from a functional point of
view and the likelihood of

obsolescence attributable to new inventions, new materials and changes
in tastes

o the trends and rate of change of characteristics of the neighborhood
and their effect on land values

o workmanship, durability of construction and the rate with which
natural forces cause physical deterioration

o the physical condition and probable cost of maintenance and repair,
the maintenance policy of owners and occupants and the use or abuse to
which structures are

subjected

C. END OF USEFUL LIFE OF BUILDING IMPROVEMENTS

The useful life of a building has come to an end:

o when the building can no longer produce annual income or services
sufficient to offset maintenance expense, insurance and taxes to produce
returns on the value of the land

AND

o when rehabilitation is not feasible

The improvements on the lot at the time have no more value than the
amount obtainable from a purchaser who will buy them and remove them
from the site.

[]{#__RefHeading___Toc167790711 .anchor}**3-5 CODE ENFORCEMENT FOR
EXISTING PROPERTIES** [\<TOP\>](#TableofContents)

Local municipalities design local housing code standards; therefore,
enforcement of such housing standards rests with the local authority.
HUD does not have the authority or the

responsibility for enforcing local housing codes except for mortgages on
properties to be insured under Section 221(d)(2)-a program with mortgage
limits at \$36,000. Loans insured under Section 221(d)(2) of the
National Housing Act require code enforcement. The appraiser should
contact the lender for further instructions if the mortgage is to be
insured under Section

221(d)(2).

[]{#__RefHeading___Toc167790712 .anchor}**3-6 GENERAL ACCEPTABILITY
CRITERIA FOR FHA-INSURED MORTGAGES** [\<TOP\>](#TableofContents)

These criteria define standards for existing properties to be eligible
for FHA mortgage insurance. Underwriters bear primary responsibility for
determining eligibility; however, the

appraiser is the on-site representative for the lender and provides
preliminary verification that these standards have been met. Many of the
requirements are technical and beyond the expertise of the appraiser.
They are presented here for reference, and the appraiser\'s
responsibility is noted by category.

These criteria form the basis for identifying the deficiencies of the
property that the appraiser must note in the VC form and that must be
addressed by the lender before closing. When examination of existing
construction reveals noncompliance with the General

Acceptability Criteria, an appropriate specific condition to correct the
deficiency is required if correction is feasible. If correction is not
feasible and compliance can be effected only by

major repairs or alterations, the lender will reject the property. The
appraiser is only required to note conditions that are readily
observable.

As-Repaired Appraisal. The appraiser prepares the valuation
\"as-repaired\" subject to the conditions noted on the VC form. Those
items not listed on the VC will form the basis of comparison to
comparable properties for physical conditions.

Required repairs are limited to those repairs necessary to preserve the
continued marketability of the property and to protect the health and
safety of the occupants.

Deferred Maintenance. Any operable or useful element that will have
reached the end of its useful life within two years should be replaced.
With respect to such deferred maintenance items, exercise good judgment
in requiring repair.

Replacement Because of Age. If an element is functioning well, do not
recommend replacement simply because of its age.

\> If the septic system shows evidence of failure because of age,
recommend a specific inspection.

Valuation Conditions. The Valuation Conditions Form and its protocol
help the appraiser evaluate the standards required by the General
Acceptability Criteria. The criteria are described below. The appraiser
must ascertain if the condition called for exists and mark yes if it
does.

\> If the observed deficiencies exist, mark \"YES\" in the appropriate
location on the Valuation Conditions Form, condition the appraisal on
the requirement for repair or further inspection and prepare the
appraisal \"as-repaired\" subject to the satisfaction of the condition.

The following guidelines are HUD\'s General Acceptability Criteria for
existing properties. They provide general guidance for determining the
property\'s eligibility for FHA mortgage

insurance. For instructions on filling out the VC form, see the protocol
in Appendix D.

A. GENERAL ACCEPTABILITY CRITERIA

These minimum requirements for existing housing apply to existing
buildings and to the sites on which they are located. The buildings may
be:

o detached

o semidetached

o multiplex

o row houses

o individual condominium units

These requirements also cover the immediate site environment for the
dwelling, including streets, other services and facilities associated
with the site.

1\. Subject Property

The subject property must be adequately identified as a single,
marketable real estate entity. However, a primary plot with a secondary
plot for an appurtenant garage or for another use contributing to the
marketability of the property will be acceptable if the two plots are
contiguous and comprise a readily marketable real estate entity.

2\. Hazards

The property must be free of all known hazards and adverse conditions
that:

o may affect the health and safety of the occupants

o may affect the structural soundness of the improvements

o may impair the customary use and enjoyment of the property

These hazards include toxic chemicals, radioactive materials, other
pollution, hazardous activities, potential damage from soil or other
differential ground movements, ground water, inadequate surface
drainage, flood, erosion, excessive noise and other hazards on or off
site.

\> If the property meets the acceptability guidelines in the VC protocol
(Appendix D), quantify the deficiency\'s impact in the property
valuation.

\> If the property does not meet the acceptability guidelines, note the
appropriate hazard in VC-1 and explain.

In the appraisal of new and proposed construction, special conditions
may exist or arise during construction that were unforeseen and
necessitate precautionary or hazard mitigation measures. HUD will
require corrective work to mitigate potential adverse effects from the
special conditions as necessary.

Special conditions include:

o rock formations

o unstable soils or slopes

o high ground water levels

o springs

o other conditions that may have a negative effect on the property value

The builder must ensure proper design, construction and satisfactory
performance when any of these issues are present.

For specific instructions about noting this information in the VC form,
see VC-1 in the protocol (Appendix D).

3\. Soil Contamination

a\. Septic and Sewage

If a septic system is part of the subject property, the appraiser must
determine whether the area is free of conditions that adversely affect
the operation of the system. Consider the following:

3-8

4150.2

(3-6) o the type of system

o topography

o depth to ground water

o soil permeability

o the type of soil to a depth several feet below the surface

If in doubt about the operation of sewage disposal systems in the
neighborhood, mark \"YES\" in VC-2, condition the appraisal on further
inspection and prepare the appraisal \"as-repaired\" subject to
satisfaction of the condition.

The lender will contact the local health authority or a professional to
determine the viability of the system.

b\. Other Soil Contaminants

The following conditions may indicate unacceptable levels of soil
contamination: pools of liquid, pits, ponds, lagoons, stressed
vegetation, stained soils or pavement, drums or odors.

\> If there is evidence of hazardous substances in the soil, require
further inspection. Mark \"YES\" in VC-2, condition the appraisal on
further inspection and prepare the appraisal \"as-repaired\" subject to
the satisfaction of condition.

c\. Underground Storage Tanks

During the site inspection, the appraiser must walk the property and
search for readily observable evidence of underground storage tanks.
Evidence would include fill pipes, pumps, ventilation caps, etc.

\> If there is evidence of underground storage tanks, require further
analysis. Mark \"YES\" in VC-2, condition the appraisal on that
requirement and prepare the appraisal \"as-repaired\" subject to the
satisfaction of the condition.

4\. Drainage

The site must be graded to provide positive drainage away from the
perimeter walls of the dwelling and to prevent standing water on the
site. Signs of inadequate draining include standing water proximate to
the structure and no mitigation measures such as gutters or downspouts.

For specific instructions about noting this information in the VC form,
see VC-3 in the protocol (Appendix D).

\> If drainage is inadequate and needs improvement, mark \"YES\" in
VC-3, make a repair requirement, condition the appraisal on that
requirement and prepare the appraisal \"as-repaired\" subject to the
satisfaction of the condition.

3-9

4150\.

2

(3-6)5. Water Supply And Sewage Systems

Each living unit must contain the following:

o domestic hot water

o a continuing and sufficient supply of potable water under adequate
pressure and of appropriate quality for all household uses

o sanitary facilities and a safe method of sewage disposal

Connection must be made to a public water/sewer system or a community
water/sewer system, if connection costs to the public or community
system are reasonable (3% or less of the estimated value of the
property). If connection costs exceed 3%, the existing on-site systems
will be acceptable provided they are functioning properly and meet the
requirements of the local health department.

\> If the correction is feasible, require connection. Mark \"YES\" in
VC-4, condition the appraisal on the requirement and prepare the
appraisal \"as repaired\" subject to the satisfaction of the condition.

a\. Individual Water Supply and Sewage Disposal

Systems

If water and sewer systems are not connected to public systems, the
water well and/or septic system must meet the requirements of the local
health authority with jurisdiction. If the local authority does not have
specific requirements, the maximum contaminant levels established by the
Environmental Protection Agency (EPA) will apply. If the authority is
unable to perform the water quality analysis in a timely manner, a
private commercial testing laboratory or a licensed sanitary engineer
acceptable to the authority may take and test water samples.

o Each living unit must be provided with a sewage disposal system that
is adequate to dispose of all domestic wastes and does not create a
nuisance or in any way endanger the public health.

o Individual pit privies are permitted where such facilities are
customary and are the only feasible means of waste disposal and, if they
are installed in accordance with the recommendations of the local
Department of Health.

\> If there is a well or septic system on the property, mark \"YES\" in
VC4, condition the appraisal on further inspection by the lender and
prepare the appraisal \"as-repaired\" subject to satisfaction of the
condition.

A domestic well must be a minimum of 50 feet from a septic tank, 100
feet from the septic tank\'s drain field and a minimum of 10 feet from
any property line.

3-10

4150.2

\> Clearly show the location of private wells and septic systems on the
site sketch and note the distance between the two.

b\. Unacceptable Conditions

The following water well conditions are unacceptable and must be noted
in VC-4:

o mechanical chlorinators

o water flow that decreases noticeably when simultaneously running water
in several plumbing fixtures (the well may not be able to provide a
continuous, adequate supply of water)

o properties served by dug wells unless a complete survey conducted by
an engineer was delivered to the lender and subsequently given to the
appraiser

o properties served by springs, lakes, rivers or cisterns (3-6)

To be considered acceptable, the engineer\'s survey must include these
items:

o a health report with no qualifications

o indication that an inoperative well was cased, sealed and capped with
concrete to a depth of at least 20 feet

o a pump test indicating a flow of at least 3-5 gallons per minute
supply for an existing well, and 5 gallons per minute for a new well

o an acceptable septic report

o no indication of exposure to environmental contamination, mechanical
chlorination or anything else that adversely affects health and safety

\>If these requirements for individual wells or septic tanks are not
met, note them in VC-4 and prepare the appraisal \"as-repaired\" subject
to further inspection.

The lender will require the engineer\'s follow-up report and will
arrange forany required corrective measures.

6\. Wood Structural Components: Termites

Termites can cause serious problems in the wood structural components of
a house and may go undetected for a long period of time. FHA requires
maximum assurances that a home is free of any infestation. A pest
inspection is always required for:

3-11

4150\.

2

(3-6)o any structure that is ground level

o any structure where the wood touches ground

Structures in a geographic area with no active termite infestation may
not require a pest inspection.

However, the appraiser must always note:

o any infestation

o any damage resulting from previous infestation

o whether damage from infestation has been repaired or is in need of
repair

Observe all areas of the property that have potential for termite
infestation, including the bottoms of exterior doors and frames, and
wood siding in contact with the ground and crawl spaces. Examine mud
tunnels running from the ground up the side of the house for possible
evidence of termite infestation.

\> If there is any evidence of termite infestation, require an
inspection by a reputable licensed termite company. Mark \"YES\" in
VC-5, condition the appraisal on the requirement and prepare the
appraisal \"as-repaired\" subject to the satisfaction of the condition.

For specific instructions on noting this information in the VC Form, see
VC-5 in the protocol (Appendix D).

7\. Streets

Each property must be provided with safe and adequate pedestrian and
vehicular access from a public or private street. Private streets must
be protected by permanent recorded easements and have joint maintenance
agreements or be owned and maintained by a HOA.

All streets must provide all-weather access to all buildings for
essential and emergency use, including access for deliveries, service,
maintenance and fire equipment. FHA defines all-weather surface as a
road surface over which emergency vehicles can pass in all types of
weather. Streets must either be:

o dedicated to public use and maintenance

OR

o retained as private streets protected by permanent f recorded
easements (when approved by HUD)

\> If these requirements are not met, mark \"YES\" in VC-6 and prepare
the appraisal \"as-repaired\" subject to the correction of this
deficiency.

3-12

4150\.

2

(3-6)8. Defective Conditions

A property with defective conditions is unacceptable until the defects
or conditions have been remedied and the probability of further damage
eliminated.

Defective conditions include:

o defective construction

o poor workmanship

o evidence of continuing settlement

o excessive dampness

o leakage

o decay

o termites

o other readily observable conditions that impair the safety, sanitation
or structural soundness of the dwelling

The items outlined in VC-7: Structural Conditions, are meant to alert
the appraiser and the lender to the possibility of defective conditions.
These items are readily identifiable characteristics that could indicate
one of the defective conditions.

9\. Ventilation

Natural ventilation of structural space - such as attics and crawl
spaces - must be provided to reduce the effect of excess heat and
moisture that are conducive to decay and deterioration of the structure.
All attics must have ventilation to allow moisture and excessive heat to
escape. The appraiser must check the attic areas to determine whether
the ventilation is adequate.

\> If ventilation is not provided, make a condition for repair, mark
\"YES\" in VC7 and prepare the appraisal \'as-repaired\" subject to the
satisfaction of the condition.

10\. Foundations

All foundations must be adequate to withstand all normal loads imposed.
Stone and brick foundations are acceptable if they are in good
condition. The appraiser must review the conditions in VC-8 for evidence
of conditions that could indicate safety or structural deficiencies that
may require repair.

\>If the foundation is deficient, mark \"YES\" in VC-8 and prepare the
appraisal \"as-repaired\" subject to the repair of the deficiencies.

11\. Crawl Space

To ensure against conditions that could cause the property to
deteriorate and seriously affect the marketability of the property, it
is required that:

3-13

4150\.

2

(3-6) o There must be adequate access to the crawl space; the appraiser
must be able to access the crawl space for inspection. Access is defined
as ability

to visually examine all areas the crawl space. Specifically, the minimum
distance is 18 inches.

oThe floor joists must be sufficiently above ground level to provide
access for maintaining and repairing ductwork and plumbing.

oThe crawl space must be clear of all debris and trash and must be
properly vented.

o The crawl space must not be excessively damp and must not have any
water ponding.

\> If these requirements are not met, mark \'YES\" in VC-8 and prepare
the appraisal \"as-repaired\" subject to repair of the deficiency.

12\. Roof

The covering must prevent moisture from entering and must provide
reasonable future utility, durability and economy of maintenance. When
re-roofing is needed for a defective roof that has three layers of
shingles, all old shingles must be removed before re-roofing. The
details of the process are provided in the protocol.

The appraiser must observe the roof to determine whether the
deficiencies present a health and safety hazard or do not allow for
reasonable future utility. The appraiser is only required to note
readily observable conditions.

\> If the roof is deficient, mark \"YES\" in VC-9 and prepare the
appraisal \"as repaired\" subject to the repair of the deficiency.

Flat roofs typically have shorter life spans and therefore require
inspection.

\> If there is a flat roof mark \"YES\" in VC-9 and prepare the
appraisal \"as repaired\" subject to further inspection.

13\. Mechanical Systems

These are the requirements for mechanical systems:

o must be safe to operate

o must be protected from destructive elements

o must have reasonable future utility, durability and economy

o must have adequate capacity and quality

3-14

4150\.

2

(3-6) The appraiser must observe the systems in VC-10 and determine if
any of the conditions do not meet the above stated criteria.

\> If the systems require repair, mark \"YES\' in VC-10, condition the
appraisal on the repair or further inspection and prepare the appraisal
\"as-repaired\" subject to the satisfaction of the condition.

\> If systems could not be operated due to weather conditions, explain
that in VC-10, condition the appraisal on assumed functionality, and
make a note of this condition on the Homebuyer Summary - Part 3 of the
Comprehensive Valuation Package.

14\. Heating

Heating must be adequate for healthful and comfortable living
conditions:

o Dwellings that use wood-burning stoves or solar systems as a primary
heat source must have permanently installed conventional heating systems
that can maintain a temperature of at least 50 degrees F. in areas
containing plumbing systems. These systems must be installed in
accordance with the manufacturer\'s recommendations.

o Properties with electric heating sources must have an acceptable
electric service that meets the general requirements of the local
municipal standards.

o All water heaters must have a non-adjustable temperature and
pressure-relief valve. If the water heater is in the garage, it must
comply with local building codes.

o All non-conventional heating systems -- space heaters and others -
must comply with local jurisdictional guidelines.

Solar energy systems are discussed in Appendix B.

15\. Electricity

Electricity must be available for lighting and for equipment used in the
living unit. Refer to the specific instructions in the protocol
(Appendix D) for determining adequate electricity.

16\. Other Health And Safety Deficiencies

The appraiser must note and make a repair requirement for any health or
safety deficiencies as they relate to the subject property, including:

o broken windows, doors or steps

o inadequate or blocked doors

o steps without a handrail

o others

3-15

4150\.

2

The appraiser must operate a representative number of windows, interior
doors and all exterior and garage doors, as well as verify that the
electric garage door operator will reverse or stop when met with
resistance during closing.

If conditions exist that require repair, mark \"YES\" in VC-11 and
prepare the appraisal \"as-repaired\" subject to the satisfaction of the
condition.

17\. Lead-Based Paint And Other Hazards

If the home was built before 1978, the appraiser should note the
condition and location of all defective paint in the home. Inspect all
interior and exterior surfaces - wars, stairs, deck porch, railing,
windows and doors - for defective paint (chipping, flaking or peeling).
Exterior surfaces include those surfaces on fences, detached garages,
storage sheds and other outbuildings and appurtenant structures.

\> If there is evidence of defective paint surfaces, condition the
appraisal on their repair, mark \"YES\" in VC-12 and prepare the
appraisal \"as-repaired\" subject to the satisfaction of the condition.

For condominium units, the appraiser needs to inspect only the exterior
surfaces and appurtenant structures of the unit being appraised and
address the overall condition, maintenance and appearance of the
condominium project.

\> If the condominium project was built before 1978 and shows signs of
excessive deferred maintenance or defective paint, mark \"YES\" in VC-13
and prepare the appraisal \"as-repaired\" subject to the satisfaction of
the condition.

B. OTHER CRITERIA

There are other eligibility criteria that are not part of the VC form.
The lender bears primary responsibility for these; however, they are
provided here so that the appraiser may reference them if questions
arise during the property inspection.

1\. Party Or Lot Line Wall

There must be adequate space based upon market acceptability between
buildings to permit maintenance of the exterior walls for detached
homes.

2\. Service And Facilities

Trespass. Each living unit must have the capacity to be maintained
individually without trespassing on adjoining properties.

Utilities. Utilities must be independent for each living unit except
that common services - water, sewer, gas and electricity - may be
provided for living units under a single mortgage or ownership.

o Each unit must have separate utility service shut-offs.

3-16

4150\.

2

(3-6)o Each unit must have individual meters.

o For living units under separate ownership, common utility services may
be provided from the main service to the building line when protected by
an easement or covenant and maintenance agreement acceptable to HUD.

o Individual utilities serving a unit must not pass over, under or
through another unit, unless:

\- Provisions have been made for repairing and maintaining those
utilities without trespassing on adjoining properties.

OR

\- An easement of covenant is made for permanent right of access for
maintenance and repair of utilities.

o If a single drain line in the building serves more than one unit, the
building drain clean-outs must be accessible from the exterior.

o Other facilities must be independent for each living unit, except
common services, such as laundry and storage space or heating, may be
provided for two-to-four-living-unit buildings under a single mortgage.

Dedication. Utilities must be located on easements that have been
permanently dedicated to the local government or appropriate public
utility body. This information must be recorded on the deed record so
that the utility services match the easement.

3\. Non-Residential Use Design Limitations

A qualified property must be predominantly residential in use and
appearance. Any nonresidential use of the property must be subordinate
to its residential use, character and appearance. A property, any
portion of which is designed or used for nonresidential purposes, is
eligible only if the type or extent of the nonresidential use does not
impair and/or remove the property\'s residential character and
appearance.

4\. Access Onto Property

Access to the living unit must be provided without passing through any
other living unit. Access to the rear yard must be provided without
passing through any other living unit. For a row-type dwelling, the
access may be by an alley, easement or passage through the dwelling.

3-17

4150\.

2

(3-6)5. Space Requirements

Each living unit must have the space necessary to ensure suitable
living, sleeping, cooking and dining accommodations and sanitation
facilities.

6\. Bedroom Egress

All bedrooms must have adequate egress to the exterior of the home. If
an enclosed patio (solid walls) covers the bedroom window, it is
possible that the bedroom won\'t qualify as a habitable bedroom.
Security bars are acceptable if they comply with local fire codes.
Occupants of a bedroom must be able to get outside the home if there is
a fire.

7\. Energy Efficiency

For new and proposed construction and properties less than one year old,
all detached one- and two-family dwellings and one-family townhouses not
more than three stories in height must comply with the CABO Model Energy
Code, 1992 Edition, Residential Buildings, except for sections 101.3.1,
101.3.2, 104 and 105. These sections remain:

o Section 101.3.2.2, Historic Buildings

o The Appendix

o HUD Intermediate MPS Supplement 4930.2 Solar Heating and Domestic Hot
Water Systems, 1989 edition

Valuation procedures for solar energy systems can be found in Appendix
B.3.

C. CONDITIONS NOT REQUIRING REPAIRS

Conditions that do not ordinarily require repair include any surface
treatment, beautification or adornment not required for the preservation
of the property.

These are some examples:

o A wood floor\'s finish that has worn off to expose the bare wood must
be sanded and refinished. However, a wood floor that has darkened with
age but has an acceptable finish does not need polishing or refinishing.

o Peeling interior paint and broken or seriously cracked plaster or
sheetrock require repair and repainting, but paint that is adequate
though not fresh does not need to be redone.

o Missing shrubbery or dead grass on an existing property does not need
to be replaced.

o Cleaning or removing carpets is required only when they are so badly
soiled that they affect the livability and/or marketability of the
property.

3-18

4150.2

o Installing paved driveways or aprons should not be required if there
is an otherwise acceptable surface.

o Installing curbs, gutters or partial street paving is not required
unless assessment for the same is imminent.

o Complete replacement of tile floors is not necessary if some tiles do
not match, etc.

Avoid unnecessary requirements because they increase housing cost
without adding any basic amenities to the property.

D. REPAIR CONDITIONS FOR NEW/PROPOSED CONSTRUCTION

The appraiser must develop the cost approach for new or proposed
construction and the normal site development costs must be included in
the lot value. Where unusual cuts, fills, retaining walls, etc. are
necessary to prepare the site for the proposed building improvements,
estimate the amount by which the cost of the work exceeds the cost of
preparing typical sites for similar structures from the Marshall and
Swift Cost Handbook. This estimate supplements the estimate of the
replacement cost of building improvements.

o When estimating the market price of a site with unusual site
characteristics that must be corrected, assume that the site is in the
condition that will exist after the corrective work is completed.
Disregard the cost of the treatment, but use the value of the improved
site in the estimate of the replacement cost of the property.

o Use the supplemental cost estimate to:

\- determine the extent to which the replacement cost of the property
will exceed the cost of a substitute property produced by constructing
identical improvements on a typical site

\- indicate the extent to which value may be less than the replacement
cost for that part in excess of the cost of preparing the typical site

o Do not include the cost of treating unusual site characteristics in
the estimate of replacement cost of building improvements. It is
necessary to avoid including both the effect of site treatment and the
cost of the work in the estimate of replacement cost of the property.

# 4 THE VALUATION PROCESS

[]{#__RefHeading___Toc167790714 .anchor}**4-0 INTRODUCTION**
[\<TOP\>](#TableofContents)

This Chapter addresses the development of the three approaches to value:

o Sales Comparison Approach

o Income Capitalization Approach

o Cost Approach

It also addresses their impact in arriving at a final value conclusion
that reflects the conditions denoted on the Valuation Conditions (VC)
Form. These approaches form the foundation for developing a value and
lead to the final reconciliation for an estimated market value.

The [VC](../pdfforms/valuation.exe) form identifies key components of
the property analysis and requires the appraiser to:

o describe the results of the visual inspection

o identify known conditions, if any

o reconcile their findings with the approaches to value

This Chapter conforms to the current Uniform Standards of Professional
Appraisal Practice (USPAP) and the requirements of the URAR. In
developing and coming to a conclusion about value, the appraiser must be
aware of and comply with all state and federal laws and requirements.
Furthermore, strict compliance with USPAP is required for all FHA
appraisals.

[]{#__RefHeading___Toc167790715 .anchor}**4-1 MARKET VALUE ESTIMATES**
[\<TOP\>](#TableofContents)

In accordance with HUD/FHA requirements, an appraiser must do the
following:

o define the type of value being considered for the property appraisal

o ascertain the definition of market value appropriate for the appraisal

o indicate whether the estimate is the most probable price that the
property will sell for on the open market

\> Follow the standards of USPAP. Key sections that are most applicable
are provided below.

A. DEFINITION OF MARKET VALUE

The definition of market value that applies to HUD/FHA is cited from the
Uniform Standards of Professional Appraisal Practice. This is the
definition of value which must be used for all appraisals performed for
FHA-insured mortgages.

\"The most probable price which a property should bring in a competitive
and open market under all conditions requisite to a fair sale, the buyer
and seller each acting prudently and knowledgeably, and assuming the
price is not affected by undue stimulus.\"

Implicit in this definition is the consummation of a sale as of a
specified date and the passing of title from seller to buyer under
conditions whereby:

4-1

4150.2

1\. The buyer and seller are typically motivated.

2\. Both parties are well informed or well advised, and each is acting
in what they consider their best interest.

3\. A reasonable time is allowed for exposure in the open market.

4\. Payment is made in terms of cash in United States

Dollars or in terms of a financial arrangement comparable thereto.

5\. The price represents the normal consideration for the property sold
unaffected by special or creative financing or sales concessions.

(4-1)

B. PROPERTY RIGHTS APPRAISED

Identifying property rights to be valued determines the criteria for
selecting market data and for comparable transactions. The following
table is an example of property rights.

**Property Type** **Occupancy** **Property Rights**

**Appraised**

Single-family Owner Fee Simple

Two-to-Four family One unit owner- Leased Fee

occupied, other units

rented

All property types Ground lease Leasehold Estate

The appraiser examines property rights to determine what rights, if any,
the property owner has conveyed to others. The conveyance of rights to
others impacts the value of the property. For example, a single-family
owner-occupied property has fee simple property rights that are absolute
and unencumbered - unlike a leasehold estate where property rights are
specified to use and occupancy for a stated term. The appraiser must
determine to what extent, if any, the transfer of property rights
impacts the property\'s value.

Fee Simple is defined as absolute ownership unencumbered by any other
interest or estate.

Lease Fee is defined as an ownership interest held by a landlord with
the right of use and occupancy conveyed by lease to others; usually
consists of the right to receive rent and the right to repossession at
the termination of lease.

Leasehold Estate is defined as the right to use and occupy real estate
for a stated term and under certain conditions that have been conveyed
by a lease.

C. PURPOSE

The purpose of an appraisal is the stated reason for performing an
appraisal assignment. The purpose is typically stated as the basis for
an underwriting decision. For HUD, the purpose is to determine market
value for mortgage insurance purposes.

4-2

4150.2

D. INTENDED USE OF APPRAISAL/FUNCTION

(4-1)The intended use or function for all appraisals prepared for FHA is
to support the underwriting requirements for an FHA-insured mortgage.

E. USE OF THE APPRAISAL

The use of the appraisal is to support FHA\'s decision to provide
mortgage insurance on the real property that is the subject of the
appraisal. Therefore, intended users include the lender and HUD.

F. EFFECTIVE DATE OF VALUE

The effective date of value is either the date when the appraiser
physically inspects the subject property or another date specifically
defined by the lender.

\> If another date is used as the effective date, indicate the
alternative date and the date on which the subject property was
physically inspected.

G. SCOPE

The appraiser must perform a complete appraisal as defined by USPAP,
considering all of the applicable approaches to value and developing the
appropriate approaches identified in this Handbook. Departure is not
allowed.

H. SPECIAL LIMITING CONDITIONS AND ASSUMPTIONS

The appraiser must adequately identify, report and quantify any
extraordinary assumptions or limiting conditions that directly impact
the valuation. Examples include:

o a negative external influence (proximity to a municipal landfill, for
example)

o proposed road improvements

o a pending zone change

[]{#__RefHeading___Toc167790716 .anchor}**4-2 HUD/FHA REQUIREMENTS**
[\<TOP\>](#TableofContents)

HUD/FHA requirements for market value estimates are as follows:

o The appraiser must appraise the property to determine market value
under the requirements detailed in Chapter 4-1 of this Handbook.

o The appraiser must evaluate the physical condition of the property and
note it on the Valuation Conditions (VC) Form of the Comprehensive
Valuation Package. Note any necessary repairs. If repairs are in
process, disclose the extent or status of those repairs at the time of
the appraisal. Always base the value on the completion of repairs and
include this as a special limiting condition when repairs are required
and expected to be completed.

o The appraiser must evaluate whether the property is free of hazards,
noxious odors, grossly offensive sights or excessive noises that may:

4-3

\- endanger the physical improvements

\- affect the livability of the property or its marketability

\- affect the health and safety of its occupants

\> If any of these conditions exist, recommend correction of the problem
or rejection of the property and explain.

(4-2)

For more information, see Chapter 2-2 of this Handbook.

o The appraiser must determine if the subject property possesses
sufficient remaining economic life to warrant a long-term mortgage,
assuming a reasonable level of continued maintenance. If the property
does not warrant a long-term mortgage it will be ineligible for FHA
mortgage insurance.

o The appraiser must indicate if the property conforms to applicable
Minimum HUD/VA Property Requirements detailed in Chapter 3.

\> If the property does not conform to the Minimum Property
Requirements, note it in the VC section of the appraisal report and
require correction of the deficiency or rejection of the property and
explain.

\> If there are so many necessary repairs that an \"as-repaired\" value
cannot be determined, or if correcting the deficiencies would require
major rehabilitation/alterations, return the appraisal to the lender
with a detailed explanation.

## 4-3 NEW AND PROPOSED CONSTRUCTION REQUIREMENTS

Before performing an appraisal for new or proposed construction, the
appraiser must have the plans and specifications and a fully completed
Builder\'s Certification. The lender must provide this information to
the appraiser prior to issuing the assignment. Without these items, the
property will not be acceptable for FHA insurance purposes.

A. NEW CONSTRUCTION

The appraiser must develop the cost approach for new construction less
than one year old. Appraise new construction in the same way that
existing properties are valued under the specifications outlined in this
chapter of the Handbook. Also, consider using the Gross Rent Multiplier
method when developing the income approach for three-or four-unit
buildings.

B. PROPOSED CONSTRUCTION

Appraise proposed construction consistent with the methodology presented
in this chapter. USPAP requires that the appraiser be provided with
written specifications of the proposed structure. Specifically, the
Lender must provide the appraiser with these documents:

o builder\'s plans, specifications and construction documents

o completed builder\'s certification (Form HUD-92541)

4-4

(4-3)o Builder\'s Warranty (Form HUD-92544)

o the 10-year Warranty, when required (the Secretary has proposed a
1-year Home-Owner Warranty period)

o all reports and information available (i.e. sales agreement, title
report, environmental assessments or studies and inspection reports)

\> If these documents are not provided, return the incomplete appraisal
to the lender. Check the box stating that the valuation is subject to
completion and that the value is contingent on the structure receiving a
certificate of occupancy.

[]{#__RefHeading___Toc167790718 .anchor}**4-4 UNIQUE PROPERTY
APPRAISALS** [\<TOP\>](#TableofContents)

Appraisers are sometimes faced with unique properties: a log home, an
extra small home, lower than normal ceiling heights, etc. Eligibility of
these properties depends on whether or not the property is structurally
sound and readily marketable. If a property meets these criteria, the
appraiser estimates market value. However, depending on the uniqueness
of a property, the final determination to accept or reject the property
is made by the lending institution\'s underwriter.

Excess land is another area in which to exercise caution. Land is
considered to be excess if it is:

o larger than what is typical in the neighborhood

AND

o capable of a separate use

o If there is excess land, describe it but do not value it. In this
instance, the appraisal is based upon a hypothetical condition. A legal
description of the portion being appraised is required.

[]{#__RefHeading___Toc167790719 .anchor}**4-5 COST APPROACH**
[\<TOP\>](#TableofContents)

The cost approach is an indication of value based on the premise that a
buyer would not pay more for a property than the cost to construct a
property of equal utility. The cost approach is not necessarily the best
indication of market value for many properties, but it is often
applicable for new(er) or proposed construction and special use
properties. Such situations include the following for single family one-
to four-unit dwellings:

Property Age Cost-Approach Requirement

Proposed Construction Required

New Construction Required

Existing, less than one year Required

Existing, regardless of age

Market acceptability of

cost as an

indication of pricing and

value

4-5

4150.2

Unless the cost approach is deemed reliable on the above table or
considered applicable in the appraiser\'s judgment, developing this
approach is not required for a HUD/FHA appraisal. The reporting
requirement of USPAP known as the departure rule does not apply because
the appraiser must always use the cost approach to value when considered
applicable.

USPAP Requirements

Strict compliance with USPAP standards is required for all FHA
appraisals.

Reporting Requirements

\> If the cost approach was excluded, report it in the reconciliation
and insert the rationale for its exclusion.

A. COST APPROACH METHODOLOGY

1\. Land Value Estimate

(4-5)Standard Rule 1-3(b) of USPAP requires appraisers to \"recognize
that land is appraised as though vacant \... \". The appraiser estimates
the value of the land because it is generally considered to be a
permanent, non-depreciating asset. There are exceptions to this
generally agreed upon premise, but the exceptions will rarely be a
factor in FHA/HUD related appraisals. Exceptions may include land with
an erosion problem or a polluted property.

2\. Excess Land

Excess Land is defined as the area by which the plot exceeds the area of
a readily marketable real estate entity. This occurs when the subject
lot is considerably larger than typical lots in the neighborhood and the
excess is capable of separate use. Generally, the defining
characteristic is an excess portion that can be subdivided and marketed
as an individual parcel. However, in small communities and outlying
areas, appraisers must use different criteria because the market may
accept a wide variance in lot sizes. This segment of the market may show
wide differences in lot use.

\> If the plot contains excess land, delineate and appraise separately
the readily marketable real estate entity and the existing or proposed
improvements. Describe the excess land but do not appraise it with the
primary 1 - 4 family residential building that is subject to a mortgage.

The lender will require that the value of excess land be excluded from
the maximum mortgage amount that will be calculated only on a reasonable
amount of land and improvements.

3\. Sales Comparison Approach For Land Value

In areas with an active real estate market, the sales comparison
approach is generally the primary method used. This method allows for
collecting, verifying and analyzing recent and similar land sales to be
compared with the subject land. Before a conclusion is reached, the
comparable land sales are adjusted for differences between the sales and
the subject property.

4-6

(4-5)4. Alsite

In areas with a significant lack of comparable sales to develop the
sales comparison approach, use the alsite method, which assumes a
market-accepted ratio between land value and property value. Although
the value estimate from this method is inherently less accurate than
that of the sales comparison approach, it is still an acceptable
approach.

\> The appraiser must document, support and justify the chosen alsite
ratio.

5\. Extraction

Extraction is a method to deduct the depreciated contribution of the
subject\'s improvement from the total sales price of the property. The
remainder represents an estimate of land value. This approach is also
inherently less accurate than the sales comparison approach.

\> The appraiser must document, support and justify the estimate of the
depreciated contribution of the improvements.

B. IMPROVEMENT COST ESTIMATE

Replacement cost is the preferred method for developing the Cost New of
the subject improvements. Typically the appraiser uses the Replacement
Cost New and quantifies all forms of depreciation, except obsolescence.
An alternative is the reproduction cost. HUD does not require a specific
method.

The replacement cost of property is estimated to enable the application
of the substitution principle. Estimates of the replacement/reproduction
cost of property are not estimates of value, although they indicate the
possibility that value, in an equivalent amount, may exist. Value
depends entirely upon usefulness, not on the cost. Value tends to
conform to cost, but this is not to imply that it is always equivalent
to cost.

C. TYPICAL REPLACEMENT COST

The replacement cost estimate must reflect the costs typically found in
an area - not necessarily the costs of a particular builder or owner.
This method is typically preferred to the reproduction cost.

D. UNUSUAL AND NON-TYPICAL COSTS

Some of the items or allowances in the cost estimate may not represent
equivalent value in a particular case. An owner might erect a house that
would cost more than the houses that generally characterize the
neighborhood, but the value of the home to the typical prospective owner
in that neighborhood might be less than the replacement cost of the
property. The cost of construction also may be in excess of value at a
given time. Under some circumstances, a reduction in cost may be in
prospect. If construction costs decline, value may also decline if it
was originally equal to cost.

4-7

(4-5)E. RECOMMENDED METHODOLOGIES

Generally, the Marshall and Swift square foot method is the most
applicable method for estimating the Replacement Cost New. This is a
simplified procedure and all appraisers must have the knowledge and
skill to apply this methodology. This method may not be used for
custom-built homes or unique buildings that require the segregated cost
method.

Typical residential construction with which HUD is involved should be
rated \"fair,\" \"average\" or \"good\" quality. Mass produced,
tract-built homes are rated either \"fair\" or \"average,\" meeting only
the minimum construction requirements of lending institutions, mortgage
insurance agencies and building codes. Appraisers must review the basic
description to determine the correct construction type.

The appraiser will complete the cost approach for each proposed
construction case based on the construction type and quality rating of
the property as shown in the Marshall and Swift Cost Handbook.

\> Reference on the form the pages and revision date where the figures
were obtained (usually two pages).

\> Include a marketing expense with the replacement cost of improvements
and an applicable current multipliers.

F. REMAINING ECONOMIC LIFE

Remaining economic life is an estimate of the remaining time period in
which the improvements continue to contribute value to the property
(building and improvements). The appraiser must consider the effect, if
any, of modifications or renovations on the improvements. This effect is
typically expressed in years.

[]{#__RefHeading___Toc167790720 .anchor}**4-6 SALES COMPARISON
APPROACH** [\<TOP\>](#TableofContents)

This is often the most applicable approach in estimating the market
value of a single-family one- to four-unit property. This approach
relies on:

o the availability of sales data

o the volume of transactions

o the reliability of reporting the transaction data confirmed and
developed under this approach

When developing a value indication by the sales comparison approach,
always include the assumptions and data from the other approaches on the
VC form.

A. DATA REQUIREMENTS

1\. Sales Data vs. Comparable Sale

Any transaction in the market is a sale, but not all sales are
comparable. Consider the type of transaction and physical
characteristics of any sale before considering the sale a comparable.

4-8

(4-6)2. Selection of Comparable Sales for Analysis

Identify the relevant market based on the area in which the property
competes and the forces/dynamics that affect the comparable sale
properties. This is necessary in relating the sales to the subject.

Consider the amount of time that has elapsed between the sale date and
the effective date of the appraisal. Sales data should not exceed six
months between the date of the appraisal and the sale date of the
comparable, and must not exceed twelve months. An explanation is
required for sales dates in excess of six months.

Consider neighborhood and other external factors that influence property
value, including real estate and non-real estate influences. For
example, when most of the neighborhood\'s residents are employed by one
major employer who is relocating out of the region, the neighborhood may
experience a decline in values. The term \"non-real estate influenced\",
however, must never include racial composition.

Consider the quality and quantity of data available for the given
assignment. A lack of quality data in a market may force reliance on
data in a similar market not necessarily the subject\'s immediate market
area. However, clearly explain and justify any sales from outside the
subject\'s immediate market area

3\. Excluded Sales Transactions

When using conventional sales data, the appraiser must be aware of the
terms of the sale and adjust the conventional sales price to reflect any
unusual terms. For example, there are sales that must be excluded;
however, some transactions may be included but adjusted for factors such
as below-market financing to provide a cash equivalent sales price.

4\. Current Offerings and Listings Analysis

Using these types of sales are discouraged. However, under certain slow
market conditions or in markets with rapidly increasing pricing, it may
be acceptable include properties offered for sale. Proceed with caution
when analyzing and adjusting these offerings. Recognize the inherent
negotiability in price between an offering and a consummated sale.
Clearly label these comparables as offering, listing, under agreement,
etc., but present them as additional comparable data only.

5\. Sales in Escrow

If a bona fide transaction is imminent, sales in escrow are considered
to be reliable indications of market pricing. Exercise care in
identifying the planned date of closure for the sale and any extraneous
circumstances that may impede the closing on the projected date.

6\. Distressed Sales

Using distressed sales is strongly discouraged because of the special
circumstances surrounding these transactions.

4-9

(4-6)7. Resite Sales

Using resite sales from a corporate seller at a below market value is
strongly discouraged when the purchaser is the resite company because of
the unusual circumstances surrounding these transactions.

Both distressed and resite sales are strongly discouraged because they
fail to meet the test of \"market value,\" particularly item No. 1:
\"The buyer and seller are typically motivated.\" However, these sales
can exceed normal market transaction and affect market values.

8\. Confirmation of Sales and Transaction Information

The appraiser must verify all market and comparable information used in
the appraisal process and is accountable for any information presented
as \"fact\" used to develop the subject property\'s value estimate.
Verification ensures that the information is accurate and meaningful and
provides the appraiser with a firm understanding of market motivations
and trends. The goal of the verification process is to ensure that only
information that accurately reflects current market conditions and
trends is presented and that meaningful conclusions can be reached from
this information.

During the verification process, it is necessary for the appraiser to
gain an understanding of the motivations surrounding the sale in order
to:

o determine if the sale was arm\'s length and not distressed

o understand current market conditions that influence value

Whenever possible, interview a party to the sale to determine the
expectations and motivations for purchasing the property. Also,
determine whether significant capital expenditures funded by the seller
were made shortly after the transaction occurred. If so, determine
whether the expenditure needs to be added back into the sale price to
reflect the actual conditions surrounding the sale.

The appraiser must verify sale information with the buyer, the seller or
one of their representatives (broker, lender, lawyer, etc.) . If the
sale cannot be verified with someone who has first-hand knowledge of the
transaction, use public records. However, the appraiser must clearly
state how the sale was verified and to what extent. Do not use or rely
heavily on any sale that was not verified with an involved party or one
of their representatives because concessions have become more common in
the market.

B. ADJUSTMENT PROCESS

Other factors that affect the use of comparable sales must be
considered. Account for differences between the subject property and
each comparable sale. The analysis of sales includes both quantitative
and qualitative factors. Remember that the comparable data is adjusted
to the subject property. Present these adjustments as dollar amount
figures and justify

4-10

4150.2

The sequence of adjustments are part of the URAR. All FHA appraisers
should be familiar with the adjustment grid within the URAR. Adjustments
are indicated as a dollar amount. If an adjustment is not necessary, the
appraiser can either enter \"equal\" or \$0 as the adjustment. (4-6)An
individual line item adjustment should not exceed +/- 10%. The total
adjustments to the comparables should not exceed 15% net and 25% gross
of the sales price. If adjustment exceeds a parameter, the appraiser
must explain why as part of the appraisal report.

Adjustments to the sales include:

o Property Rights Conveyed. Refer to the property right appraised
section of this chapter. This adjustment is always the first adjustment
made to all sales.

o Sales or Financing Concessions. Account for and adjust for any special
sale or financing terms, including sales concessions, non-market
financing terms, points, buy downs, closing terms and swaps/exchanges.
The most common scenario involves the seller paying points in the form
of settlement help to the buyer. To reflect the amount, adjust the sales
price of the comparable sale downwards. Typically this amount will not
exceed six percent of the sales price for typical transactions.

o Condition of Sale. Account for the conditions surrounding the sale,
including foreclosure/distressed sale, purchased by an adjoining owner,
sold between family members, auctioned or any unusual factor that could
be reflected in the price paid.

o Market Conditions. Account for changes that have occurred or are
occurring from the date of sale of the comparable transaction to the
date of appraisal, including appreciation, new development, availability
of financing, loan terms, supply and demand.

o Property Adjustments. These are required if the difference between the
sale and the subject is quantifiable and supported by the market.

Location - Account for location considerations.

Physical Characteristics - Account for physical differences between the
comparables and the subject, including condition, view, design/appeal
and quality of construction. These are typically entered as individual
categories.

Economic Characteristics - Account for economic characteristics between
the comparables and the subject, including occupancy, rent level, lease
structure or terms.

**Property Type Occupancy Property Rights**

**Appraised**

Single-family Owner Fee Simple

Two-to-Four family One unit owner- Leased Fee

occupied, other units

rented

All property types Ground lease Leasehold Estate

## 4-7 INCOME APPROACH

A. DATA REQUIREMENTS

The appraiser must choose similar market rentals to compare to the
subject property. Consider the transaction and physical characteristics
of a rental before considering the rental as comparable.

1\. Confirmation Of Leases And Transaction Information

The appraiser must verify all comparable information used in the
appraisal process. The appraiser is liable and accountable for any
information presented as a \"fact\" in developing the value estimate.
This ensures that the information is accurate and meaningful and
provides the appraiser with an understanding of market motivations and
trends. The goals of the verification process are to ensure:

o that only the information that accurately reflects current market
conditions and trends is presented

o that meaningful conclusions can be reached from this information

If possible, interview the lessee or the lessor to determine their
expectations and motivation for entering into the lease.

4-13

Verify lease information with the lessor/lessee or one of their
representatives (broker, agent, lawyer, etc.). If this verification is
not possible, clearly state how the lease was verified and to what
extent. Do not rely heavily on any lease that was not verified with an
involved party or one of their representatives.

2\. Adjustment Process

The appraiser must consider other factors that affect the use of
comparable leases. The appraiser must account for differences between
the subject property and the comparable leases to reconcile the actual
lease income. This selection of comparable rentals is significant
because the gross income multiplier should not be adjusted, only the
comparable rental rate. These adjustments are typically presented as
percentage or dollar amount figures. The appraiser must be able to
justify and explain the rationale behind all adjustments. The sequence
of adjustments should follow the same format as that presented in the
sales comparison approach section; however, tailor the categories to the
comparable rentals.

3\. The Income Projection

In developing the projected gross rent for the subject, the appraiser
needs to review and analyze the leases in place on the effective date of
the appraisal. Also, consider leases that will commence or terminate
around the effective date of the appraisal and the impact, if any, on
the property.

The appraiser must take appropriate steps to ensure that the development
of the income approach reflects the actual conditions at the subject
property. If the subject is new, consider when the property income will
stabilize. Include the justification for any assumption made - lease up
time, for example. The income approach is typically based upon the \"as
stabilized\" premises. Support this approach appropriately and clearly
state the date when stabilized income will be achieved.

B. DEVELOPMENT OF RATES

The Gross Rent Multiplier (GRM) is the ratio between the sales price of
a property and its gross rental income. This method is used to develop
indications of a property value. The appraiser must consider the
strengths and weaknesses of each comparable rental and develop an
estimated multiplier that adequately reflects the income-generating
ability of the subject property. This ratio is applied to the estimated
income for the subject to conclude an indication of value by the income
approach.

[]{#__RefHeading___Toc167790722 .anchor}**4-8 FINAL RECONCILIATION**
[\<TOP\>](#TableofContents)

The final analytical step in the valuation process is to reconcile value
indicators. In this step, the appraiser must measure the strengths and
weaknesses of each of the applicable approaches performed and develop
this data into a single value estimate.

[]{#__RefHeading___Toc167790723 .anchor}**4-9 RECONSIDERATION OF
APPRAISED VALUE** [\<TOP\>](#TableofContents)

The underwriter may request reconsideration of the appraised value when
new market data exists that

4-14

may not have been reflected in the appraisal. The lender can select new
comparables and request a reappraisal. This request from the lender must
be in writing and maintained in the appraiser\'s work file. The
appraiser must decide whether to use the new comparables and perform the
reappraisal. If the comparables were available when the initial
appraisal was performed, the lender may not offer pay for the
reconsideration.

[]{#__RefHeading___Toc167790724 .anchor}**5 REPORTING THE APPRAISAL**

[]{#__RefHeading___Toc167790725 .anchor}**5-0 INTRODUCTION**
[\<TOP\>](#TableofContents)

Accurate and thorough appraisal reporting is critical to the accuracy of
underwriting for the mortgage insurance process. The need for accuracy
is greater for FHA-insured mortgages because buyers tend to have more
limited income and lower equity in the properties. This chapter presents
the requirements for reporting complete and accurate appraisal
information to HUD. An appraisal performed for HUD/ FHA purposes
requires that all sections of the Comprehensive Valuation Package (CVP)
must be completed. The CVP constitutes the reporting instrument to HUD
for FHA-insured mortgages.

[]{#__RefHeading___Toc167790726 .anchor}**5-1 REPORTING THE APPRAISAL**
[\<TOP\>](#TableofContents)

When the appraisal is completed, submit the CVP and all required
attachments - maps, photographs, sketches, etc. to the lender. Also, for
new and proposed construction, submit the plans, specifications,
construction documents and the completed builder\'s certification (Form
[HUD-92541](../pdfforms/92541.pdf)). Submit the original package and a
complete copy to the lender.

The CVP is required for reporting the appraisal findings, analyses and
conclusions about the observed conditions of the property. A complete
HUD appraisal package includes three parts: the Uniform Residential
Appraisal Report (URAR), the Valuation Conditions Form and the Homebuyer
Summary. These are described below.

A. PART 1: UNIFORM RESIDENTIAL APPRAISAL REPORT (URAR) The URAR is the
standard appraisal reporting form available through all lenders. The
following are required in reporting appraisal findings on the URAR:

o All information must be reported consistently with the HUD protocol in
Appendix D of this Handbook.

o All findings must be reported consistent with Standard 2 of USPAP for
a summary report.

o All boxes must be filled in and relevant factual data included, unless
specifically noted.

o All calculations must be verified.

o Consistency between the sections must be verified.

1\. Departure from HUD Requirements

HUD requirements are presented in this Handbook. Any departure from
these requirements must be explained in the URAR or as an attachment to
the appraisal. Present the reasoning, the result of such departure and
any additional limitations to the use of the appraisal or the reported
value as a result of this departure. Departure from USPAP is not
permitted for an appraisal submitted to HUD.

2\. Certification

Within the URAR, the appraiser must certify that the reported value is
an unbiased, independent valuation of the subject property. This
certification is consistent with that required by USPAP. Of particular
importance is the certification that the appraisal is not based on any
of the following:

o a requested minimum value

o a specific value

o the approval of a loan as indicated

If the appraiser is subject to additional certifications in developing
and reporting the appraisal, include them in the URAR report. Such
additional certifications may be the result of state certification
requirements in certain jurisdictions or of relationships with
professional appraisal and real estate organizations.

The assigned appraiser is required to sign the report making him/her
fully and wholly accountable for the information presented on the URAR
and in developing the appraisal findings. If any party provided
significant professional assistance, name this party on the
certification and note the contribution.

3\. Statement of Limiting Conditions

For each appraisal, the URAR includes the standard limiting conditions.
The appraiser must confirm these limiting conditions and strike any that
do not apply.

Also, if there are additional limiting conditions, clearly state them.
If the limiting conditions differ or are contrary to the limiting
conditions stated on the URAR, fully disclose those limiting conditions
and make them known in the value estimate. Cite any value influencing
limiting conditions with the report of the estimate of market value.

The repair conditions reported in the VC segment of the report
constitute a limiting condition for the development of the appraisal
because HUD appraisals estimate value \"as-repaired.\" The reported
estimate assumes that the noted deficiencies have been corrected. It is,
therefore, important that the appraiser certify to testing specific
systems and examining all areas of the house to note the deficiencies.

B. PART 2: VALUATION CONDITIONS FORM

The Valuation Conditions (VC) Form specifically addresses physical
conditions of the property- that may render the property uninhabitable
or cause health and safety concerns. Note the conditions observed during
the walk-through on the VC form as of the date of appraisal. A home
inspection. Is not required to complete the VC. The VC form is divided
into Site and Property Analysis as well as other property related
information.

o VC-1 identifies the site hazards and nuisances that may render a
location ineligible for FHA insurance.

o VC-2 through VC-11 identify the basic structural and mechanical
components of the property and are the bases for determining if the
property is habitable and eligible for FHA-insured financing.

oVC-12 and VC-13 provide further information on the property.

oThe addenda include a provision for current market assessed value and a
summary of estimated repair costs.

Each section must be completed entirely, based on the instructions in
the protocol in Appendix D of this Handbook.

The appraiser must observe the property\'s components, test certain
basic operations, view areas of the home that may include adverse
conditions and report on readily observed adverse conditions. In all
instances, the observations are as of the effective date of value, as
identified in the VC and appraisal segments.

oFor each item in VC-1, a \"YES\" renders the property ineligible for
FHA mortgage insurance.

o For each specific item in VC-2 through VC-11, \"YES\" indicates a
limiting condition on the appraisal subject to the repair of the
deficiency or further inspection.

o For each specific item in VC-2 through VC-11, \"NO\" indicates that
the appraiser did not observe a deficient condition.

The appraiser may encounter a negative physical condition that does not
require repair or inspection. In this instance the appraisal is based
upon the existing condition.

\"NO\" is not a substitute for a home inspection by a qualified
professional home inspector, but merely indicates that the appraiser did
not observe the condition during the property inspection for valuation
purposes.

For both \"YES\" and \"NO\" responses, exercise care and judgment in
reporting the extent and the magnitude of the observed condition. The
mere presence of an item may not require an inspection or repair.
Likewise, depending on the condition observed, a minor observation may
prove to be significant to the soundness of the property. The property
analysis relies heavily on the appraiser\'s judgment. It is important to
note all considerations as comments for each Valuation Condition.

For detailed instruction regarding the Valuation Conditions Form, please
see the protocol in Appendix D of this Handbook.

Appraisals performed for HUD/FHA are not intended to protect the buyer:
they protect HUD. Many homebuyers mistakenly believe that a HUD
appraisal and subsequent inspection is a guarantee that the property is
free from defects when, in fact, the appraisal only establishes the
value of the property for mortgage insurance purposes. Buyers need to
secure their own home inspection through the services of a qualified
inspector and satisfy themselves about the condition of the property. If
available in a timely manner, home inspection reports should be sent to
the appraiser; this affords the appraiser the opportunity to make
valuation adjustments as needed.

C. PART 1: HOMEBUYER SUMMARY

This part summarizes required repairs from the appraiser\'s observation
of the physical condition. The Homebuyer Summary intends to protect the
homebuyer by informing him/her of any material conditions that typically
make the property ineligible for FHA mortgage insurance.

\> If any of the VC\'s are marked \"YES\" in the VC form, the appraiser
must denote it in the appropriate box of the Homebuyer Summary and
explain, in detail, the nature of the problem.

The summary also includes a notice to the homebuyer regarding the value
of securing a home inspection, by a qualified inspector.

[]{#__RefHeading___Toc167790727 .anchor}**5-2 ACCESS TO FORMS**
[\<TOP\>](#TableofContents)

The Homebuyer Summary and Valuation Conditions Form are available
electronically from the HUD Internet website: http://www.hudclips.org.

[]{#__RefHeading___Toc167790728 .anchor}**5-3 RECORD KEEPING**
[\<TOP\>](#TableofContents)

HUD reserves the right to request and review the appraiser\'s work files
supporting an FHA-insured mortgage at any time and without prior notice.
Appraisers on the FHA Register must comply with the record-keeping and
inspection requirements as a condition of performing appraisals for
FHA-insured mortgages.

A. MINIMUM TERM FOR RECORD KEEPING

The appraiser is required to keep supporting documentation in addition
to a copy of the CVP. These files must be maintained for five years
after the date of preparation or at least two years after final
disposition of any judicial proceeding in which testimony was given,
whichever expires last. This is consistent with the Record Keeping Rule
of USPAP.

B. DOCUMENTATION FILE REQUIREMENTS

Although there is no prescribed file for-mat or content, the
appraiser\'s work files must include information to support all
findings, observations and conclusions supporting the value estimate.
The files must indicate the rationale for adjustments and the market
data analyzed in the development of the appraisal report. The files must
include documentation of the acceptance of the assignment and historical
and factual information, such as photographs and maps. A sample
documentation file index is provided below. This is not a comprehensive
list of information.

C. SAMPLE DOCUMENTATION FILE

Section Supporting Data

Acceptance of assignment File memorandum

Property DescriptionLegal description

Photographs

Floor plans

Tax map and information

Field notes from inspection

Listing information

Offer to purchase

Neighborhood

Notes from the field visit

Photographs

Demographic data

Cost Approach Relevant Marshall Swift

Valuation

(if applicable) information

Calculations performed

Land Sales detail

Sales Comparison Approach Sale details and photographs

Transaction information

Derivation of adjustments

Interview notes

income approach Market rent comparable

information

(if applicable) Cap rate justification

Historical financial

statements

VC Conditions Noted Photograph of condition

Field notes

Support for any assumed

repairs

Calculation of cost to

repair a VC

condition

Additional Information Surveys

Relevant market data

Other sources of data

# 6 APPRAISAL AND APPRAISER MONITORING

[]{#__RefHeading___Toc167790730 .anchor}**6-0 INTRODUCTION**
[\<TOP\>](#TableofContents)

The review process is a critical quality control and performance
monitoring mechanism for HUD. FHA will monitor appraisals and appraisers
using statistical analysis and field reviews. Through analysis of
performance measures, FHA will identify candidates for field reviews. By
performing statistical analysis as well as field reviews, HUD maintains
the capability to broadly track its portfolio and investigate it in
greater depth.

[]{#__RefHeading___Toc167790731 .anchor}**6-1 MONITORING AND STATISTICAL
ANALYSIS** [\<TOP\>](#TableofContents)

The Real Estate Assessment Center (REAC) will conduct statistical
analysis to track the performance of appraisers and properties and to
identify problematic appraisals for review. If the review and subsequent
analysis indicate behavior that is out of compliance with FHA
guidelines, FHA may take enforcement action. The performance categories
below will guide the monitoring and enforcement efforts.

[]{#__RefHeading___Toc167790732 .anchor}**6-2 PERFORMANCE CATEGORIES**
[\<TOP\>](#TableofContents)

The following performance categories allow FHA to monitor each aspect of
the appraiser\'s performance. The table below lists examples of
performance measures for each category.

Performance Category Performance Measure

Appraisal Process Transaction quality

Proof of analysis

Relevance of data

Appraisal Reporting Completeness

Mathematical Accuracy

Valuation Conditions Identified repairs

Maintenance of Professional Maintenance of state

licensure

Standards Disciplinary actions

Field reviews Supported findings

Required record keeping

Responsiveness to field

review

HUD expects a high level of professionalism, customer service, technical
expertise and record keeping from appraisers. The above measures
demonstrate HUD\'s focus on:

o complete, justifiable and accurate appraisals

o qualified and competent appraisers

o professionalism

o accuracy

## 6-3 APPRAISAL REVIEW PROCESS

The oversight process includes statistical analysis of appraisals and
field reviews. The reviews will be used to determine the reliability of
the appraisal supporting FHA financing as well as the performance of the
appraiser. To gauge an appraiser\'s performance, REAC will review a
sample of appraisals performed for FHA over a specified time period
and/or a specified number of appraisals performed.

# 7 REGULATORY ENVIRONMENT, ENFORCEMENT AND SANCTIONS

[]{#__RefHeading___Toc167790735 .anchor}**7-0 INTRODUCTION**
[\<TOP\>](#TableofContents)

This chapter describes the regulatory environment in which FHA
single-family appraisals are performed and the enforcement and sanctions
that are available to HUD and other government entities in that
environment. Appraisers are subject to:

o federal laws and regulations

o state licensing laws and regulations

o the requirements associated with any professional appraisal
designations

This chapter enumerates these requirements and explains their connection
to HUD\'s enforcement and sanctions processes.

[]{#__RefHeading___Toc167790736 .anchor}**7-1 REGULATORY ENVIRONMENT**
[\<TOP\>](#TableofContents)

A. FINANCIAL INSTITUTIONS REFORM, RECOVERY, ENFORCEMENT

ACT OF 1989 (\"FIRREA\")

FIRREA instituted reform and regulation of real estate appraising
through Title XI, the Real Estate Appraisal Reform Amendments. The
amendments achieved the following:

o established the Appraisal Foundation, comprising the Appraiser
Qualifications Board (AQB) and the Appraisal Standards Board (ASB):

\- The AQB determines the minimum education, examination and experience
requirements for state-certified and state-licensed appraisers.

\- The ASB promulgates the Uniformed Standards of Professional Appraisal
Practice (USPAP).

o required that only a state-certified or state-licensed appraiser may
perform appraisals for federally related transactions

o established that an appraiser trainee can sign an appraisal if a
state-certified or state-licensed appraiser closely supervises the
trainee, signs the appraisal report and inspects the property

o established the definition of a \"state-certified real estate
appraiser\" as someone who has satisfied the requirements in a state or
territory whose criteria for certification meets the minimum criteria
for certification by the Appraiser Qualification Board of the Appraisal
Foundation

o established the state agencies to license, certify and supervise
appraisers

##  

All appraisers performing services for FHA-insured mortgages must comply
with USPAP in developing and reporting appraisals. Key aspects of USPAP
include:

Standard Citation

Ethics Rule Conduct management, confidentiality

and recordkeeping

Competency Rule Full responsibility of appraiser to

have the knowledge and experience

to complete the assignment

competently or disclose any

discrepancy before acceptance and

take all necessary steps to correct

Departure Rule 1 Permits limited departures from acceptable

portions of USPAP reducing the

reliability of the valuation

Jurisdictional Exception Individual portions of USPAP can be superseded
by law or public policy

Standard 1In developing a real estate appraiser ust be aware of,
understand and orrectly employ the recognized methods and techniques
that are necessary to produce a credible appraisal

Standard 2In reporting the results of a real estate property appraisal,
an appraiser must communicate each analysis, opinion and conclusion in a
manner that is not misleading

In compliance with USPAP, unacceptable practices include:

o estimating a specified (predetermined) value determined by the lender

o fee splitting between lenders and appraisers

o other practices that do not comply with HUD\'s standards

Also, USPAP contains statements on appraisal standards that have the
full weight of USPAP. These statements were issued to clarify the
existing standards. The ASB has also issued advisory opinions that
currently do not establish new standards but offer advice on complex
technical issues.

B. FEDERAL FINANCIAL INSTITUTION REGULATORY AGENCIES

The Federal Financial Institution Regulatory Agencies issued a final
rule on appraisals in June 1994. In general, the threshold for requiring
state-certified appraisers to perform appraisals on federally related
transactions was raised to Two Hundred Fifty Thousand Dollars
(\$250,000).

1/ FHA does not permit departure from USPAP.

D. FALSE, FICTITIOUS OR FRAUDULENT CLAIMS ON HUD (18 U.S.C. 1010,
CRIMINAL PENALTIES AND FINES 1012)-

(7-1) These statutes prescribe criminal penalties for any person who
knowingly files a false claim on or against HUD.

E. FEDERAL FALSE CLAIMS ACT (31 U.S.C. 3_729) - CIVIL FRAUD

The Federal False Claims Act defines the civil monetary damages imposed
on any person who knowingly presents or files a false claim that was
paid or approved by the United States Government.

F. 24 CFR PART 28 - PROGRAM FRAUD CIVIL REMEDIES ACT (PFCRA)

These regulations define the administrative procedures for imposing
civil penalties and assessments by HUD officials against any person who
makes or submits false claims or false statements to Federal authorities
or to their agents.

G. 24 CFR PART 30 - CIVIL MONEY PENALTIES

These regulations define the money penalties that HUD may levy for
submission of a false certification by another person - for example, an
appraiser who makes a false certification at the bottom of the USPAP
appraisal form about the truth/ correctness of the appraisal data.

H. 24 CFR PART 24 - ADMINISTRATIVE SANCTIONS

These regulations define the administrative sanctions available to HUD
officials for any person determined to have violated HUD regulations and
policies.

I. STATE LAWS AND PROFESSIONAL ORGANIZATIONS

The appraiser must adhere to all state and local laws relating to
appraisal, licensing and certification requirements. Also, as a
voluntary member of an appraiser\'s professional organization, the FHA
appraiser should adhere to that organization\'s guidelines on appraiser
conduct. However, HUD has no enforcement powers in private
organizations.

1\. State Certifications

Appraisers on the FHA Register must be licensed, certified-residential
or certified-general appraisers. To perform appraisals for FHA,
appraisers must maintain and be able to prove that they are so
certified. While some states do not require an appraiser to be
certified, they provide a licensing program so appraisers can meet
federal guidelines.

Appraisers must comply with the practices of their state unless the
requirements of the state contradict those of the federal government;
federal requirements preempt any and all state requirements.

The appraiser must report to HUD any action or pending action that
relates to appraisal reports prepared by the appraiser two years
subsequent to the date on which the action was initiated. After
disposition of any disciplinary action or adjudication of the action,
the appraiser must provide HUD with the documentation and official
findings within 14 days.

2\. Professional Organizations

The appraiser may be a member or hold designations in professional
organizations. Such involvement is encouraged, but not required. If the
appraiser is a member, candidate or associate of any organization, the
appraiser must report any adjudicated actions resulting in the
suspension of the appraiser to HUD within 14 days of such action. On
disposition of the-action or adjudication of the action, the appraiser
must provide HUD with documentation and official findings. HUD reserves
the right to suspend any appraiser found guilty of professional
misconduct as adjudicated by the professional organization.

[]{#__RefHeading___Toc167790737 .anchor}**7-2 ENFORCEMENT**
[\<TOP\>](#TableofContents)

FHA intends to hold appraisers accountable for valuations that are
inconsistent with USPAP or this Handbook. The Valuation Conditions Form
must accurately reflect any site, structural or mechanical deficiencies.
FHA recognizes that most appraisals are properly valued and do not
indicate improper action. Accordingly, HUD emphasizes quality assurance,
but will take enforcement action when necessary.

A. STATE CERTIFICATION BOARDS

HUD will enforce actions against appraisers through existing state
certification and licensing boards. HUD is required by law to refer
appraisers to these boards if HUD considers the actions to be of such
magnitude or frequency as to warrant such referral.

B. PROFESSIONAL ORGANIZATIONS

HUD will cooperate with and refer cases to the enforcement arms of all
applicable professional organizations.

[]{#__RefHeading___Toc167790738 .anchor}**7-3 APPLICABLE REMEDIES AND
SANCTIONS** [\<TOP\>](#TableofContents)

FHA will review appraiser and appraisal performance data. In making any
determination, the following will be considered:

· the seriousness and extent of the non-compliant action

· the degree to which the appraiser is responsible for that action

· the frequency of the action(s)

· any mitigating factors

HUD will impose sanctions on four tiers:

1\. Notice of Appraisal Deficiencies and Remedial Education

2\. Administrative Sanctions

3\. Civil Sanctions

4\. Criminal Sanctions

o the frequency of the action(s)

o any mitigating factors

HUD will impose sanctions on four tiers:

1\. Notice of Appraisal Deficiencies and Remedial Education

2\. Administrative Sanctions

3\. Civil Sanctions

4\. Criminal Sanctions

(7-3)

HUD expects that all appraisers performing appraisals for FHA are
knowledgeable of HUD\'s policies and procedures. If, however, minor
appraisal errors indicate lack of knowledge, HUD may require remedial
education and training. For offenses arising from unethical behavior or
for repeated offenses, HUD will apply more serious sanctions. All
sanctions will be reported to the state regulatory agencies.

The following sections generally define the actions taken under each
tier. Generally, these penalties will be expunged after three years. A
table providing examples of offenses and possible sanctions is included
at the end of this chapter.

A. NOTICE OF APPRAISAL DEFICIENCIES AND REMEDIAL EDUCATION

Education and training directives will be managed internally by HUD. If
the evidence indicates that the appraisal deficiency is a matter of
training, then the appraiser must undergo professional training. HUD
will notify the appraiser and inform the appraiser of:

o the appraisal\'s deficiencies

o the findings that support the recommended training

o the recommended training

o the appraiser\'s right to refute the findings of the notice

The appraiser must appeal within 20 days from receipt of the notice if
he or she disagrees with the findings. If the findings are adequately
refuted, no action will be taken against the appraiser and the
circumstances surrounding that particular incident will be noted in the
appraiser\'s file. However, if the findings hold, the appraiser must
comply with HUD\'s requirements for improved performance, including the
type of training required and the time-frame for completion. This action
will go on record in the appraiser\'s file.

B. ADMINISTRATIVE SANCTIONS

Administrative sanctions will be managed internally by HUD and consist
primarily of removal from the FHA Register for a specified time. Removal
from the FHA Register can be imposed for

noncompliance with FHA policies and requirements on appraisals. HUD will
consider the seriousness of the appraiser\'s acts or omissions and any
mitigating factors.

HUD/FHA will notify the appraiser of the alleged violation and pending
sanction in writing. If the appraiser believes that removal from the FHA
Register is unwarranted, the appraiser must appeal in writing within 20
days and may arrange a meeting or conference call with FHA at a mutually
acceptable time. If there is evidence and documentation of unacceptable
performance, appraisers will be removed from the FHA Register at
HUD/FHA\'s sole discretion.

Upon any legally effected removal, HUD will notify the state licensing
or certification agency in writing that such appraiser has been removed
from the FHA Register. HUD will provide the state agency with:

o the state license or certification number of the appraiser

o the reason for removal

o copy of the original appraisals

o copy of the review report

In addition to removal from the FHA Register, administrative sanctions
include sanctions under 24 CFR Part 24, Debarment, Suspension and
Limited Denials of Participation (LDP) from HUD and government-wide
programs.

C. CIVIL SANCTIONS

HUD will pursue civil sanctions by initiating an investigation of the
alleged non-compliant action. A report containing the findings and
conclusions of the investigation will be submitted to HUD\'s Office of
the General Counsel or The Enforcement Center. If the Office of General
Counsel or The Enforcement Center determines that the investigation
report supports an action, the respective office will submit a written
request to the Department of justice for approval to pursue civil
sanctions. Civil sanctions are pursuant to Part 24 CFR 28-PFCRA and are
described in Chapter 7-1.

D. CRIMINAL

If the non-compliant action is so egregious as to violate criminal law,
HUD\'s Office of General Counsel or the Inspector General will refer the
case to the Attorney General at the U.S. Department of Justice.

E. PERFORMANCE VIOLATIONS AND LEVEL OF SANCTION

The following chart outlines the type of sanction to be levied by the
type of performance violation. For example, the appraiser may receive a
Notice of Appraisal Deficiencies for a square footage error of less than
10% as a first offense. However, repeatedly making this mistake will
result in removal from the FHA Register. If the violation is repeated so
that it constitutes a pattern of misconduct, it may be considered gross
negligence. The offense could also be considered gross negligence if the
offense is so obvious that it could not have reasonably been the result
of simple error. In this example, the sanction for gross negligence
includes removal from the FHA Register and may include a Limited Denial
of Participation or Debarment.

7-6

Violations of intent include knowing and willful noncompliance with
FHA/HUD requirements, as well as extensive or repeated intentional
violations. In this example, the appraiser is guilty of intentional
misconduct if he or she chooses to disregard the requirement. Sanctions
at this level may include debarment and civil and/or criminal penalties.
The Department may impose civil money penalties or other sanctions for
minor violations if the Department determines that circumstances
warrant.

7-6a

[]{#__RefHeading___Toc167790739 .anchor}**7-4 PERFORMANCE AND SANCTION
MATRIX** [\<TOP\>](#TableofContents)

This is not an exhaustive list of violations. It is meant to highlight
the ramifications for non-compliant performance. This does not preclude
the Department from pursuing other remedies or related sanction(s); the
Department reserves the right to take any such other actions and
remedies in accordance with applicable law. Time frames are included for
illustration and can vary depending on the degree of violation.

[PAGES 7-7 THRU 7-12 WHICH INCLUDE THE MATRIX IS IN THIS PDF
FILE.](../pdfforms/pg7-7etc.pdf)

# 8 MANUFACTURED HOMES

## 8-0 DEFINITION

A Manufactured Home is a structure that is transportable in one or more
sections. In traveling mode, the home is eight feet or more in width and
forty feet or more in length. A Manufactured Home is designed and
constructed to the Federal Manufactured Construction and Safety
Standards and is so labeled. When erected on site, the home is:

· at least 400 square feet

· built and remains on a permanent chassis

· designed to be used as a dwelling with a permanent foundation built to
FHA criteria

The structure must be designed for occupancy as a principal residence by
a single family.

[]{#__RefHeading___Toc167790742 .anchor}**8-1 PROPERTY STANDARDS FOR
TITLE II MORTGAGE INSURANCE** [\<TOP\>](#TableofContents)

The appraiser should be aware of the primary standards in this Handbook
to prepare an appraisal for underwriting purposes. These are the key
standards:

o The site must be served by permanent water and sewer facilities
approved by the local municipal authority, if available at the site.

o An all-weather roadway must serve the site.

o The entire property must be taxed as real estate.

o The towing hitch or running gear must have been removed. The towing
hitch or running gear must also have been removed for properties greater
than one year.

o No part of the finished grade level under the home is below the
100-year flood level.

o Structural integrity must have been maintained during transportation
and sufficient anchoring, support and stability must be evident.

All manufactured homes must have an affixed HUD seals(s) located on the
outside of the home. If the home is a multi-wide unit, each unit must
have a seal. These seals will be numbered sequentially. If the tags are
missing from the property, the appraiser must recommend rejection of the
property and notify the lender.

In some states, a manufactured home may not be resold without a seal and
homes without a HUD seal must be rejected. In states where resale
without a HUD seal is permissible, a manufacture\'s certification must
be obtained verifying the date of the sale.

The certification label/seal shall be located at the tall-light end of
each transportable section of the manufactured home approximately one
foot up from the floor and one foot in from the road side, or as near
that location on a permanent part of the exterior of the manufactured
home unit as practicable. The roadside is the right side of the
manufactured home when one views the manufactured home from the tow bar
end of the manufactured home. (24 CFR 3280.11 (d))

o The home must be erected on a permanent foundation in compliance with
the Permanent Foundation Guide for Manufactured Housing. All proposed or
newly constructed manufactured homes must meet the standards set forth
in the Permanent Foundation Guide. A licensed professional engineer\'s
seal and signature (certification) is required to indicate compliance
with the Foundation Guide. The lender should furnish the appraiser with
a design engineer\'s inspection of the foundation prior to the
appraisal.

o Existing manufactured homes in place over one year are to be inspected
by the appraiser for evidence of permanent concrete footings with
tie-downs anchored to the footings.

o The appraiser must inspect the crawl space for the following: poured
in place concrete footings placed below the frost line supporting the
manufactured home carriage frame, tie-downs anchored to the footings,
protection from the elements and enclosed with material imperious to rot
and infestation and perimeter foundation-type construction with footings
extended below the frost line. The appraiser must require an engineering
inspection if there is evidence of structural defects or other problems
relating to the foundation or set-up of the home.

o The manufactured home must not have been constructed before June 15,
1976. The unit must have been built to the manufactured housing
construction safety standards as evidenced by having a small, red
metallic label attached to it. Any unit without this label is
unacceptable. If it has been removed, it cannot be reattached to make it
acceptable for FHA insurance.

o New, never occupied homes that are transported directly from the
manufacturer or directly from the dealership to the site are eligible
for insurance. For an existing manufactured home, evidence must be
provided to verify that the home was assembled in accordance with the
above paragraphs and has not been moved from its initial installation
site.

o Additions or structural modifications may put the home at risk if
changes were not performed in accordance with the HUD Manufactured Home
Construction Safety and Standards. If the appraiser observes changes to
the original home, an inspection by the State Administrative agency,
which inspects manufactured homes for compliance, must be required. If
there is no agency willing or able to inspect existing homes for
compliance to the Manufactured Home Construction and Safety Standards,
the manufactured home is unacceptable and should be rejected.

[]{#__RefHeading___Toc167790743 .anchor}**8-2 PROPERTY DESCRIPTION**
[\<TOP\>](#TableofContents)

Measurement is based on the overall length, including living areas and
other projections that are at least seven feet in height. Length and
width should not include bay windows, roof overhangs, drawbars,
couplings or hitches. Each manufactured home must have a data plate with
the name of the manufacturer and the construction date.

## 8-3 APPRAISER QUALIFICATIONS FOR MANUFACTURED HOMES CLASSIFIED

## AS PERSONAL PROPERTY

For all appraisals of manufactured homes classified as personal
property, lenders must engage independent fee appraisers who have
successfully completed a specialized course in manufactured home
valuation based on the N.A.D.A. appraisal system. These independent fee
appraisers must be knowledgeable in the business of manufactured home
retail sales. Appraisal services may be obtained from an appraisal
company if their appraisers meet these qualifications.

[]{#__RefHeading___Toc167790746 .anchor}**8-4 MANUFACTURED HOME LOT
APPRAISALS** [\<TOP\>](#TableofContents)

A manufactured home lot appraisal may be requested to estimate land
value in determining the maximum loan proceeds allowable for a
manufactured home lot loan or a combination loan (home and lot). A lot
appraisal may also be requested to establish value for claim purposes on
a foreclosed lot or manufactured home-and-lot combination.

When appraising manufactured housing, appraisers should use normal
single-family residential appraisal techniques (see Chapter 4 of this
Handbook). Give special consideration to other manufactured homes as
comparables in appraising manufactured

homes. This will provide a comparable value indication from which to
make justifiable conclusions. Therefore, make all efforts to obtain such
comparables even though their distance from the subject may be greater
than normally desirable.

If there are no manufactured housing sales within a reasonable distance
from the subject property, use conventionally built homes. Make the
appropriate and justifiable adjustments for size, site, construction
materials, quality, etc. As a point of reference, sales data for
manufactured homes can usually be found in local transaction records.

A. MANUFACTURED HOME LOT SITES

A manufactured home lot may consist of:

o an interest in a manufactured home condominium project (including an
undivided interest in the common areas)

OR

o a share in a cooperative association that owns and operates a
manufactured home park

The lot may be located within Native American Trust Lands if the
borrower owns or leases the lot.

B. HOW TO PERFORM A MANUFACTURED HOME LOT APPRAISAL

In addition to the single-family residential appraisal techniques (see
Chapter 4 of this Handbook), the appraiser must take the following steps
when performing manufactured home lot appraisals:

o The appraiser must obtain Form HUD-92802, Application and Request for
Manufactured Home Lot and/or Site Preparation and the FHA case number
from the mortgagee.

o The appraiser must receive a copy of the design engineer\'s inspection
of the foundation from the mortgagee.

o The appraiser must estimate the value of the lot by comparison with
other lots offering similar amenities.

o When the appraisal is complete, the appraiser must send the original
and one copy of the appraisal report, a photograph of the lot and one
photograph of each comparable to the lender for review. 4150.2

o The appraiser must receive a copy of the design engineer\'s inspection
of the foundation from the mortgagee.

o The appraiser must estimate the value of the lot by comparison with
other lots offering similar amenities.

o When the appraisal is complete, the appraiser must send the original
and one copy of the appraisal report, a photograph of the lot and one
photograph of each comparable to the lender for review.

[]{#__RefHeading___Toc167790747 .anchor}**9 PLANNED UNIT DEVELOPMENTS
AND CONDOMINIUM**S

[]{#__RefHeading___Toc167790748 .anchor}**9-0 PLANNED UNIT DEVELOPMENT
(PUD)** [\<TOP\>](#TableofContents)

A PUD is defined as a mixed-use residential development of single-family
dwellings in conjunction with rental, condominium, cooperative or town
house properties. A residential development should be processed as a PUD
if it has these minimum characteristics:

o a homeowner association that holds either title in fee or a lease of
prescribed length on the common area

o mandatory membership of all unit owners (or units) in the association

o the right of all unit owners to participate by vote in the peration of
the association

o lien supported assessment of the members to meet the association\'s
budgeted operating costs (special assessments may be handled
differently)

To be eligible for insurance endorsement, PUDs must be approved by HUD.
The lender is responsible for obtaining a case number from HUD to ensure
that the PUD is already approved. The appraiser should note whether
there is a case number.

A. APPROACH TO VALUE

The approach to value for a PUD is the same as the approach to value for
other types of developments (see Chapter 4 of this Handbook).
Frequently, however, no valid comparisons are available that estimate
market value. In these instances, appraisers should use the replacement
cost estimate in valuation. Estimate the replacement cost of
improvements, miscellaneous allowable costs and marketing expenses the
same as any Section 203(b) case. If properties in similar developments
in the area have been sold, then direct comparisons are possible and the
Comparative Approach would be valid and should be used.

B. ESTIMATE OF MARKET PRICE

Estimating the market price of an equivalent site requires consideration
of these factors not usually encountered in ordinary appraisals:

o Consider the size of individual sites when approaching the use of
common areas and recreational facilities.

o If there are similar developments in the neighborhood, consider a
comparison of common areas, including recreational amenities.

o If there are no similar developments, place more emphasis on the cost
to produce a similar site with similar facilities and benefits.

o Distribute the pro rata supportable cost to maintain the common
improvements, facilities and land owned by the homeowner\'s association
to each site in the development (subdivision) and add it to the
estimated value.

o To reflect additional amenities to the common areas, include an
estimate on the Marshall and Swift Form 1007. On line 32, cross out
\"landscaping cost\" and enter additional amenities\".

o Consider maintenance charges regarding cluster arrangements. For
example, note whether the advantages of cluster arrangements are negated
by high maintenance charges.

o Before performing the assignment, check with the lender to ascertain
that the project is on an approved list maintained by the Home Ownership
Center (HOC). Check the URAR item indicating that the property is within
a PUD project.

[]{#__RefHeading___Toc167790749 .anchor}**9-1 CONDOMINIUMS**
[\<TOP\>](#TableofContents)

A condominium is a form of fee ownership or long-term leasehold of
separate units or portions of multiunit buildings that provides for
formal filing and recording of a divided interest in real property. In
contrast to a PUD, a joint share in ownership of the common area is part
of the mortgaged property, and therefore, constitutes a measure of the
security backing the mortgage loan. FHA\'s interest is therefore more
immediate and direct with respect to the common areas of condominiums
than those of PUDS.

Before performing the assignment, the appraiser must check with the
lender to ascertain that the project is on an approved list maintained
by the HOC or by a DE underwriter who has performed a spot condominium
approval. The appraiser must check the URAR item indicating that the
property is within a condominium project, and therefore, eligible for
FHA endorsement.

A. DEFINITIONS

Mortgage: a lien covering a fee interest or eligible leasehold interest
in a one-family unit in a project, together with an undivided interest
in the common areas and facilities serving the project.

Family Unit: a one-family unit including the undivided interest in the
common areas and facilities and such restricted common areas and
facilities as may be designated.

Common Areas and Facilities: areas that are for the use and enjoyment of
the owners of family units located in the project, including the land,
roof, main walls, elevators, staircases, lobbies, halls, parking spaces
and community and commercial facilities.

Restricted or Limited Common Areas and Facilities: areas and facilities
restricted for use by a particular family unit or number of family
units.

Project: a structure or structures containing four or more units.

Conversion: the creation of the condominium as of the date when all of
the documents necessary to create a condominium regime have been
recorded under state and/or local law.

Bona fide Tenants\' Organization: an association formed by the tenants
to promote their interest in a particular project whose membership is
open to each tenant and whose requirements apply equally to each tenant.

Condominium Fee (Assessment): the apportionment of common expenses that
are to be charged to a unit owner in a manner to be determined in the
declaration or by-laws. The charge may include costs for utilities on
individual units and on common use buildings, security requirements,
salaries for employees of the association and repairs to common
facilities.

(9-1)

B. APPROACH TO VALUE

The approach to value for a single unit in a condominium project is
similar to that for other home mortgage programs. As in other home
mortgage appraisals, value indications from the Sales Comparison and
Income Capitalization Approaches are developed and considered (see
Chapter 4 of this Handbook). The cost approach can not be performed for
a condominium unit.

1\. Sales Comparison Approach

The appraiser should obtain sales data from any other units in the
project and from other competitive condominium projects, including
adjustments because of site factors, such as:

o differences in views from the unit

o proximity to recreation areas (swimming pools, clubhouses, tennis
courts, etc.)

o proximity to odors and the nuisance of incinerators proximity to
garbage chutes or

refuse areas proximity to noisy pumps or boiler rooms

Adjustments must also be made for the following:

o differences in physical improvements within the dwelling that have
been made by the owner-

occupant

o differences in preferences of purchasers between upper and lower
floors and all other site factors

# APPENDIX A: VALUATION OF REAL ESTATE OWNED PROPERTIES

A-1 REAL ESTATE OWNED (REO) [\<TOP\>](#TableofContents)

FHA's Real Estate Owned (REO) properties are a result of paying a claim
to a lending institution and the lender transferring ownership of the
property to HUD. Typically, title to REO properties is held by the
lender prior to transfer to HUD due to the borrower's default on the
mortgage.

The appraisal process is HUD's primary tool for determining the listing
price of FHA REO properties. FHA appraisers provide preliminary
verification that FHA's Minimum Property Requirements (MPR) for existing
housing and Minimum Property Standards (MPS) for new construction have
been met for properties evaluated as ôinsurableö or ôinsurable with
repair escrowö prior to being listed for sale.

A. Appraiser Requirements for REO properties

Requirements for appraisers who perform REO appraisals are the same as
for appraisers of any other property type. An appraiser of REO property
must be state licensed or certified in the state in which the property
is located and listed on the FHA Appraiser Roster.

B. Appraisal Requirements for REO properties

Per Mortgagee Letter 2005-34 and Revised Appendix D to Handbook, the
appraiser must report the appraisal on the applicable property specific
revised Fannie Mae appraisal reporting form.

Under ôAssignment Typeö in the Subject Section of the applicable
property specific appraisal reporting form, the appraiser is to mark the
box labeled ôotherö and indicate that the property being appraised is a
HUD Real Estate Owned (REO) property. If the appraiser is performing a
land only appraisal which is not reported on a Fannie Mae appraisal
reporting form, the appraisal must note, in bold font, that the property
being appraised is a REO property in the section of the report providing
information on the subject property.

The guidance provided in Appendix D, Appraisal Protocol, to Handbook
4150.2, applies equally to REO properties, unless otherwise indicated in
the guidance presented in this appendix.

REO properties are to be appraised \"as-is\". The Dictionary of Real
Estate Appraisal, Fourth Edition, Appraisal Institute defines an
\"as-is\" value as follows:

\"The value of specific ownership rights to an identified parcel of real
estate as of the effective date of the appraisal; relates to what
physically exists and is legally permissible and excludes all
assumptions concerning hypothetical market conditions or possible
rezoning.\"

The \"as-is\" value is the market value for the property as it exists on
the effective date of the appraisal.

The appraisal report shall consist of the applicable property specific
appraisal reporting form, all required exhibits and a copy of the
Property Condition Report (PCR). M&M contractors are required to
complete a PCR prior to ordering an appraisal of a REO property. The PCR
contains information specific to the condition and functionality of the
property. Prior to performing a site visit of a REO property, the
appraiser must be provided a copy of the PCR by the M&M contractor.

The appraiser must coordinate a specific time for a full site inspection
of the property with the property manager. Generally, a REO property is
secured with the utilities de-activated. The appraiser should request
that the M&M contractor make sure the utilities, including the
mechanical systems, are activated at the time the appraiser makes the
property inspection. If an appraisal is completed without the utilities
turned on and/or the mechanical systems functioning, the appraiser must
note this in the appraisal report and must rely upon the information
provided by the M&M contractor in its Property Condition Report (PCR);
reference the PCR in the applicable sections of the appraisal report
(condition of property or physical deficiencies) as well as append a
copy of the PCR to the appraisal report.

There will be occasions when the appraisal of a REO property may involve
extraordinary conditions which dictate additional research,
documentation and due diligence on the part of the appraiser. For
example, a single family property that features a second unit which is
an illegal use due to non-compliance with the local zoning
code/regulations, the appraiser must provide an estimate of the costs
necessary to bring the property into compliance. The appraiser should
provide documentation for such conclusions, such as a copy of the
pertinent portion of the zoning code and a summary of any discussions
with local authorities. When appraising a REO property that is impacted
by complex or extraordinary circumstances, the appraiser must contact
the M&M Contractor for guidance and clarification before completing the
appraisal. The M&M Contractor may, in turn and in cases of problematic
appraisals, seek additional guidance from the Homeownership Center that
has jurisdiction over the locality where the property is located. Any
discrepancies between the information contained in the PCR and what the
appraiser observed during the inspection of the property must be noted
and highlighted in the appraisal report.

A land appraisal may be warranted when the improvements are in such
deteriorated condition as to provide no contributory value to the
property or when condemnation proceedings by the local authority have
acquired the improvements in part or in their entirety. In such cases,
when the supporting land represents the value of the property, the
appraiser must report the appraisal on a form or in a narrative format
that must address, at minimum, the following:

\* Detailed information similar in scope to the Subject section of
Fannie Mae Form 1004 March 2005 (Uniform Residential Appraisal Report)
including, but not limited to, property address, legal description,
owner of record, occupancy, assessment/tax information, and property
rights appraised.

\* Detailed information similar in scope to the Site section of Fannie
Mae Form 1004 March 2005 (Uniform Residential Appraisal Report)
including, but not limited to, size, zoning, highest and best use,
shape, topography, drainage, utility availability, and location in a
FEMA designated Special Flood Hazard Area.

\*

A sales grid similar in scope to that presented in the Sales Comparison
Approach section of Fannie Mae Form 1004 March 2005 (Uniform Residential
Appraisal Report) including, but not limited to, detailed information on
three comparable sales, attributes, number of comparable unimproved sale
properties and offered/listed for sale properties.

Form FW 68, Land Appraisal Report, is an acceptable reporting format.

The appraiser must adjust the sales of comparable, unimproved building
lots/sites for differences in location, size, zoning, utility connection
and/or availability, site improvement and any other pertinent factors.
Any costs incurred in razing the existing improvements and/or clean up
should be extracted from the value of the supporting land to arrive at a
final conclusion of value.

C. Scope

The appraiser must develop and report the appraisal in accordance with
the scope of work requirements established by USPAP and HUD/FHA.

D. Contractual Responsibility of Appraisers

The appraiser is hired by the M&M contractor and, therefore, has a
contractual responsibility to the M&M contractor. Additionally, as with
any appraisal performed for a HUD/FHA program, the appraiser has an
obligation to perform appraisal services commensurate the standards and
requirements of HUD/FHA.

E. Intended Use of Appraisal

The intended use for an REO appraisal is to estimate the ôas isö market
value

of the property in order to provide a basis for determining the listing
price of

the property for marketing purposes.

F. Intended User

The intended user of a REO appraisal is the M&M contractor, the lender
(under certain circumstances) and HUD/FHA.

G. Statement of Insurability

The following definitions shall apply to the insurability of a REO
property:

Insurable: Properties marketed as \"insurable\" are those that meet
FHA\'s Minimum Property Requirements (MPR) for existing housing and
Minimum Property Standards (MPS) for new construction at the time of the
appraisal in their as-is condition without repairs being necessary.

Insurable With Repair Escrow: A property that requires no more than
\$5,000 for repairs to meet FHA\'s MPR or MPS as estimated by the PCR
and as reviewed and determined to be reasonable by the appraiser, is
eligible to be marketed for sale in its as-is condition with FHA
mortgage insurance available, provided the purchaser(s) establishes a
cash escrow to ensure the completion of the required repairs.
Purchaser(s) are permitted to include in

the mortgage an amount equal to 110% of the estimated cost of the
repairs.

Uninsurable: Properties offered for sale \"Uninsured\" do not meet, in
their as-is condition, FHA\'s MPR or MPS and the cost of repairs
identified by the appraiser, to meet MPR or MPS, are estimated to exceed
\$5,000. Uninsurable properties can qualify for FHA's Section 203(k)
rehabilitation program and, depending upon the scope and extent of
repairs needed, the Streamlined (k) Limited Repair Program.

A Statement of Insurability, in bold font, must be included in the
Comment section of the appraisal report. This Statement of Insurability
shall indicate if the property can be sold with FHA mortgage insurance
(meets MPR if existing construction or meets MPS if new construction)
either (1) in its ôas-isö state without repairs or (2) in its ôas-isö
state with repairs costing \$5,000 or less with repair escrow or (3)
uninsurable. In appraising REO properties, as with the performance of
any FHA appraisal, a FHA Roster appraiser must denote any deficiency to
the supporting site or improvements in the appraisal report. The
appraiser is to note those repairs necessary, together with a cost to
cure, to bring the property into compliance with either MPR or MPS.

The marketing categorization, ôInsurable with conditionsö, introduced in
Mortgagee Letter 2000-27 and defined under ôHUD REO Marketing
Approachesö is no longer available. All other instructions and
requirements outlined in Mortgagee Letter 2000-27 remain unchanged
except where updated by the guidance and requirements provided in
Mortgagee Letters 2005-34 and 2005-48.

H. Effective Date of Value

The effective date of value is the date when the appraiser performs the
site visit for the subject property. If another date is used as the
effective date, the appraiser must specifically indicate:

\* the alternative date (with detailed explanation of why)

\* the date when the subject property was physically inspected

I. Additional Appraisal Requirements

The appraiser must value the subject property from the information
gathered and arrive at an estimated market value of the subject property
based on the requirements detailed in the Appraisal Protocol, issued as
an attachment to Mortgagee Letter 2005-48.

A building sketch is required, but a floor plan or room layout of the
property is not required unless there is evidence of functional
obsolescence. Representative interior photos are required in cases where
there is significant interior repair (in excess of \$5,000 repair costs)
required.

A-2 Sales Comparison Approach [\<TOP\>](#TableofContents)

Typically, the Sales Comparison Approach is the most applicable approach
to estimate the market value of a REO property. Appraisers may utilize
sales comparables from other REO transactions only when such sales are
deemed to be the best available for the market area and they meet all of
the following criteria:

\* located in the subject neighborhood or reasonable proximity

\* comparable property subject to reasonable adjustment

\* sold with a willing buyer and seller

\* exposed to the market for a reasonable period

Appraisers are reminded that an explanation, as well as support, must be
provided for any adjustments to the sales price of comparable sales that
exceed the guidelines set forth in Revised Appendix D: Appraisal
Protocol, pages D-31, D-68, D-98 and D-127, attachment to Mortgagee
Letter 2005-48.

Inclusion of vacancy rates, rates of foreclosure and a discussion of
foreclosure sales in the subject's market area may be used as additional

support for reliance on sales of other REO transactions.

Do not use distressed sales such as Sheriff Sales. These sales do not
involve a willing seller nor are they exposed to the market under normal
conditions. The resulting value indication derived from the use of such
sales is not consistent with the definition of market value.

A-3 Reporting Requirements [\<TOP\>](#TableofContents)

As with any appraisal performed by a FHA Roster Appraiser, an REO
appraisal must be performed in accordance with the Uniform Standards of
Professional Appraisal Practice (USPAP).

Other reporting requirements are as follows:

\* With each appraisal, the appraiser must provide a list of any buyer
incentives that would enhance the marketability of the property to
provide an incentive to buy the property unrepaired as opposed to
repaired.

\* For all property constructed before 1978, the appraiser must
condition the appraisal on the completion of a lead-based paint test.

\* For appraisals of vacant lots (land), complete a land appraisal
report form.

# APPENDIX B: SPECIAL PROGRAMS

B-1 203(K) REHABILITATION HOME MORTGAGE INSURANCE
[\<TOP\>](#TableofContents)

The Section 203(k) program is HUD\'s primary program for rehabilitating
and repairing single-family properties. A Section 203(k) mortgage
provides financing for the acquisition and rehabilitation construction
of a property. The mortgage is funded by a HUD-approved lender and
insured by HUD/FHA. A Section 203(k) mortgage may be used to perform the
following:

oPurchase a property and repair/renovate it.

oPurchase a dwelling on another site, move it onto a new foundation and
repair/ renovate it.

oRefinance existing indebtedness and repair/ renovate a property.

oRepair/renovate a presently owned property.

The following table summarizes which properties are eligible under
Section 203(k).

Type of Property Eligibility

CondominiumsYes 2

Mobile homes Yes

Cooperatives No

Non-residential being converted to

single family (1-4 unit) Yes

Single family (over 1 year old) Yes

A 203(k) mortgage may be originated on a \"mixed use\" residential
property provided that:

o The percentage floor area used for commercial purposes follows these
standards:

\- One story building 25%

\- Two story building 49%

\- Three story building 33%

o The commercial use will not affect the health and safety of the
occupants of the residential property

o The rehabilitation funds will only be used for the residential
functions of the dwelling and areas used to access the residential part
of the property.

2 Condominiums are eligible only if they meet the following
requirements:

\- FHA/VA approved

\- Maximum loan does not exceed 100%

\- Improvements are only within the unit walls

\- Condominium is complete with no ongoing or anticipated addition of
any units or common areas

\- Unit owners have had control of the common area for at least one year

\- The condominium association has proof of hazard, liability and flood
insurance coverage

\- Unit is owned fee simple

\- There are no restrictive covenants or provisions restricting
conveyance of the unit

\- A minimum of 90% of the units in the project have been sold

\- 51 % or greater of the units in the project are owner occupied

\- No single entity owns more than 10% of the units in a project with
more than 30 units.

\- No single entity owns more than 20% of the units in a project with
less than 30 units.

B-1 6/99

A. ELIGIBLE IMPROVEMENTS

(B-1)A minimum of \$5,000 must be used in part for renovation and/or
repair of an existing property. Minor or cosmetic repairs or new
fixtures alone, such as stoves and refrigerators, are not acceptable.
The repair or renovation may include:

o making structural alterations such as repair or replacement of
structural damage, additions to structure and finished attics and/or
basements

o eliminating health and safety hazards that would violate HUD\'s
Minimum Property Standards

o installing wells and/or septic systems and reconditioning plumbing

o making changes for improved functions and modernization

o making changes for aesthetic appeal and eliminating obsolescence

o repairing or adding roofing, gutters and downspouts

o making energy conservation improvements

o landscaping, grading, repairing patios and terraces that improve the
property equal to the dollar amount spent on the improvements

o creating accessibility for the handicapped

B. INELIGIBLE IMPROVEMENTS

Any luxury item and/or improvement that does not become a permanent part
of the subject property is not eligible, including:

o additions or alterations to support commercial use or to equip or
refurbish space for commercial use

o recreational or luxury improvements, such as swimming pools, hot tubs,
whirlpool baths and saunas

o barbecue pits, bath houses, tennis courts, satellite dishes or tree
surgery

C. BORROWER, PLAN REVIEWER AND APPRAISER

The borrower must have the following items prepared before an
application, review or appraisal can occur:

o an existing plan of the structure

o a proposed plan detailing where structural or planning changes are
contemplated

o inspection reports from a qualified engineer or inspection service
denoting the presence of rodents, dry rot or termites and evaluating the
adequacy of the existing structural, heating, plumbing, electrical and
roofing systems

o specifications of repairs

o for site improvements, a plot plan denoting the location of the
structure, walkways, drives and other relevant details

o description of materials (HUD Form 92005 or similar form)

6/99 B-2

4150.2

203k Consultant: The borrower selects a HUD approved 203(k) Consultant
to do the following:

o visit the site

o prepare work write-up that specifies a description and cost of each
work item

o review the architectural exhibits for compliance with HUD\'s Minimum
Property Standards

o inspect any of the property\'s health and safety items noted on the
drawings

In comparing the cost estimates with others projects, the consultant can
use R.S. Means & Company Repair and Remodeling Cost Data Book or The
Home-Tech Remodeling and Renovation Cost Estimator. When the consultant
has reviewed the property and respective plans, an appraisal can be
requested. The lender will hire the same or another 203(k) Consultant to
inspect the rehabilitation during construction and sign off on all draw
requests.

Appraiser. The appraiser is required to perform an \"as-repaired\"
appraisal and to report it on the URAR. When performing an
\"as-repaired\" appraisal, appraise the subject property at its expected
market value when the proposed rehabilitation and/or improvements are
complete.

Also, a lender may request an \"as-is\" appraisal to be recorded on a
separate URAR. Under an \"as-is\" appraisal, the subject property is
appraised in its present condition to establish the value before
rehabilitation. Repair requirements or VC conditions are not included in
the \"as is\" valuation.

The appraiser must visit the property, review the architectural exhibits
showing the proposed work and review the proposal for standard valuation
conditions that may have been overlooked. If conditions exist that
impact the safety and health of the occupants, discuss these items with
the plan reviewer to correct them in the architectural exhibits.

B-2 SECTION 255: HOME EQUITY CONVERSION MORTGAGES (REVERSE MORTGAGES)
[\<TOP\>](#TableofContents)

A Reverse Mortgage allows a borrower aged 62 and older to borrow against
the equity in a property that has limited outstanding debt. A subject
property under this program must be a one- to four-unit dwelling in
which the mortgagor occupies one of the units. The appraiser must
perform the appraisal with the same standards and forms expected in an
FHA single-family appraisal. It may be a unit in an approved condominium
or Planned Unit Development (PUD). Manufactured homes are eligible if
the home complies with outstanding FHA guidance. The same deficiencies
and repair items must be noted on the URAR forms. In certain instances,
the borrower is not required to treat any defective paint surfaces after
closing for properties built before 1978.

B-3

4150.2

B-3 SECTION 223(E) [\<TOP\>](#TableofContents)

Section 223(e) is a mortgage insurance program for properties located in
older, declining urban areas. The program allows for the acquisition,
repair and/or renovation or construction of a residential property.
Under this program, FHA waives the requirement that the subject property
have a remaining economic life of at least five years if the property is
in a reasonably viable location where there is a need for affordable
housing.

Appraisal: The property must comply with HUD\'s Minimum Property
Requirements of , and the appraisal must denote any deficiencies on the
VC form. When conducting an appraisal on a subject property eligible for
this program, the appraiser must determine the remaining economic life
by examining the pattern of recent changes in the adjacent sites\' land
use strategies that would be incompatible with single-family use. If the
remaining economic life is less than five years, prepare a plan of the
subject property denoting the land use patterns surrounding it.

The physical life of the property must be sufficient to permit a
long-term mortgage. Under this program, the physical life of a property
can be substituted for the economic life because of the special risk
provisions that compensates for the economic factors that adversely
affect the property.

B-4 TITLE I PROPERTY IMPROVEMENT AND MANUFACTURED HOME LOAN PROGRAM
[\<TOP\>](#TableofContents)

Title I is two-loan programs, one for property improvements and one for
the purchase of manufactured homes and/or lots on which the manufactured
homes are to be placed. No appraisal is needed for a property
improvement loan; however, an appraisal of any real property involved in
a manufactured home is required or for any existing home. This would be:

o a manufactured home lot loan

o the lot portion of a combination loan for the purchase of a lot and
manufactured home

o a used manufactured home

If a loan defaults, the lender repossessing the manufactured home under
the Uniform Commercial Code or through judicial processes must request
an N.A.D.A. appraisal. Appraisals of repossessed manufactured homes
should be made before removal by the lender.

B-5 SOLAR ENERGY [\<TOP\>](#TableofContents)

To encourage the use of solar energy in homes, HUD will insure a
mortgage up to 20 percent above the maximum allowable insurable amount
in a geographical area if such increase is necessary to account for the
increased cost of the residence due to the installation of a solar
energy system which may not exceed 20 percent of the value of the
property.

An eligible solar energy system is defined as any addition, alteration,
or improvement to an existing or new structure which is designed to
utilize wind or solar energy to reduce energy requirements obtained from
other sources. Active, passive and photovoltaic solar energy systems are
permitted in this program, provided they are accompanied by operational
100 percent back-up conventional systems.

B-4

The solar energy system\'s contribution to value will be limited by its
replacement cost or by its effect on the market price of the dwelling.
In the event that market data is not available to indicate the
additional amount which would be paid for a property containing a solar
energy system, the amount of increase would be the lesser of the actual
cost of the solar system installed in the subject house or 20 percent of
the market value of the property. The difference in added value
contributed by the solar system in comparison to the conventional system
must represent a reasonable proportion of the total value of the
property and may never exceed 20 percent of the market value of the
property without a solar energy system.

A. Appraisal Procedure

The appraiser shall reflect in value the local market acceptance of
solar heating equipment. Solar collectors must be located where they
will be free from natural or man made obstructions to the sun.

1\. Solar Hot Water Systems

Acceptability. When such systems are proposed to be installed, they must
comply with the provisions of Use of Materials Bulletin Number 100,
Subject: HUD Building Product Standards and Certification Program for
Solar Water Heating Systems, issued August 15,1993. \[Use of Materials
Bulletin are available for public inspection during regular business
hours in the Office of Consumer and Regulatory Affairs, Department of
Housing and Urban Development, Room 9156,451 7\'h Street S.W.,
Washington, DC 20410. They will soon be available on the HUD Web Page.\]
When such a system is already installed in an existing home, the
appraiser may request an inspection by a qualified solar system
inspector/contractor for recommendations as to acceptability in
operations, maintenance and life expectancy.

2\. Photovoltaic Systems \[In Preparation\]

3\. Limits to Value

The solar heating or hot water system\'s contribution to value will be
limited by its replacement cost and by its effect on the market price of
the dwelling. In estimating market value by comparing a subject property
that has a solar heating system to a recently sold comparable property
with a fossil fuel system only, increased the sale price of the
comparable by the amount typically paid in the market for the solar
heating system.

4\. Temporary Procedure

Lack of Market Data. In the event that market data is not available to
indicate the additional amount which would be paid for a property which
does include solar heating or hot water system, then the amount of the
increase shall be the difference in cost between all heating equipment,
including solar installed in the subject house, less the cost of all
heating equipment installed in the comparable property without a solar
installation.

B-5

However, in making this adjustment based on differences in cost, the
appraiser shall consider the ratio between the value added by a solar
heating system and the value of the property with a conventional heating
system only, to ensure that the contribution of a solar heating system
to the total value represents a reasonable proportion of the total value
of the property.

5\. Responsibility for Temporary Limit

The HOC will consider the costs of acceptable solar energy systems for
homes of several sizes, and will consider the market prices of typical
homes of these several sizes (without solar energy systems) in order to
set a limit on the amount which a solar energy system can add to the
estimated value of the subject property. This limit shall be expressed
as a percentage of the market value of the subject property (before
consideration of the solar energy system) and this limit shall not
exceed 20 percent of the market value of the subject property (without a
solar energy system).

# APPENDIX C: APPRAISAL OF SINGLE FAMILY HOMES ON NATIVE AMERICAN LANDS

C-1 OVERVIEW [\<TOP\>](#TableofContents)

For purposes of this appraisal guidebook, if a lender specifically needs
an appraisal under

HUD/FHA\'s Section 248 program on Tribal Trust land or for HUD\'s Office
of Native American Program (HUD/ONAP) Section 184 on Tribal Trust,
allotted (which is also known as individual trust) and fee simple lands,
these guidelines will apply. If the property is on

allotted (or individual) trust or fee simple land located on Native
American Reservations

and it will be mortgaged under HUD/FHA\'s Section 203(b), the appraiser
must use the

basic appraisal methodology addressed in this handbook.

Within designated Native American Reservations, treaties and tribal laws
have created a variety of ownership patterns. Some parcels may be
unrestricted fee simple, other parcels restricted tribal trust or
allotted trust land. The appraiser must be familiar with the different
restrictions and develop a reasonable value for the subject property.
Following are the general designations.

C-2PROPERTY RIGHTS APPRAISED [\<TOP\>](#TableofContents)

A. FEE SIMPLE UNRESTRICTED

Fee simple unrestricted ownership is ownership real property which may
be bought, sold and transferred between Native American or non-Native
American purchasers without review by the Tribe or Bureau of Indian
Affairs, (BIA). For the HUD/FHA Section 203(b) program, appraisals must
conform to all other standard HUD appraisal policies. For the HUD/ONAP
Section 184 program, fee simple land on a reservation, the procedures
utilized for tribal trust and allotted trust may be followed.

B. TRIBAL TRUST LANDS

1\. Restricted Trust Land is land held by an individual Indian or Tribe
which is subject to Federal restriction against alienation or
encumbrance. Before any lien can be placed against restricted land, the
transaction must be approved by the Bureau of Indian Affairs (BIA). All
HUD loans must comply with this requirement and provide evidence in the
HUD loan file. Lenders are encouraged to make contact with the
appropriate BIA and Tribal realty officers early in the loan processing.

Tribal trust lands are held in trust for the tribe by the United States
government. Tribes may lease portions of the tribal trust land for the
use of specific individuals, but ownership, through the Federal trust,
remains with the tribe.

HUD/FHA\'s Section 248 insures mortgages and HUD/ONAP\'s Section 184
guarantees mortgages on homes that are located on Native American Tribal
Trust Land. For these properties, leased ownership of the underlying
land remains with the tribe and will be subject to a long-term 50-year
ground lease (or a 25 year lease with a 25 year renewable term).
Determining the value for the leasehold estate is the purpose of the
appraisal and the subsequent use is to provide supporting documentation
for a HUD insured or guaranteed mortgage. Mortgages on tribal trust
sites must include an acceptable lease signed by the mortgagor and
Tribal authority and approved by the BIA.

2\. Allotted (or individual) Trust Land is land owned by individual
tribal members but held in trust by the United States government. It is
common for allotted trust lands to be owned by several individuals. If a
prospective borrower proposes to use all or a portion of a fractionated
property, all other owners must indicate acceptance of this arrangement
by becoming parties to the mortgage or subdividing the subject parcel
out to the individual for

undivided ownership.

Mortgages on allotted (or individual) trust sites do not involve a
lease, but a specific mortgage rider is required. All HUD loans must
have a Deed of Trust Rider attached approving the mortgage pursuant to
25 USC 483 (a) and approved by the BIA.

HUD/ONAP\'s Section 184 guarantees mortgages on allotted trust land.
Allotted trust land is held in trust by the federal government for
individual Native Americans. The land is owned by the individual and
value is given for the land. When appraising allotted trust land for
Section 184, appraisers may follow the method given for Tribal Trust
Land.

HUD/FHA insures mortgages on homes that are located on allotted trust
land under Section 203(b). The appraiser can use this data for
background information, but must use the typical appraisal practices for
FHA Section 203 addressed in Chapters 3 and 4 of this handbook.

The appraiser must perform the complete appraisal process according to
current USPAP and HUD/FHA standards. This includes consideration of all
applicable approaches to value and complete development of all
applicable approaches, as identified herein.

C-3 APPROACHES TO VALUE [\<TOP\>](#TableofContents)

The appraiser must be familiar with the different restrictions and
develop the appropriate value for the subject property. The supply of
comparable sales and rental transactions vary by site and by tribes.
Until sufficient sales exist on a reservation or within the specific
Native American area to provide a reasonable sales comparison approach
for determining the value of tribal trust leaseholds or allotted land
sales, the appraiser must rely on other value indicators. The appraisal
process must be documented more thoroughly than a typical market
appraisal. USPAP Standards #1 and \# 2 are effective to allow the
appraiser to \"correctly employ those recognized methods and techniques
that are necessary to produce a credible appraisal.\" And \"in reporting
the results of a real property appraisal an appraiser must communicate
each analysis, opinion and conclusion in a manner that is not
misleading.\" An appraisal on trust land may rely more on the cost
approach, or data developed from other tribes. HUD will accept the
report if the appraiser has documented the search, information developed
and conclusions clearly for the intended users to understand.

A. Cost Approach

The cost approach is often the primary indication of value based on the
unique nature of the reservation setting. In Conjunction with the
completion of this approach on tribal trust sites, the value of the site
as vacant does not apply. On the cost approach addenda to the URAR the
value of the site is zero or a small leasehold value. if the land lease
is at market and there was no upfront payment the lease-fee value is
equivalent to the leasehold value, which is zero. This is the typical
scenario and no value exists for the underlying land. The appraiser
should enter the statement \"subject is on Tribal Trust Land with annual
rent not capitalized\" in comments. If a market exists and the land was
purchased, the value is estimated via traditional methods.

1\. New Construction

Due to the flexibility allowed by law, HUD permits the inclusion of
development costs for new construction, which can exceed market value,
to be used in both section 248 and Section 184. Following are
instructions specific to new construction on tribal lands. The basic
appraisal methodology is addressed in Chapter 4 of this handbook.

In addition to including the cost of water, septic, and any other
on-site costs in the cost approach, for lands within the reservation,
the appraiser may provide an allowance for off-site development costs.
The lesser of actual pro-rated costs or up to 15% of the cost of the
construction of the subject house may be added for off-site
infrastructure associated with development of the subject lot. This
policy applies principally to new construction where such charges are
assessed by tribally approved entities such as housing entities or
housing authorities, or agreements with other federal or local
government bodies for providing power, utilities, sewer/water and/or
road construction. The costs to bring utilities; including public water,
sewer, electricity, and telephone represent significant development
costs. The traditional tract development of residential homes may not be
a part of the local culture. Therefore, the utility costs to hook-up to
any form of a public system in a more rural area can exceed local
standards.

In remote areas, the construction costs in the Marshall & Swift guide or
related cost manuals may have to be adjusted for transportation, labor
or other costs not included in the basic estimate. Architect fees are
not typically reflected in the base building costs. Due to special
circumstances the normal allocation for this fee may not automatically
reflect the above actual cost. The appraiser must provide a supporting
explanation in the adjustments to the construction costs.

2\. Existing Construction

Where market sales are limited, HUD requires the cost approach to be
completed on all tribal trust appraisals, including a credible estimate
of depreciation.

B. Sales Comparison Approach

Native American communities are developing economies at varying rates
and degrees. It is important for the lender and HUD to understand the
economic factors which affect value. Therefore the appraiser must
communicate the local tribal housing market. The sales comparison
approach will generally be completed, and in remote areas may involve
sales up to 18 months old. Where no credible comparables are available,
a narrative justification that

discusses the market, and provides any sales, rental or vacancy
information pertinent to the subject will be acceptable to support value
developed from the cost approach. In addition to the typical data
sources the appraiser may obtain sales information from the local tribal
or Bureau of Indian Affairs (BIA) realty office. Sales from other
reservations within the region may be considered. Each situation will
have unique factors and the appraiser should explain deviations from the
sales comparison approach instructions outlined in Chapter 4 of this
Handbook. The order of selection preferences for sales would depend on
the type of land being appraised.

\* Tribal Trust Leasehold sales (market sales between tribal members)

\* Sales of allotted land trust between tribal members

\* Fee Simple within the Reservation (residual value of the improvements
by adjusting out the land contribution)

\* Fee Simple proximate to the Reservation

For comparable sales that include land value, an adjustment is required
to back-out the raw land value. This adjustment is required when
comparing a fee simple comparable sale to a Native American trust sale
transaction.

Enter adjustments on the form under \"Other\" and label as \"Raw Land
Value, \"which is determined separately for each of the comparable
sales.

C. Income Approach

The income approach is generally not developed with regard to Native
American Trust Land. If the property includes a rental unit(s), the
appraiser must provide an estimate of monthly rent for each unit and
note whether or not the rent is limited to the tribal sub-market. If the
appraiser determines that this approach is justified, the appraiser
should complete the income approach according to the specifications
outlined in Chapter 4 of this Handbook.

D. Reconciliation of Value

The appraiser must determine the market value for the restricted trust
properties from the limited data available. Value determination on trust
land is an exception to typical HUD/FHA instructions; value is not
limited to the lower of cost or market. Where market information is
limited, greater weight may be given to the replacement cost approach.
Document the decision process and the value.

C-4 HUD/FHA REQUIREMENTS [\<TOP\>](#TableofContents)

On loans involving restricted trust land, with either Section 184 or
Section 248, HUD waives the requirement of a strict interpretation of
market value and will accept loans based on the

above market cost approach. All other HUD health, safety, access, and
property condition issues must conform to FHA requirements.

The appraiser must indicate if the property is in need of, or in the
process of receiving any repairs. Make appropriate requirements for
repairs-to-be-completed and appraise the property \"as repaired.\"

The appraiser must indicate if the property conforms to the applicable
Minimum Property Requirements of this Handbook. If it does not, the
appraiser must recommend correction of the deficiency or rejection of
the loan and explain. Tribally owned and maintained streets and
utilities are considered publicly owned. Appraisers must require
easements and a maintenance agreement for non-public, common ownership
situations.

HUD accepts tribal enforcement of building codes and inspections to the
extent they are standard and enforced. At the point tribal support is
not available, review and certification that the work complies with an
appropriate national standard must be contracted out to a licensed or
certified specialist. Example, a tribe issues building permits, but has
no provisions for inspections. The lender/borrower must contract with a
lender approved qualified specialist such as an engineer, architect or
inspector. Inspection/approval by the Indian Health Service is
acceptable for individual or community water and sewer systems.

The remaining economic life must be estimated and reported but does not
limit the mortgage. The subject property must possess sufficient
remaining physical life to warrant a long-term mortgage. The mortgage
term may not exceed the remaining physical life of the property.

A. HUD/FHA Section 248 and HUD/ONAP Section 184 Requirements

For both Section 248 and Section 184 programs, the property must be free
of hazards, noxious odors, grossly offensive sights or excessive noises
which might endanger the physical improvements, affect the livability of
the property, its marketability, or the health and safety of its
occupants. If any of these conditions exist, the appraiser must
recommend correction of the problem or rejection of the loan and
explain.

For both programs, the appraiser will make appropriate requirements to
correct any observed or potential environmental problems. Many
reservations have not been mapped for the 100-year flood plain. If the
appraiser observes a possible flood plain problem, they are to require
flood insurance on existing properties. The Underwriter may waive the
flood insurance requirement if the borrower or the tribe provides an
elevation certificate from a licensed engineer that the property is not
at risk from flooding. Note that the lowest floor (including basement)
for new construction must be at or above the 100-year flood elevation.

B. REPORTING REQUIREMENTS

The appraiser must report if an approach was not developed and insert
the rationale for exclusion of the approach. The appraiser must attach
an addendum complete with the assumptions supporting the indication of
value by the cost approach. The cost approach is reconciled to the other
values, if any, on the URAR. The appraiser will indicate any work
requirements or VC pursuant to outstanding instructions. The DE
underwriter/lender must assure acceptable completion of any work
requirements pursuant to existing instructions.

C-5 INSTRUCTIONS FOR ASSISTED APPRAISAL PROCESSING IN APPRAISAL HIGH
COST AREAS [\<TOP\>](#TableofContents)

To accommodate the special conditions associated with remote sites on
Native American lands, the following assisted appraisal process is
allowed.

The assigned appraisers may network with local personnel where the high
cost of real estate appraisals is a concern for underwriting single
family mortgages in Native American communities. To minimize this
problem, FHA and ONAP will allow the use of trained local personnel to
perform the inspection, provide current analysis of the local market,
and draft the appraisal report. The report must be forwarded to the
assigned appraiser who win review the report, provide additional
documentation, sign the URAR and forward the report to the lender.

Using the Assisted Appraisal Process is restricted to remote areas where
licensed appraisers are not readily available. It may be used when the
cost of transportation and/or time increases the cost of the appraisal
to twice the cost of typical appraisals in the local urban areas. The
process must be monitored and acceptable to the DE underwriter/lender.
The assigned appraiser may use local subcontractors who:

\* Have general real estate skills (construction, lending, sales,
management) acceptable to the appraiser (such as Housing Authority
staff, Tribal Designated Housing Entities (TDHE) staff or BIA realty
personnel, local real estate professionals).

\* Must comply with the Conflict of Interest limitations (have no
personal or financial interest with the buyers or sellers of the
property).

\* An appraiser who signs a real property appraisal report prepared by
another, even under the label of \"review appraiser\" must accept full
responsibility for the contents of the report, USPAP Standard 2-5.

\* The assigned appraiser is responsible for the entire appraisal and
signs the URAR. The individual assisting in the report must document the
extent of help provided and certify no conflict of interest exists in
the certification.

\* The assigned appraiser must be familiar with the Competency Rule in
the USPAP. This includes key issues such as the unique property rights
conveyed, the local market involved and market conditions. It is assumed
the remote area markets will change slowly. If conditions have changed,
an updated analysis is required. The assigned appraiser assumes all
responsibility that the appraisal meets all HUD/FHA and ONAP program
requirements.

[Click Here for Appendix D effective January 1,
2006](../pdfforms/41502xd.doc)

[Click Here for Mortgagee Letter
05-48](../nph-brs.cgi%3Fd=MLET&s1=05-48%5Bno%5D&SECT1=TXT_HITS&SECT5=MLET&u=./hudclips.cgi&p=1&r=1&f=G)

# APPENDIX D: VALUATION PROTOCOL

The appraisal process is the lender\'s tool for determining if a
property meets the minimum requirements and eligibility standards for a
FHA-insured mortgage. Underwriters bear primary responsibility for
determining eligibility; however, the appraiser is the on-site
representative for the lender and provides preliminary verification that
the General Acceptability Criteria standards have been met.

FHA RESIDENTIAL APPRAISAL REQUIREMENTS

This section provides specific instructions for completing appraisal
report forms.

The appraisal reporting form to be used will depend on the property type
that is being appraised. The appraiser must select the appropriate
appraisal form for reporting an FHA appraisal from the following:

1\. Uniform Residential Appraisal Report (Fannie Mae Form 1004 March
2005) - Required to report an appraisal of a one-unit property or a
one-unit property with an accessory unit.

2\. Manufactured Home Appraisal Report (Fannie Mae Form 1004C March
2005) - Required to report an appraisal of a one-unit manufactured home.

3\. Individual Condominium Unit Appraisal Report (Fannie Mae Form 1073
March 2005) - Required to report an appraisal of a unit in a condominium
project or a condominium unit in a planned unit development (PUD).

4\. Small Residential Income Property Appraisal Report (Fannie Mae Form
1025) - Required to report an appraisal of a two- to four-unit property.

An appraisal performed for HUD/FHA purposes requires that all sections
of the appraisal form be addressed. The appraiser must complete the form
in a manner that clearly reflects the thoroughness of the investigation
and analysis of the appraisal findings. The conclusions about the
observed conditions of the property provide the rationale for the
opinion of market value. The completed appraisal form utilized, together
with the required

exhibits, constitutes the reporting instrument to HUD for FHA-insured
mortgages.

The FHA Appraisal is made

Under the following conditions

A. \"As Is\"

1\. There is/are no repair(s), alteration(s) or inspection conditions
noted by the appraiser, or

2\. Establishing the \"as is\" value for a regular 203(k), or

3\. The property is being recommended for rejection

B. \"Subject to Completion perPlans and Specifications\"

1\. Proposed Construction where construction has not started, or

2\. Under Construction but not yet complete (less than 90%), or

3\. Regular 203(k)

C. \"Subject to the following Repairs or Alterations\"

1\. Repair or Alteration Condition(s) noted by the appraiser, or

2\. Streamline 203K, or

3\. Under Construction, more than 90% complete with only minor finish
work remaining (buyer preference items i.e., floor coverings,
appliances, fixtures, landscaping, etc.). This eliminates the need for
construction exhibits.

D. \"Subject to the following Required Inspection\"

1\. Required Inspection(s) noted by the appraiser

FHA Quick Tips

Minimum Property Requirements (MPR) and Minimum Property Standards (MPS)

For new construction to be eligible for FHA financing, it must comply
with HUD\'s Minimum Property Standards (including 24 CFR 200.926d).
Existing construction must comply with HUD\'s Minimum Property
Requirements (HUD Handbook 4905.1). .

In the performance of an FHA appraisal, the appraiser must denote any
deficiency in the appropriate section(s) (site issues in the site
section, improvement issues in the improvements section) of the
appraisal report. The appraiser is to note those repairs necessary to
make the property comply with FHA\'s Minimum Property Requirements (MPR)
or Minimum Property Standards (MPS) together with the estimated cost to
cure. The lender will determine which repairs for existing properties
must be made for the property to be eligible for FHA-insured financing.

Cosmetic repairs are not required; however, they are to be considered in
the overall condition rating and valuation of the property. Examples of
cosmetic repairs would include surface treatments, beautification or
adornment not required for the preservation of the property. For
example, generally, worn floor finishes or carpeting, holes in window
screens, or a small crack in a windowpane are examples of deferred
maintenance that do not rise to the level of a required repair but must
be reported by the appraiser.

The physical condition of existing building improvements is examined at
the time of the appraisal to determine whether repairs, alterations or
inspections are necessary - essential to eliminate conditions
threatening the continued physical security of the property.

Required repairs will be limited to necessary requirements to:

\* protect the health and safety of the occupants (Safety)

\* protect the security of the property (Security)

\* correct physical deficiencies or conditions affecting structural
integrity (Soundness)

A property with defective conditions is unacceptable until the defects
or conditions have been remedied and the probability of further damage
eliminated. Defective conditions include:

\* defective construction

\* other readily observable conditions that impair the safety,
sanitation or structural soundness of the dwelling

Typical conditions that would require further inspection or testing by
qualified individuals or entities:

\* infestation - evidence of termites

\* inoperative or inadequate plumbing, heating or electrical systems

\* structural failure in framing members

\* leaking or worn-out roofs

\* cracked masonry or foundation damage

\* drainage problems

Appraisers are reminded not to recommend inspections only as a means of
limiting liability. The reason or indication of a particular problem
must be given when requiring an inspection of any mechanical system,
structural system, etc.

These guidelines are provided to assist in the examination of the
property. To perform this analysis, the appraiser must have full access
to all property improvements.

If unable to visually evaluate the improvements in their entirety,
contact the lender and reschedule a time when a complete visual
inspection can be performed. This includes access to the crawl space and
attic. The appraiser is not required to disturb insulation, move
personal items, furniture, equipment, plant life, soil, snow, ice or
debris that obstructs access or visibility.

An inspection done in accordance with these guidelines is visual and is
not technically exhaustive. These guidelines are applicable to buildings
with four or less dwellings units and their related property
improvements.

Unacceptable Locations

FHA guidelines require that a site be rejected if the property being
appraised is subject to hazards, environmental contaminants, noxious
odors, offensive sights or excessive noises to the point of endangering
the physical improvements or affecting the livability of the property,
its marketability, or the health and safety of its occupants. Rejection
may also be appropriate if the future economic life of the property is
shortened by obvious and compelling pressure to a higher use, making a
long-term mortgage impractical.

If the condition is clearly a health and safety violation, contact the
lender for further instructions before completing the appraisal. The
lender must clear the condition and may require an inspection or reject
the property. If there is any doubt as to the severity, report the
condition and submit the completed report. For those conditions that
cannot be repaired, such as site factors, the appraised value is based
upon the existing conditions.

Site Hazards And Nuisances

The appraiser must note and comment on all hazards and nuisances
affecting the subject property that may endanger the health and safety
of the occupants and/or the structural integrity or marketability of the
property, including: subsidence, operating and abandoned oil and gas
wells, abandoned wells, slush pits, heavy traffic, airport noise and
hazards, runway clear zones/clear zones, proximity to high pressure gas,
liquid petroleum pipelines

or other volatile and explosive products, residential structures located
within the fall distance of a high-voltage transmission line, radio/TV
transmission tower, etc., excessive hazard from smoke, fumes, odors, and
stationary storage tanks containing flammable or explosive material.

If hazards or nuisances are observed, the appraiser must describe the
condition(s) and make a requirement for repair and/or for further
inspection, and prepare the appraisal \"subject to repairs\" and/or
\"subject to inspection\" in the site section of the report. Supporting
documentation provided by the appraiser may include extra photos or
copies of site studies or analyses, property reports, surveys or plot
plans, etc.

Any and all references to Valuation Condition items addressed in
Chapters 2 and 3 are to be addressed in the appropriate section of the
applicable appraisal reporting form. For example, Chapter 2, Sec. 2-2-E,
Slush Pits, instructs: \"If there is any readily observable evidence of
slush pits, mark the \"yes\" column in VC-1\". The new protocol will
require the appraiser to address this condition in the site section of
the appraisal report and note that the property may not be eligible for
FHA financing referencing the information contained in chapter 2;
otherwise, the guidance provided by chapters 2 and 3 remains in effect.

Soil Contamination

Check readily observable evidence of hazardous substances in the soil.
Conditions that could indicate soil contamination include pools of
liquid, pits, ponds, lagoons, stressed vegetation, stained soils or
pavement, drums or odors. If any of these conditions exist further
analysis or testing is required. Note the proximity to dumps, landfills,
industrial sites or other sites that could contain hazardous wastes.

If there is any readily observable surface evidence of leakage from an
underground storage tank, further analysis or testing is required. If
there is readily observable evidence of on-site contamination, make a
requirement for further inspection in the site section of the report.

Grading and Drainage

Check for readily observable evidence of grading and drainage problems.
Proper drainage control measures may include gutters and downspouts or
appropriate grading or landscaping to divert the flow of water away from
the foundation. If the grading does not provide positive drainage from
the improvements, make a repair requirement. Note any readily observable
evidence of standing water near the property that indicates improper

drainage. If the standing water is problematic, make a repair
requirement in the site section of the report.

Individual Water Supply and Sewage Systems

Identify the type of utilities in the site section of the appraisal
report. When water and sewer are private, well and septic testing is to
be governed by state or local requirements; however, the appraiser must
note any readily observable deficiencies regarding the well or septic
system. The appraiser is also required to report on the availability of
connection to public and/or community water/sewer systems. The lender is
responsible for the determination of the feasibility for requiring
connection.

Wood Destroying Insects/Organisms

Report any evidence of infestation in the \"improvements section\" of
the appraisal report under \"foundation\" by simply marking the evidence
of infestation box.

Private Road Access and Maintenance

Address private road access in site area under \"off-site
improvements\". Private streets must be protected by permanent recorded
easements or be owned and maintained by a HOA. Shared driveways must
also meet these requirements.

Each property must have vehicular or pedestrian access. ?If the property
is inaccessible by foot or by vehicle, note this deficiency. FHA defines
all-weather surface as a road surface over which emergency vehicles can
pass in all types of weather. If the property is not provided with an
all-weather surface, note the absence of such in the appraisal.

Structural Conditions

Appraiser must answer yes/no question on the appraisal addressing
physical deficiencies affecting structural integrity. If answered
\"yes\", provide an explanation addressing the nature of the deficiency
and recommend repairs, alterations or required inspections, in the
improvements section under physical deficiencies/adverse conditions.

Foundation

Report any evidence of dampness or settlement by noting such under the
foundation section of improvements description.

Describe the nature of the deficiency and recommend repairs, alterations
or required inspections, if any, in the improvements section under
physical deficiencies/adverse conditions.

Roofing

Identify roofing material type, and the condition observed, in the
improvements section of the report. The nature and degree of any noted
deficiency will determine whether the appraiser addresses the deficiency
in the narrative comments area of the report under \"condition of the
property\", or \"physical deficiencies\" affecting livability or
structural soundness.

Mechanical Systems

Report on the condition of the improvements, which includes mechanical
systems. The nature and degree of any noted deficiency will determine
whether to address the deficiency in the narrative comments area of the
report under \"condition of the property\", or \"physical deficiencies\"
affecting livability or structural soundness.

Check mechanical, plumbing and electrical systems in the subject
property to ensure that they are in proper working order. This
examination entails turning on the applicable systems and observing
their performance. If any conditions exist that would affect the health
or safety of the occupants, condition the appraisal on the repair or
alteration of the condition\" and/or a \"required inspection.\" The
following is not an all-inclusive list, but a listing of the more common
readily observable property deficiencies.

Electrical System

\* Examine the electrical system to ensure that there is no visible
frayed wiring, or exposed wires in living areas and note if the amperage
appears adequate for the property.

\* Operate a representative number of lighting fixtures, switches and
receptacles inside the house, garage and on the exterior walls and note
any deficiencies. If the appliances present at the time of the
inspection do not appear to be reasonable (undersized), determine if
there is adequate amperage to run \"standard\" appliances, as per local
code.

? The appraiser is not required to insert any tool, probe or testing
device inside the panels or to dismantle any electrical device or
control.

Plumbing System

? Flush the toilets and turn on a representative number of faucets to
determine that the plumbing system is intact, that it does not emit foul
odors, that faucets function appropriately, that both cold and hot water
run and that there is no readily observable evidence of leaks or
structural damage under fixtures.

? Turn on several cold water faucets in the house to check water
pressure and flow. Flushing a toilet at the same time will also reveal
any weaknesses in water pressure.

? If the property has a septic system, examine it for any signs of
failure or surface evidence of malfunction.

Other Health and Safety Deficiencies

Address all health and safety issues, physical deficiencies or adverse
conditions that affect the livability, soundness or structural integrity
of the property. The nature and degree of any health and/or safety
issues will determine whether to address said deficiency in the
narrative comments area of the report under \"condition of the
property\", or \"physical deficiencies\" affecting livability or
structural soundness.

Lead Based Paint Hazards

For any home built prior to 1978, check for evidence of defective paint
surfaces, including: peeling, scaling or chipping paint. For all FHA
insured properties, correction is required to all defective paint
surfaces in or on structures and/or property improvements built before
January 1, 1978 in accordance with 24 CFR Part 35. Provide a detailed
description and identify the exact location of any deficiency under
\"physical deficiencies\" affecting

livability.

Comparable Selection

At a minimum, comparable selection should be based on properties having
the same or similar locational characteristics as well as physical
characteristics which includes: style, age, size, utility and condition.
Comparable sales should never be selected based on sales price.

In selecting comparables, use the bracketing method. Bracketing, as
defined in The Dictionary of Real Estate Appraisal, Fourth Edition,
Appraisal Institute, is \"a process in which the an appraiser determines
a probable range of values for a property by applying qualitative
techniques of comparative analysis to a group of comparable sales. The
array of comparable sales may be divided into two groups - those
superior to the subject and those

inferior to the subject. The adjusted sales prices reflected by these
two groups limit the probable range of value for the subject and
identify a bracket in which the final value opinion will fall.\" It is
advisable to bracket sales using both dwelling size and sales price
whenever possible. If bracketing is not possible, the appraiser should
explain why.

For properties in established subdivisions, or for units in established
condominium or PUD projects that have resale activity, the appraiser
should use comparable sales from within the same subdivision or project
as the subject property if there are any available. Resale activity from
within the subdivision or project should be the best indicator of value
for properties in that subdivision or project. If the appraiser uses
sales of comparable properties that are located outside of the subject
neighborhood, he or she must include an explanation with the analysis.

For properties in new subdivisions, or for units in new (or recently
converted) condominium projects, the appraiser must compare the subject
property to other properties in its general market area as well as to
properties within the subject subdivision or project. This comparison
should help demonstrate market acceptance of new developments and the
properties within them. The comparable selection should include at least
one sale outside the subdivision or project and one sale from within the
subdivision or project. The third sale may be either.

In selecting the comparable sales, the appraiser should keep in mind
that sales or resales from within the subject subdivision or project are
preferable to sales from outside the subdivision or project as long as
the developer or builder of the subject property is not involved in the
transactions.

Rural properties often have larger lot sizes and their locations can be
relatively undeveloped. As a consequence, there may be a shortage (or
absence) of recent comparable sales in the immediate vicinity. This may
cause the appraiser to select comparable sales that are located a
considerable distance from the subject property. In those instances, the
appraiser must use his or her knowledge of the area and apply good
judgment in selecting comparable sales that are the best indicators of
value for the subject property. In these situations, the appraiser must
include an explanation of why the particular comparable sales were
selected.

Only closed (settled) sales may be used as comparable sales 1, 2 or 3.
If a sale is over six months is used, an explanation must be provided.

No sales over one year old are permitted except as \"additional
comparable sales\" and would be identified as comparable sale(s) 4, 5 or
6. Properties under contract may be also be submitted as additional
comparable sales 4, 5 or 6 to support trends or value conclusions
observed.

FHA, VA, Conventional or cash sales are acceptable as comparable sales.

Intended Use of Appraisal

The intended use for all appraisals prepared for FHA is to support the
underwriting requirements for an FHA-insured mortgage.

FHA Appraisals

FHA appraisals are no guarantee that the property is free from defects.
The appraisal only establishes the value of the property for mortgage
insurance purposes. Buyers need to secure their own home inspections
through the services of a qualified inspector and satisfy themselves
about the condition of the property.

Contractual Responsibility of Appraisers

The appraiser is hired by the lender and therefore has a contractual
responsibility to the lender. However, the appraiser provides services
for HUD programs, and therefore, has an obligation to perform these
services commensurate with the standards and requirements of HUD. This
dual responsibility of the appraiser is recognized in the review and
reporting requirements of HUD. The lender and the appraiser must meet
their respective obligations as prescribed by HUD/FHA. These contractual
obligations to the lender and HUD/FHA are in addition to the
appraiser\'s legal obligations to his or her credentialing state.

For HUD/FHA purposes

FHA appraisals are subject to the following scope of work, intended use,
intended user, definition of market value, statement of assumptions an
limiting conditions, and certifications. Modifications, additions, or
deletions to the intended use, intended user, definition of market
value, or assumptions and limiting conditions are not permitted. The
appraiser may expand the scope of work to include any additional
research or analysis necessary based on the complexity of this appraisal
assignment. Modifications or deletions to the certifications are also
not permitted. However, additional certifications that do not constitute
material alterations to this appraisal report, such as those required by
law or those related to the appraiser\'s continuing education or
membership in an appraisal organization, are permitted.

Field

Protocol

Scope of Work

The scope of work for this appraisal is defined by the complexity of
this appraisal assignment and the reporting requirements of this
appraisal report form, including the following definition of market
value, statement of assumptions and limiting conditions, and
certifications. The appraiser must, at a minimum: (1) perform a complete
visual inspection of the interior and exterior areas of the subject
property, (2) inspect the neighborhood, (3)

inspect each of the comparable sales from at least the street, (4)
research, verify, and analyze data from reliable public and/or private
sources, and (5) report his or her analysis, opinions, and conclusions
in this appraisal report.

Intended Use

The intended use of this appraisal report is for the lender/client to
evaluate the property that is the subject of this appraisal for a
mortgage finance transaction.

Intended User

The intended user of this appraisal report is the lender/client and
HUD/FHA

Definition of Market Value

\"The most probable price which a property should bring in a competitive
and open market under all conditions requisite to a fair sale, the buyer
and seller, each acting prudently, knowledgeably and assuming the price
is not affected by undue stimulus.\"

Statement of Assumptions and Limiting Conditions: The appraiser\'s
certification in this report is subject to the following assumptions and
limiting conditions:

Field

Protocol

1\. Matters of a Legal Nature

The appraiser will not be responsible for matters of a legal nature that
affect either the property being appraised or the title to it, except
for information that he or she became aware of during the research
involved in performing this appraisal. The appraiser assumes that the
title is good and marketable and will not render any opinions about the
title.

2\. Sketch of Improvements

The appraiser has provided a sketch in this appraisal report to show the
approximate dimensions of the improvements. The sketch is included only
to assist the reader in visualizing the property and understanding the
appraiser\'s determination of its size.

3\. Special Flood Hazard Area

The appraiser has examined the available flood maps that are provided by
the Federal Emergency Management Agency (or other data sources) and has
noted in this appraisal report whether any portion of the subject site
is located in an identified Special Flood Hazard Area. Because the
appraiser is not a surveyor, he or she makes no guarantees, express or
implied, regarding this determination.

4\. Court Testimony

The appraiser will not give testimony or appear in court because he or
she made an appraisal of the property in question, unless specific
arrangements to do so have been made beforehand, or as otherwise
required by law.

5\. Adverse Conditions

The appraiser has noted in this appraisal report any adverse conditions
(such as needed repairs, deterioration, the presence of hazardous
wastes, toxic substances, etc.) observed during the inspection of the
subject property or that he or she became aware of during the research
involved in performing this appraisal. Unless otherwise stated in this
appraisal report, the appraiser has no knowledge of any hidden or
unapparent physical deficiencies or adverse conditions of the property
(such as, but not limited to, needed repairs, deterioration, the
presence of hazardous wastes, toxic substances, adverse environmental
conditions, etc.) that would make the property less valuable, and has
assumed that there are no such conditions and makes no guarantees or
warranties, express or implied.

Field

Protocol

5\. Adverse Conditions, con\'t

The appraiser will not be responsible for any such conditions that do
exist or for any engineering or testing that might be required to
discover whether such conditions exist. Because the appraiser is not an
expert in the field of environmental hazards, this appraisal report must
not be considered as an environmental assessment of the property.

6\. Repairs or Alterations

The appraiser has based his or her appraisal report and valuation
conclusion for an appraisal that is subject to satisfactory completion,
repairs, or alterations on the assumption that the completion, repairs,
or alterations of the subject property will be performed in a
professional manner.

Appraiser\'s Certification: The Appraiser certifies and agrees that:

FIELD

Protocol

1\. Scope of Work

I have, at a minimum, developed and reported this appraisal in
accordance with the scope of work requirements stated in this appraisal
report.

2\. Complete Visual

Inspection

I performed a complete visual inspection of the interior and exterior
areas of the subject property. I reported the condition of the
improvements in factual, specific terms. I identified and reported the
physical deficiencies that could affect the livability, soundness, or
structural integrity of the property.

3\. USPAP Compliant

I performed this appraisal in accordance with the requirements of the
Uniform Standards of Professional Appraisal Practice that were adopted
and promulgated by the Appraisal Standards Board of The Appraisal
Foundation and that were in place at the time this appraisal report was
prepared.

4\. Sales Comparison Approach

I developed my opinion of the market value of the real property that is
the subject of this report based on the sales comparison approach to
value. I have adequate comparable market data to develop a reliable
sales comparison approach for this appraisal assignment. I further
certify that I considered the cost and income approaches to value but
did not develop them, unless otherwise indicated in this report.

5\. Current Agreement for Sale

I researched, verified, analyzed, and reported on any current agreement
for sale for the subject property, any offering for sale of the subject
property in the twelve months prior to the effective date of this
appraisal, and the prior sales of the subject property for a minimum of
three years prior to the effective date of this appraisal, unless
otherwise indicated in this report.

6\. Prior Sales of

Comparable Sales

I researched, verified, analyzed, and reported on the prior sales of the
comparable sales for a minimum of one year prior to the date of sale of
the comparable sale, unless otherwise indicated in this report.

7\. Most Similar Comparable Sales

I selected and used comparable sales that are locationally, physically,
and functionally the most similar to the subject property.

8\. Combining Land Sales

I have not used comparable sales that were the result of combining a
land sale with the contract purchase price of a home that has been built
or will be built on the land.

9\. Adjustments to Comparable Sales

I have reported adjustments to the comparable sales that reflect the
market\'s reaction to the differences between the subject property and
the comparable sales.

10\. Verification

I verified, from a disinterested source, all information in this report
that was provided by parties who have a financial interest in the sale
or financing of the subject property.

11\. Competency

I have knowledge and experience in appraising this type of property in
this market area.

12\. Resources

I am aware of, and have access to, the necessary and appropriate public
and private data sources, such as multiple listing services, tax
assessment records, public land records and other such data sources for
the area in which the property is located.

13\. Reliable Sources

I obtained the information, estimates, and opinions furnished by other
parties and expressed in this appraisal report from reliable sources
that I believe to be true and correct.

14\. Factors Impacting Value

I have taken into consideration the factors that have an impact on value
with respect to the subject neighborhood, subject property, and the
proximity of the subject property to adverse influences in the
development of my opinion of market value. I have noted in this
appraisal report any adverse conditions (such as, but not limited to,
needed repairs, deterioration, the presence of hazardous wastes, toxic
substances, adverse environmental conditions, etc.) observed during the
inspection of the subject property or that I became

aware of during the research involved in performing this appraisal. I
have considered these adverse conditions in my analysis of the property
value, and have reported on the effect of the conditions on the value
and marketability of the subject property.

15\. Knowingly Withholding Information

I have not knowingly withheld any significant information from this
appraisal report and, to the best of my knowledge, all statements and
information in this appraisal report are true and correct.

16\. Professional Analysis

I stated in this appraisal report my own personal, unbiased, and
professional analysis, opinions, and conclusions, which are subject only
to the assumptions and limiting conditions in this appraisal report.

17\. Present or Prospective Interest

I have no present or prospective interest in the property that is the
subject of this report, and I have no present or prospective personal
interest or bias with respect to the participants in the transaction. I
did not base, either partially or completely, my analysis and/or opinion
of market value in this appraisal report on the race, color, religion,
sex, age, marital status, handicap, familial status, or national origin
of either the prospective owners

or occupants of the subject property or of the present owners or
occupants of the properties in the vicinity of the subject property or
on any other basis prohibited by law.

18\. Employment and Compensation

My employment and/or compensation for performing this appraisal or any
future or anticipated appraisals was not conditioned on any agreement or
understanding, written or otherwise, that I would report (or present
analysis supporting) a predetermined specific value, a predetermined
minimum value, a range or direction in value, a value that favors the
cause of any party, or the attainment of a specific result or occurrence
of a specific subsequent event (such as approval of a pending mortgage
loan application).

19\. Personally Prepared Report

I personally prepared all conclusions and opinions about the real estate
that were set forth in this appraisal report. If I relied on significant
real property appraisal assistance from any individual or individuals in
the performance of this appraisal or the preparation of this appraisal
report, I have named such individual(s) and disclosed the specific tasks
performed in this appraisal report. I certify that any individual so
named is qualified to perform the

tasks. I have not authorized anyone to make a change to any item in this
appraisal report; therefore, any change made to this appraisal is
unauthorized and I will take no responsibility for it.

20\. Identified Lender/Client

I identified the lender/client in this appraisal report who is the
individual, organization, or agent for the organization that ordered and
will receive this appraisal report.

21\. Lender/Client Disclosure and Distribution of Appraisal Report

The lender/client may disclose or distribute this appraisal report to:
the borrower; another lender at the request of the borrower; the
mortgagee or its successors and assigns; mortgage insurers; government
sponsored enterprises; other secondary market participants; data
collection or reporting services; professional appraisal organizations;
any department, agency, or instrumentality of the United States; and any
state, the District of Columbia, or other jurisdictions; without having
to obtain the appraiser\'s or supervisory

appraiser\'s (if applicable) consent. Such consent must be obtained
before this appraisal report may be disclosed or distributed to any
other party (including, but not limited to, the public through
advertising, public relations, news, sales, or other media).

22\. Disclosure and Distribution by Appraiser

I am aware that any disclosure or distribution of this appraisal report
by me or the lender/client may be subject to certain laws and
regulations. Further, I am also subject to the provisions of the Uniform
Standards of Professional Appraisal Practice that pertain to disclosure
or distribution by me.

23\. Who May Rely on Appraisal Report

The borrower, another lender at the request of the borrower, the
mortgagee or its successors and assigns, mortgage insurers, government
sponsored enterprises, and other secondary market participants may rely
on this appraisal report as part of any mortgage finance transaction
that involves any one or more of these parties.

24\. Electronic Signature

If this appraisal report was transmitted as an \"electronic record\"
containing my \"electronic signature,\" as those terms are defined in
applicable federal and/or state laws (excluding audio and video
recordings), or a facsimile transmission of this appraisal report
containing a copy or representation of my signature, the appraisal
report shall be as effective, enforceable and valid as if a paper
version of this appraisal report were delivered containing my original
hand written signature.

25\. Civil Liabilities & Criminal Penalties

Any intentional or negligent misrepresentation(s) contained in this
appraisal report may result in civil liability and/or criminal penalties
including, but not limited to, fine or imprisonment or both under the
provisions of Title 18, United States Code, Section 1001, et seq., or
similar state laws.

Appraiser /Client Information

Field

Protocol

Signature

\* For FHA appraisals, the only signature permitted is that of the
Lender Selected FHA Roster Appraiser. Supervisory signatures are not
permitted.

\* The signature, as defined in USPAP, is personalized evidence
indicating authentication of the work performed by the appraiser and the
acceptance of responsibility for content, analysis, and the conclusions
of the report. It may be an original or electronic signature.

\* An electronic signature must be controlled by a personal
identification number, or other media, where the appraiser has sole
personal control of affixing the signature.

\* The appraiser bears the responsibility for the report with their
signature on it. Therefore, appraisers are advised to keep their
personal control code confidential.

Name

\* Enter appraiser name as it appears on the license.

Company Name

\* Enter company name if applicable.

Company Address

\* Enter address of business or company with city, state and zip code.

Telephone Number

\* Enter phone number with area code.

Email Address

\* Enter e-mail address if you send reports electronically.

Date of Signature and Report

\* Enter the date the report is signed.

Effective Date of Appraisal

\* Enter the effective date of the appraisal which, for FHA purposes, is
the date the property was inspected.

State Certification \#

\* Enter state certification number if applicable.

or State License \#

\* Enter state license number.

or Other (describe)

\* Enter \"N/A\"

State

\* Enter the state of licensure.

Expiration Date

\* Enter the expiration date of State Certification or License Number.

ADDRESS OF PROPERTY APPRAISED

\* This field should auto populate with the appraisal software used. If
not, enter the full property address including street, city, state and
zip code.

APPRAISED VALUE OF SUBJECT PROPERTY \$

\* Enter the appraised value.

Name

\* Enter the name of person who ordered the appraisal.

Company Name

\* Enter name of lender/client

Company Address

\* Enter company address

Email Address

\* Enter email address where report where report was transmitted if
applicable

Required Attachments/Exhibits for FHA appraisals

Item

Protocol

Street Map

\* Include a legible street map showing the location of the subject and
each of the comparable sales utilized. If substantial distance exists
between the subject and comparable sales, additional legible maps should
be submitted to show the location of the comparable sales.

Sketch

g\* Include a building sketch showing the Gross Living Area Above Grade,
including all exterior dimensions of the house. Include patios, porches,
garages, breezeways and other offsets. State \"covered\" or
\"uncovered\" to indicate a roof or no roof (such as over a patio).

\* Show calculations used to arrive at the estimated gross living area.

\* An interior sketch or floor plan is required for properties
exhibiting functional obsolescence attributable to the lay out.

Subject Photographs

\* Front and rear at opposite angles to show all sides of the dwelling,

\* Any improvements with contributory value that are not captured in
either the front or rear photograph,

\* Street scene photo to include a portion of the subject site.

\* If the subject property is proposed construction and the improvement
has not started, the appraiser should take a photograph that shows the
grade of the vacant lot.

Comparable Photos

\* Photos depicting the front view of each comparable sale utilized must
be those taken by the appraiser. The photos taken by the appraiser are
considered evidence of compliance with the Scope of Work of having
inspected each comparable sale from the street. Use of MLS photos to
exhibit comparable condition at the time of sale is acceptable; however,
the

appraiser must include their photos as well to document compliance.

The documentation provided by the required attachments/exhibits
satisfies FHA\'s minimum requirements. However, additional exterior
and/or interior photos, reports, studies, analysis, or copies of prior
listings may be included in support of the appraiser\'s observation and
analysis, e.g. photographs of positive or negative view influences,
property deficiencies, or adverse conditions, provides strong supporting
documentation of conditions observed on the date of the appraisal. Photo
documentation of property condition is always advisable.

D-1 Uniform Residential Appraisal Report [\<TOP\>](#TableofContents)

This section provides specific instructions for completing the Uniform
Residential Appraisal Report (Fannie Mae Form 1004 March 2005, URAR).

This report form is designed to report an appraisal of a one-unit
property or a one-unit property with an accessory unit; including a unit
in a planned unit development (PUD), based on an interior and exterior
inspection of the subject property. This form is not designed to report
an appraisal of a manufactured home or a unit in a condominium or
cooperative project.

Section 1 - Subject

This section provides the factual data to identify the property and the
parties to the appraisal process. The \*FHA case number together with
\*borrower and/or \*property information will be supplied by the
lender/client who engages the appraiser.

Field

Protocol

\*File Number

? Insert the FHA Case Number at the top right corner of the page.

\* The FHA appraisal may not be transmitted to the lender without a case
number.

\*Property Address

? Enter the property street number and name, city, state and zip code
for the property. A post office box number is not acceptable. Enter the
nearest intersection if a house number is not available.

\*Borrower

\* Enter the name of the borrower/mortgagor.

Owner of Public Record

\* Enter the name of the owner as listed in public records. If the
seller is not the owner of public record the appraiser must explain.

County

\* Enter the name of the county in which the property is located. It
further provides locational parameters. If not applicable enter \"N/A\".

Legal Description

? Enter the legal description of the property. The four types of legal
descriptions are: lot and block system, geodetic survey, government
survey system and metes and bounds system. If the space provided is
insufficient, enter this information with the heading \"Legal
Description\" in the \"Additional Comments\" section of the form report
or attach this information as an addendum.

Assessor\'s Parcel \#

\* Enter the parcel number assigned by the local tax assessor. For those
areas that do not have an assessor\'s parcel number, enter the tax
identification number.

Tax Year

\* Enter the current tax year used by the locale, e.g. fiscal year or
actual year.

R. E. Taxes \$

\* Enter the dollar amount of the annual real estate taxes, including
all relevant taxes (school district tax, fire district tax, etc.).

Neighborhood Name

\* Enter the name of the subdivision, if applicable, or the commonly
known local neighborhood designation. If the subject property is in a
planned unit development, provide the name of the development.

Map Reference

\* Enter location map reference, page number and coordinates, from
source used. This reference should relate to the location maps most
commonly used in the locale.

Census Tract

\* Enter the census tract number. The census tract number must be
provided.

\* Census tract numbers have four digits and may have a two digit
decimal suffix. Where the basic census tract number is less than four
digits, the Census Bureau includes leading zeros except when displaying
numbers on maps or printed reports. To uniquely identify a census tract,
a two-digit state code and three-digit county code precede the four-or
six-digit census tract number. The Census Bureau has an internet
resource guide for locating census information. It can be found at URL:
www.census.gov

Occupant

\* Mark the box signifying the occupancy status at the time of the
appraisal.

If vacant, the appraiser should note, in the \"Improvements\" section
under \"condition of the property,\" whether the utilities were on or
off at the time of the appraisal. If off, condition the appraisal on a
satisfactory re-inspection that the utility that was off at the time of
the appraisal does not require alteration, repair or further inspection.

Special Assessments \$

-   Report the dollar amount of special assessments for the subject
    property, if any, and provide a brief explanation for the
    assessment. Special assessments can include municipal bond debt for
    off-site improvements. Larger than typical special assessments may
    affect marketability. If not

-   applicable enter \"N/A\".

PUD HOA\$

? Enter the dollar amount of the HOA fee and mark the box indicating if
the fees are paid \"per year\" or \"per month\".

Property Rights Appraised

? Mark the appropriate box indicating the property rights appraised for
the subject property as of the date of the appraisal. \"Other\" includes
Land

Trust.

Assignment Type

\* Mark the appropriate box indicating the assignment type.

Lender/Client

Address

? Enter the name of the lender/client who ordered and will receive the
appraisal report.

\* The use of the appraisal is to support FHA\'s decision to provide
mortgage insurance on the real property that is the subject of the
appraisal; therefore, intended users include the lender/client and FHA.

\* Enter the lender/client\'s address.

Currently offered for sale or offered for sale in last 12 months.

\* The appraiser\'s certification states in part \"I have researched,
verified, analyzed and reported on any current agreement of sale of the
subject property, any offering for sale of the subject property in the
twelve months prior to the effect date of the appraisal\...\"

\* Mark the appropriate box indicating whether the subject is currently
offered for sale or has been offered for sale in the 12-month period
prior to the effective date of the appraisal. If there are multiple
actions, report each instance. Research may reveal an expired or
withdrawn listing. The prior listing may provide a good indication of
the upper limit of value.

Report data source(s) used, offering price(s), and date(s)

\* Complete this field regardless of whether the property is currently
offered for sale or has been for sale in the 12 months preceding the
date of the appraisal.

\* Identify source(s) used, price(s) and date(s) of current or prior
listings.

Section 2 - Contract

This section must be completed when the appraisal assignment involves a
purchase transaction, otherwise enter \"N/A\" for not applicable. FHA
requires that the appraiser be provided with a complete copy of the
ratified sales contract, including all addenda, for the subject
property.

It provides the agreed-on contract price (accepted offer), date of sale,
and all financial terms implicit in the offer. If unable to obtain this
information, the appraiser is to state what efforts were made to obtain
it.

Field

Protocol

Analyze Contract for Sale

\* Explain the results of the analysis (terms and conditions) of the
contract of sale or why the analysis was not performed.

\* The analysis may include a reference to the number of pages contained
in the contract for sale provided.

Contract Price \$

? Enter the final agreed upon contract price?.

Date of Contract

? Enter the date of the contract. This is the date when all parties have
agreed to the terms of, and signed the contract.

Is The Property Seller The Owner of Public Record

Data Source(s)

?????Mark the appropriate box indicating whether or not the seller is
the owner of public record. The appraiser is instructed to contact the
lender/client if the seller is someone other than the owner of record.
The property may not be eligible for FHA financing if it involves
flipping (resale in less than 90 days). The lender will make a
determination for any exceptions to FHA\'s Flipping Rule and advise the
appraiser.

? Report where the information was obtained.

Sales Concessions Down Payment Assistance

\* Mark the appropriate box indicating whether or not there is any
financial assistance (loan charges, sales concessions, gift or down
payment assistance, etc.) paid by any party on behalf of the borrower.
If necessary, use the \"Additional Comments\" section of the appraisal
reporting form, or an addendum, and enter the heading \"Sales
Concessions\" completing the description.

\* If yes, the appraiser is to report the total dollar amount and
describe the items to be paid. If the sale involves personal property
(e.g. above ground pool, lawn mower, furniture, etc.) it should be
identified and excluded from the valuation.

Section 3 - Neighborhood

This section should reflect the area surrounding the subject property.
The appraiser must observe neighborhood characteristics and surrounding
properties to make determinations that will be incorporated into the
valuation of the subject property. In all instances, the appraiser must
mark the appropriate box for each line in neighborhood characteristics
and housing trends. Failure to note conditions that may adversely affect
the value of the

property is poor appraisal practice and violates the Uniform Standards
of Professional Appraisal Practice.

NOTE: Race and the racial composition of the neighborhood are not
appraisal

factors.

Neighborhood Characteristics

Field

Protocol

Location

? Enter the type of area surrounding the subject property.

Urban - relates to a city

Neighborhood Characteristics

Field

Protocol

Location

Suburban - relates to an area adjacent to a city

Rural - relates to the country or beyond the suburban area

Built-up

? Enter the built-up percentage - the percentage of available land that
has been improved. Land such as a state park would not be considered
available land.

Growth

? Enter the growth rate. If many lots are available, the growth rate may
be rapid, stable or slow, but if the neighborhood is fully developed,
select the \"stable\" box.

One-Unit Housing Trends

Field

Protocol

Property Values

? Mark the box describing the current trend in property values for
One-Unit single family homes in the community. Comparing houses that
have been sold and resold in recent years is an effective way to
determine market trends. Appraisers who use this method, however, should
make sure to factor in any improvements or changes made to the property
between

sales.

Demand/ Supply

? Mark the appropriate demand/supply trend. To determine the equilibrium
status of supply and demand in the neighborhood, compare the number of
houses sold to the number of houses listed for sale in a recent time
period. The similarity or difference between the number of houses sold
and listed, not the absolute numbers, should determine the demand/supply
level.

Marketing Time

? Mark the appropriate marketing time - the typical length of time a
property similar to the subject property would have to stay on the
market before being sold at a price near its market value.

One-Unit Housing

Price Age

? Indicate the low and high neighborhood prices and ages as well as

the predominant value and age. The high and low for both price and age

should exclude the extreme.

Present Land Use %

One-Unit, 2-4 Unit, Multi-Family, Commercial, Other

? Estimate each type of land usage in the neighborhood. If there is no
land in the neighborhood with one of the designated classifications,
enter a \"0\". If a portion of the land consists of parks or other
unspecified classifications, enter the estimated percentages on the
\"Other\" line and explain in the neighborhood description section.

Neighborhood Narrative

Neighborhood Boundaries

? The appraiser must clearly define the boundaries - north, south, east
and west - of the subject\'s neighborhood. Providing a description of
neighborhood boundaries by physical features such as streets, rail
lines, other man-made barriers or well defined natural barriers (i.e.
rivers, lakes, etc.) details the make up and understanding regarding
neighborhood

composition.

Neighborhood Description

? Discuss factors that would attract residents or cause them to reject
the neighborhood. Some typical factors important to discuss include:

o Level of maintenance and condition of homes

o Housing styles, ages, sizes, etc.

o Land uses

o Proximity to employment and amenities, including travel distance and
time to local employment sources and community amenities

o Employment stability, in terms of variety of employment opportunities
and industries

o Overall appeal of the neighborhood as compared to competitive
neighborhoods in the same market

o Convenience to shopping with respect to distance, time and required
means of transportation

o Convenience to schools in terms of the distance and time for travel to
school

Market Conditions (including support for the above conclusions)

\* Provide relevant information in support of conclusions relating to
trends in property values, demand/supply and marketing time.

\* Provide a description of the prevalence and impact of sales and
financing concessions and/or down payment assistance in the subject\'s
market area.

\* Other areas of discussion may include days on market, list to sale
price ratios, and/or financing availability.

Section 4 - Site

This information provides the description of the land underlying the
subject property. Insert factual information on each of the lines
provided and report the conclusions as directed. Consider all aspects of
the physical description and reconcile them in the opinion of market
value. This section of the appraisal requires the appraiser to consider
any adverse site conditions or adverse external factors that may impact
value.

Field

? Protocol

Dimensions

? List all dimensions of the site beginning with the frontage. If the
shape of the site is irregular, show the boundary dimensions (85\' X
150\' X 195\' X 250\'), or attach a property survey, site plan or plat
or legal description with the comment, \"see attached.\" Do not list
site area on the dimensions line.

Area

? Enter the site area in square feet or acres. This entry must be
consistent with the dimensions provided in the \"Dimensions\" field

Shape

? Describe the shape of the site, e.g. triangular, square, rectangular,
irregular, flag lot.

View

? Briefly describe the view from the property (None is not an acceptable
response).

\* Identify a view with a significant positive or negative influence on
the value.

\* Photographs are recommended for any negative or positive view
influences affecting value or marketability.

Specific Zoning Classification

? Enter the specific zoning classification used by the local
municipality or jurisdiction, e.g., R-1

\* If none exists enter \"None Exists\".

Zoning Description

\* Describe what the specific classification means. Include a general
statement describing what the zoning permits. For example: R-1 =
Residential-Single Family

\* If \"None\" exists, describe the prevalent use of sites in the
neighborhood.

Zoning Compliance

? Determine whether the current use is in compliance with the zoning
ordinances. Mark whether it is Legal, Legal Non-Conforming
(Grandfathered Use), No Zoning, or Illegal Use.

? If the existing property does not comply with all of the current
zoning regulations (use, lot size, improvement size, off street parking,
etc.) but is accepted by the local zoning authority, enter \"Legal
Non-Conforming\" and provide a brief explanation.

\* If the use is not legal, the property is not eligible for FHA
mortgage insurance.

Highest and

Best Use

? Mark the appropriate box. This entry questions the categorization as
the highest and best use of the site as improved or, as proposed and
completed, in relation to the neighborhood and current market
conditions.

? If current use represents the highest and best use, mark \"yes\".

? If it does not, mark \"no\" and provide an explanation.

Utilities

? Mark either \"Public\" or \"Other.\" If \"Other\" is marked, describe.

Public utilities mean governmentally supplied and regulated. Public does
not include any community systems sponsored, owned or operated by the
developer or a private company not subject to government regulation or
financial assistance.

? Note if there are mechanical chlorinators or water-flow that decreases
noticeably while running simultaneous plumbing fixtures.

\* Visually inspect the septic system and its surrounding area. If there
are obvious or readily observable signs of system failure, \"require
inspection\" to ensure that the system is in proper working order.

Note: The appraiser shall indicate whether a public water or sewage
disposal system is available to the site. If available, connection must
be made to public or community water/sewage disposal system if
connection costs are reasonable. The lender will determine whether
connection is feasible.

Off-site Improvements-Type

? Briefly describe the off-site improvements under \"Type\" and enter
road surface material and mark Public or Private. For example:
\"Street-Asphalt; Public\", \"Alley-None\"

? Public refers to an improvement dedicated to and accepted by a unit of
government - not including Home Owner\'s Associations.

FEMA Special Flood Hazard Area

? FEMA (Federal Emergency Management Agency) is responsible for mapping
flood hazard areas. If the property is within a Special Flood Hazard
Area, mark \"YES\". Otherwise, mark \"NO\".

? Attach a copy of the flood map panel for properties located within an
identified flood hazard area.

FEMA Flood Zone

? ?nter the FEMA Zone designation. Only properties within Special Flood
Hazard Areas, such as zones \"A\" a special flood hazard area and \"V\"
a coastal area, require flood insurance. Zones \"B\" \"C\" and \"X\" do
not.

FEMA Map \# and FEMA Map Date

? Enter the FEMA Map number and map date. If it is not shown on any

map, enter

\"Not Mapped.\"

Are utilities and off site improvements typical for the market area

\* Mark the appropriate box indicating whether the utilities and
off-site improvements are typical for the market area.

\* If \"No\" is marked, describe what is typical.

Any adverse site conditions or external factors

? Mark the appropriate box indicating whether there are any adverse site
conditions or external factors (easements, encroachments, environmental
conditions, land uses, etc.).

\* If \"No\" is marked, no comment is necessary, if \"Yes\" is marked,
an explanation is required.

\* Describe any adverse site conditions or adverse factors. Consider
easements affecting the functional utility of the property in the
conclusions of both the highest and best use and market value. For
example, discuss adverse easements, encroachments, slide areas, illegal
or non-conforming zoning use, etc. Consider surface, sub-surface and
overhead easements.

\* List any adverse environmental conditions, including hazardous waste,
toxic substances and others.

\* Explain all deficiencies that do not require repair (extreme slope,
etc.) and consider them in the opinion of value.

? Discuss the observations with direct relationship to value and
consider them in the approaches to value.

Section 5 - Improvements

This section describes the subject improvements. Accurately report the
conditions observed. Describe needed repairs, or the existence of any
functional or external obsolescence. Enter factual information on each
of the lines provided and report the conclusions. Consider all aspects
of the physical description and reconcile them in the opinion of market
value.

Accessory Unit / Accessory Dwelling Unit

The accessory unit is defined as a habitable living unit added to,
created within, or detached from a single-family dwelling that provides
the basic requirements for living, sleeping, eating, cooking, and
sanitation.

Accessory Dwelling Units (ADUs) are commonly understood to be a separate
additional living unit, including separate kitchen, sleeping, and
bathroom facilities, attached or detached from the primary residential
unit, on a single-family lot. ADUs are usually subordinate in size,
location, and appearance to the primary unit and may or may not have
separate means of ingress or egress.

Attached units, contained within a single-family home, known variously
as \"mother-in-law apartments,\" are the most common type of accessory
dwelling unit. Accessory units usually involve the renovation of a
garage, basement, or small addition to a single-family home.

FHA Criteria

\"Accessory dwelling unit\" means a subordinate dwelling unit may or may
not be incorporated within, or detached from a single-family structure.

Accessory units may not be subdivided or otherwise segregated in
ownership from the primary residence structure.

Some accessory units may predate the adoption of local zoning ordinance
and may therefore be classified as legal nonconforming units.

Utility Service Requirements

An accessory apartment must be connected to the utilities (except
telephone, television and cable) of the dwelling unit and may not have
separate services.

General Description

Field

Protocol

Units

? Mark the appropriate box. The URAR is designed for one-unit dwelling
or one-unit with an accessory unit.

\# of Stories

? Enter the number of stories above grade, including half stories. Do
not include the basement.

Type

? Mark the box that identifies the type of dwelling, \"Det.\"
(Detached),\"Att.\" (Attached), \"S-Det.\" (Semi-Detached) or \"End
Unit\" (End unit of a group of rowhouses or townhouses).

Stage of Construction

? Mark the box signifying the stage of construction, Existing, Proposed
or Under Construction. Properties that are either Proposed or Under
Construction require plans and specifications for the appraiser to
review.

Design (Style)

? Enter a brief description of the house design style using historical
or contemporary fashion. For example: Cape Cod, bi-level, split level,
split foyer, colonial, town house, rowhouse, etc. Do not use builder\'s
model name.

Avoid generic descriptions such as Traditional or Conventional.

Year Built

? If the property is less than one year old, include both the month and
year completed.

? If it is over one year old, insert the year completed.

Effective Age (Yrs)

? Enter the effective age of the improvements. A range is acceptable.
The effective age reflects the condition of the property relative to
similar competitive properties. The effective age may be greater than,
less than or equal to the actual age.

? Note any significant difference between the actual and effective ages
and explain in the \"condition of property\" comments section.

Attic - Enter the attic and observe the interior roofing for insulation,
deficient materials, leaks or readily observable evidence of significant
water damage, structural problems, previous fire damage, FRT sheathing,
exposed and frayed wiring and adequate ventilation by vent, fan or
window. If any of these deficiencies exist, condition the appraisal on
their repair and prepare the appraisal \"subject to repairs\" and/or
\"subject to inspection\".

The attic must be entered, at a minimum, by head and shoulders, whether
access is by pull-down stairway or scuttle. Size of the scuttle and
accessibility of the attic dictate the level of entry.

Field

Protocol

None

Enter \'X\" if there is no attic.

Drop Stair

Enter \"X\" if this item exists.

Stairs

Enter \"X\" if this item exists.

Floor

Enter \"X\" if this item exists.

Scuttle

Enter \"X\" if this item exists.

Finished

Enter \"X\" if this item exists.

Heated

Enter \"X\" if the attic is heated.

Foundation

The appraiser is required to inspect the foundation and the basement.
The appraiser must address all visible deficiencies and may require a
recommendation for an inspection. Consider deferred maintenance and
physical deterioration in the valuation process.

Basement

Generally, may be partially or completely below grade (ground level). Do
not count the basement in the finished gross living area at the grade
level. The information provided must be consistent with the description
in the Foundation section.

Foundation

Field

Protocol

Concrete Slab

\* Mark this box if any part of the foundation system has concrete slab.

Crawl Space

\* Mark this box if any part of the foundation system has crawl space.

\* Access to the space should be clear. Examine the crawl space for
inadequate access (minimum entry of the head and shoulders).

\* Check the distance from the bottom of floor joists to ground. Space
should be adequate for maintenance and repair. A minimum distance of 18
inches from the ground to the bottom of the joists is highly recommended
but not mandated.

Field

Protocol

Crawl Space

\* Check for insulation, and ventilation or for any structural problems.
The support beams should be intact and of structural soundness.

Full Basement

\* Mark this box if there is a full basement.

Partial Basement

\* Mark this box if there is a partial basement.

\* For a dirt basement floor, determine whether such a property is
typical for the area and is readily marketable. If so, it is not
required that a concrete basement floor be installed. Mechanical
equipment, however, must be located on a concrete pad.

Basement Area Sq Ft

\* Enter the square footage of the basement.

Basement Finish %

\* Enter the percentage of basement (figure above) that is finished.

Outside Entry/Exit

\* Mark this box only if there is an outside entry/exit, otherwise leave
blank.

\* If there is an entry, make sure door is operable.

Sump Pump

? Mark this box only if there is a sump pump, otherwise leave blank.

Evidence of

Infestation

\* Mark this box if there is evidence of infestation, including the
house and/or other structures within the legal boundaries of the
property, otherwise leave blank.

? Examine the subject property for readily observable evidence of wood
boring insects.

\* Do not require a pest inspection based solely on the age of a
property. Inspections are necessary whenever there is evidence of decay,
pest infestation, suspicious damage or when it is customary to the area
or required by state law.

Evidence of Dampness

? Mark this box if there is evidence of dampness, otherwise leave blank.

\* Examine the foundation/basement for dampness or readily observable
evidence of water damage. Signs of past water problems may include
efflorescence, mold, mildew or stains on walls or mechanical equipment.

\* Basement or crawl space area must not have excessive dampness or
ponding of water.

\* If any of these inadequacies exist, condition the appraisal \"subject
to repairs\" to correct the condition, or \"subject to inspection\" to
determine the source of problem and corrective measures necessary by a
qualified party.

Evidence of Settlement

? Mark this box if there is evidence of settlement, otherwise leave
blank.

?????Examine foundation for readily observable evidence of settlement.

\* Hairline step-cracks are common, however, horizontal cracks, bulging
walls or separation of sill plate from top of foundation wall are
critical and require inspection.

Mechanical Systems

An appraiser must examine mechanical, plumbing and electrical systems of
the subject property to ensure that they are in proper working order.
This examination includes turning on the applicable systems and
observing their performance. Electrical, plumbing, and/or heating
certifications may be called for by the appraiser when he/she cannot
determine if one or all of these systems are working properly. An
appraiser should not arbitrarily call for such certifications. However,
the appraiser is still responsible for checking the functionality of
these systems at the time of appraisal.

Heating and Cooling Systems

Field

Protocol

Heating

? Enter an \"X\" in the box indicating the type of heating system: FWA
(forced warm air), HWBB (hot water baseboard), Radiant or \"Other\". If
\"Other\" is marked, provide a brief description, e.g. EBB (for electric
baseboard).

\* Turn on the furnace/heating system to test functionality, weather
permitting, and that no unusual noises are heard, no odors or smoke are
emitted indicating a defective unit, etc. However, do not operate the
systems if doing so may damage equipment or when outside temperatures
will not allow system to operate.

\* Note significant holes/deterioration on the unit.

Heating

\* Turn on the hot water to ensure that the water heater is operating
appropriately.

Fuel

? Enter type of fuel used: coal, gas, oil, propane, electric, etc.

Cooling

\* Enter an \"X\" in the box indicating the type of cooling system:
Central Air Conditioning, Individual or Other. If \"Other\" is marked,
provide a brief description, e.g. permanently affixed fans, zoned
air-conditioning, etc.

\* Turn on the air conditioning system to test functionality, weather
permitting, and that no unusual noises are heard, no odors or smoke are
emitted indicating a defective unit, etc. However, do not operate the
systems if doing so may damage equipment or when outside temperatures
will not allow system to operate.

\* Note significant holes/deterioration on the unit

Exterior Materials/Condition

Enter the types of Materials and rate the observed Condition of the
Materials (Good, Average, Fair, and Poor). Make every effort to describe
accurately and explain in detail \"Fair\" and \"Poor\" ratings and
whether or not the item(s) described require repair, replacement or
further inspection. The rating must relate to the habitability of the
house given local standards (Photo documentation of property condition
is always advisable).

Exterior Description

materials/condition

Field

Protocol

Foundation Walls

\* Enter the material type: poured concrete, block, brick, stone,
treated wood, etc. and rate the observed condition.

Exterior Walls

? Enter the material type: aluminum, vinyl or wood siding, brick veneer,
stucco, stone, etc. If a combination of materials, show the predominant
portion first and rate the observed condition.

Roof Surface

? Enter the material type: composition shingle, asphalt shingle, wood,
slate, clay tile, aluminum, built-up, etc. and rate the observed
condition.

\* View the roof from ground level to determine if the integrity of the
roof is sufficient.

\* Observe roof coverings, roof drainage systems, flashing, skylights,
or chimneys for readily observable evidence of leakage or abnormal
condensation on building components.

Exterior Description

materials/condition

Field

Protocol

Roof Surface

\* Note any evidence of deterioration of roofing materials (missing
tiles, shingles, flashing). Deteriorated roofing materials include those
that are worn, cupped, or curled.

\* If the roof is otherwise unobservable, look for telltale signs of
roof problems on the interior, such as damage or water stains to the
ceiling area of a room or closet.

\* The appraiser must note in the appraisal that he/she could not
adequately observe the entire roof area (state which area(s) were
unobservable). Based on the information reported by the appraiser, the
underwriter will determine whether or not a roofing inspection is
required.

Gutters and Downspouts

? Enter the material type: galvanized, aluminum, plastic, vinyl, PVC,
etc. and rate the condition observed.

Window Type

? Enter window type: Double Hung, Single Hung, Casement, Sliders, etc.
and identify the window frame material: wood, aluminum, steel, vinyl,
etc.

Rate the condition observed.

\* Bedroom windows with security bars require a quick release mechanism
for emergency egress. If not so equipped or inoperable, condition the
appraisal on a \"required repair\".

Storm Sash / Insulated

? Describe storm sash material or state if windows are double glazed,

etc. or a combination of the two. Rate the condition observed. If none,
so state.

Screens

\* Describe style (full, half, none) and rate the condition observed.

A brief description of an amenity may include its material type and/or
size and/or dimensions.

Amenities

Field

Protocol

Woodstove \#

\* Enter \"X\" if this amenity exists and provide a specific number.

Fireplace(s) \#

\* Enter \"X\" if this amenity exists and provide a specific number.
Fence

\* Enter \"X\" if this amenity exists. Describe material/type in
additional features.

Patio/Deck

\* Enter \"X\" if this amenity exists. Describe material/type in
additional features

Porch

\* Enter \"X\" if this amenity exists. Describe material/type in
additional features.

Pool

\* Enter \"X\" if this amenity exists. Describe in additional features.
Specify whether in-ground or above-ground. Above-ground pools are
considered personal property and are not to be included in the value.

Other

\* Enter \"X\" if this line is used to report another amenity or salient
feature not listed above that has contributory value. Describe \"Other\"
in additional features. Be sure to compare the subject and comparable
sales in relation to that amenity or feature and make the appropriate
adjustments.

Interior Materials/Condition

Enter the types of Materials and rate the observed Condition of the
Materials (Good, Average, Fair, and Poor) and whether or not the item(s)
described require repair, replacement or further inspection. Make every
effort to describe accurately and explain in detail \"Fair\" and
\"Poor\" ratings. The rating must relate to the habitability of the
house given local standards.

Interior

materials/condition

Field

Protocol

Floors

\* Enter material type - tile, hardwood, carpet, etc. - rate condition
observed.

Walls

?????Enter material type - plaster, drywall, paneled etc. - rate
condition observed.

Trim/Finish

? Enter material type - wood, metal, vinyl - rate condition observed.

Bath Floor

? Enter material type - ceramic tile, vinyl, carpet - rate condition
observed

Bath Wainscot

? Enter material type that protects walls from moisture - ceramic tile,
fiberglass, etc. - rate condition observed.

Car Storage

Field

Protocol

None

\* If the property does not have a garage, carport or driveway, mark
\"NONE\".

Driveway \# of Cars

\* If applicable, mark this box and enter the number of cars that can be
parked. A single lane driveway is considered to be a one-car driveway.
It would be considered a two car driveway if either car can be moved
without disturbing the other.

Driveway Surface

\* Enter surface type: concrete, gravel, macadam, etc., if none so
state.

Garage \# of Cars

\* Enter the number of cars the structure can accommodate.

Carport \# of Cars

\* Enter the number of cars the structure can accommodate.

Garage/Carport Type

\* If there is a garage, designate whether it is \"Attached\",
\"Detached\" or \"Built-in\" and Enter an \"X\" in the box(es)
indicating the style \"Att.\", \"Det., \"Built-in\"

Appliances

Make an entry \[X\] in the boxes to indicate that these items exist. An
entry in a box means that the item was considered part of the real
estate and is included in the value. If an item is personal property,
put a \"P\" in the box and do not include it in the opinion of value.
Treat non-functioning equipment as existing, but as deferred maintenance
in the valuation process.

Field

Protocol

Refrigerator

Enter \"X\" if this item exists. Enter \"P\" if personal property.

Range/Oven

Enter \"X\" if this item exists. Enter \"P\" if personal property.

Dishwasher

Enter \"X\" if this item exists. Enter \"P\" if personal property.

Disposal

Enter \"X\" if this item exists. Enter \"P\" if personal property.

Fan/Hood

Enter \"X\" if this item exists. Enter \"P\" if personal property.

Microwave

Enter \"X\" if this item exists. Enter \"P\" if personal property.

Washer/Dryer

Enter \"X\" if this item exists. Enter \"P\" if personal property.

Other

Enter \"X\" for existing item not listed above and describe. Do not
include personalty.

Gross Living Area

Room design and count should reflect local custom. A dining area built
as an L-shape off the kitchen may or may not be considered a room
depending on the size.

To determine whether one or two rooms should be counted, hypothetically
insert a wall to separate the two areas that have been built as one: if
the residents can use the resulting two rooms with the same or more
utility without increased inconvenience, count the room as two.

If the hypothetical wall would result in a lack of utility and increased
inconvenience, count the room as one. The room count typically includes
a living room (LR), dining room (DR), kitchen (KT), den (DN), recreation
room (REC) and one or more bedrooms (BR). Typically, the foyer, bath and
laundry room are not counted as rooms. A room is a livable area with a

specific use.

Room Count and Gross Living Area

Field

Protocol

Finished area above grade contains

? To complete this section, enter the total number of above grade rooms,
the total number of bedrooms above grade, and the total number of
bathrooms above grade. Do not include foyers, basement finished rooms or
unfinished attic space.

\* Calculate square footage by using exterior dimensions.

\* Enter the total square footage of the gross living area above grade.

Narrative Comments Section

The completion of this section is critical to the opinion of market
value. The appraiser must discuss all adverse conditions and observed
physical and functional deficiencies noted. If necessary, use the
Additional Comments section of the form report, or an addendum, for
additional discussion or description.

Field

Protocol

Additional Features

? Use this space to describe special energy efficient features such as
solar energy or geothermal systems and/or to further describe the
additional features,

? Please elaborate on any special or unusual aspects of items, e.g. gas
fireplace or wood burning fireplace, 16\' X 32\' inground pool, etc.
Condition of the property (including needed repairs, deterioration,
renovations, remodeling, etc.)

? Describe any physical deterioration and/or functional or external
depreciation noted in or on the property.

? Provide a conclusion as to the overall condition of the improvements
that is supported by the previous descriptive sections.

\* Describe needed repairs for property to meet FHA\'s MPR or MPS.

Physical deficiencies or adverse conditions

\* Enter an \"X \" in the applicable box indicating whether or not there
are any physical deficiencies or adverse conditions that affect the
livability, soundness, or structural integrity of the property. If the
response is \"No\", no explanation is required or needed. However, if
the response is \"Yes\", an explanation is required and, if necessary,
condition the appraisal on the \"repair or alteration of the condition\"
or a \"required inspection\" by appropriately qualified individuals or
entities, which may include professional engineers, tradespersons, HUD
Fee Inspectors.

Lead-Based Paint Hazard

\* If the home was built before 1978, this may indicate a lead paint
hazard. For all FHA insured properties, correction is required to all
defective paint in or on structures and/or property improvements built
before January 1, 1978 in accordance with 24 CFR Part 35.

Physical deficiencies or adverse conditions

Lead-Based Paint Hazard

\* Observe all interior and exterior surfaces, such as walls, stairs,
deck porch, railing, windows or doors for defective (chipping, flaking
or peeling) paint. (Exterior surfaces include surfaces on fences,
detached garages, storage sheds and other outbuildings and appurtenant
structures.). Note any areas affected (be specific) and condition the
appraisal on their repair.

Property conformity

\* Enter an \"X \" in the applicable box indicating whether or not the
subject generally conforms to the neighborhood (functional utility,
style, condition, use, construction, etc.). If the response is \"Yes\",
no explanation is required or needed. However, if the response is
\"No\", an explanation is required.

Section 6 - Sales Comparison Analysis

Comparable Data Pool

The appraiser is required to report the number of comparable properties
currently offered for sale, as of the effective date of the appraisal,
and the number of comparable sales in the subject neighborhood, within
12 months of the effective date of the appraisal, in this section.
Unlike the neighborhood price data, which includes all sales, this
section focuses only on those properties that are comparable to the
subject, not the universe of sales.

If there was difficulty in locating comparable properties, i.e. the
subject is a \"rambler\" or \"rancher\" and one or more of the
comparable properties was a \"split level\" or \"split foyer\", etc.,
then for purposes of this section, all such properties in the subject\'s
neighborhood are to be treated as comparable and counted.

Field

Protocol

Comparable properties offered for sale

Enter the number of comparable properties currently offered for sale,
including those under contract, within the subject neighborhood together
with the price range.

Comparable sales

Enter the number of comparable sales that occurred within the 12-month
period preceding the effective date of the appraisal, and within the
subject neighborhood, together with the price range.

Enter factual data in each field or line.

Field

Protocol

Address

? Enter the address that can be used to locate each property. Enter
community, if needed, to identify property. For rural properties, list
location by road name, nearest intersection and/or side road.

Proximity to Subject

? Enter proximity in straight-line distance and direction. For example,
\"1.5 miles NE\" or \"3 blocks south\". If comparable distance from the
subject is more than a generally accepted distance, or located outside
the defined neighborhood boundaries, be sure to explain why the sale is
applicable in the \"Summary of Sales Comparison Approach\" section.

Sale Price

? Enter the purchase price (total paid) for the subject and each of the
comparable sales. This means the closed or settled price of the
comparable sale.

\* If the appraisal involves a refinance of the subject, enter \"Refi\"
as the subject\'s sale price.

Sale Price / Gross Liv. Area

? Enter price per square foot for the above grade living area for the
subject, if a purchase transaction, and each comparable sale.

Data Source(s)

\* Enter data source(s) used for sales and property information.

Verification Source(s)

\* Enter verification source(s), the document or party from which the
additional proof was obtained. MLS by itself is not considered a
verification source.

\* Contacting someone with first-hand knowledge of the transaction
(agent, broker, buyer, seller, etc.), especially where it involves
confirmation of seller concessions, is the preferred method of
verification.

\* A single source may be used if the quality of data is such that sales
data are confirmed and verified by settled transactions. Information
provided should permit the reader of the report to locate the data from
the sources cited.

Verification Source(s)

\* Do not use, as market data, sales that are not verified and adjusted
to reflect the terms and conditions of sale.

Value Adjustments

Adjustments are made to the price of the sale properties for
price-influencing dissimilarities between each sale and the subject
property. Not all dissimilarities require adjustment because not all
dissimilarities achieve price differentials in the market. All
adjustments must be extracted from and supported by the actions of the
market.

For each adjustment item, enter the description of the adjustment and
whether it is an upward or downward adjustment. Do not make an
adjustment unless it has a material effect on value.

Be careful that adjustments are reasonable and not excessive. If a
property is overvalued, there is a high probability that the reason can
be traced to an excessive adjustment made in one or more of the areas
above the room count line. Make adjustments only if the dissimilarity
has a noticeable effect on the value. Small differences do not usually
require adjustments.

Field

Protocol

Sales or Financing Concessions

\* Report the type of financing such as Conventional, FHA or VA, etc.

\* Report the type and amount of sales concession for each comparable
sale listed. If no concessions exist, the appraiser must note \"none.\"

\* The appraiser is required to make market-based adjustments to the
comparable sales for any sales or financing concessions that may have
affected the sales price.

\* The adjustment for such affected comparable sales must reflect the
difference between the sales price with the sales concessions and what
the property would have sold for without the concessions.

Date of Sale / Time

? State month and year of settlement. Showing the contract date and
settled date is also acceptable.

\* Time adjustments, if any, must be supported by the market and
consistent with the neighborhood market conditions noted. If this is the
case, show both the contract date and settled date as any time
adjustment should be calculated using the contract date (meeting of the
minds) rather than the settled date. Explanation is required for any
time adjustments.

Location

\* Enter the name of the subdivision or PUD. If none is applicable enter
the neighborhood name that is commonly used to refer to the property\'s
location or,

\* Location adjustments may be warranted for positive or negative
factors that influence sales price such as a busy street versus a quiet
street rather than using the name of the community or subdivision.

\* Explain any adjustments made in this area.

Leasehold / Fee Simple

? State whether the property was sold as Fee Simple or as a Leasehold
Estate. An adjustment is required if the estate differs from the rights
appraised for the subject property.

Site

? Enter the site size in square feet or acreage. Make adjustments only
for measurable differences. Small differences in lot sizes do not
usually call for an adjustment if the size is typical.

? If necessary, consider the possibility of excess or surplus land.

View

? Describe the view from the site, i.e. similar homes, commercial area,
water view, scenic view, etc. Such terms as \"Average\" or \"Good\" are
only to be used as adjuncts, i.e. \"Residential/Average\", \"Water
view/Good\".

\* Make adjustments only if the view is superior or inferior to the
subject. If the subject has a superior view and adjustments are made, a
photograph of the view amenity is recommended; likewise for an inferior
view.

Design (Style)

? Enter the style according to a description used by local custom. Be
consistent with improvement description.

Quality of Construction

? Enter \"Good\", \"Average\", \"Fair\", etc. using the quality rating
from your cost service subscription or provider.

\* Adjustments may also be warranted for interior construction quality
and should be explained. For example, the second floor of a 1-1/2 story
home finished with lower grade materials and finish compared to first
floor.

Actual Age

? Enter only the actual age of the subject and each comparable sale.

Condition

? Enter the condition of the subject and comparable sales.

\* Ratings to be used are: \"New\", \"Good\", \"Average\", \"Fair\" and
\"Poor\" or a combination if more accurate.

? Consider required repairs or alterations, to the subject, completed
when determining the need for adjustments to the comparable sales.

Above Grade Room Count

? Enter room count, consistent with the description of improvements on
the front of the appraisal form. Up to three adjustments may be entered:

\* The first line is for bathroom count differences. A deficiency or
surplus in the number of baths should be adjusted first.

\* The second line adjustment is for room count.

\* The third is for a difference in square footage.

? Explain any comparable property that has an adjustment in both square
feet and room count.

Gross Living Area

? Enter the total square footage of the above grade living areas.

\* Adjust for market recognized differences where warranted.

Basement & Finished Rooms Below Grade

? Provide total square footage of basement area and/or enter percentage
of basement in relation to first floor area.

? Enter the type of rooms below grade: bedroom, recreation room,
laundry, full bath, etc.

? Explain any special features or finishes in the \"Summary of Sales
Comparison Approach.\"

\* If no basement, enter none or \" N/A\"

Functional Utility

? Enter \"Average\", \"Superior\" or \"Inferior\" as a total of the
items rated in the Improvement Analysis compared to the subject. Use the
\"Summary of Sales Comparison Approach\" to explain differences.

? Adjust for functional obsolescence observed in the subject, and not
found in the comparables.

\* Floor plan of the subject is required when functional obsolescence is
attributable to layout or poor floor plan.

Heating / Cooling

? Enter type of heating and cooling systems, e.g. Gas FWA C/Air.

\* Any adjustment for differences in heating and cooling systems should
be based on market expectations.

Energy Efficient Items

? Describe energy efficient items: storm windows and doors, solar
installations, replacement windows, etc. and enter an adjustment for
differences if warranted. If none, so state.

Garage / Carport

?????Enter description of garage/carport. Calculate adjustments in
accordance with market acceptance of carport value versus garage and
size (one car, two cars, etc.).

Porch, Patio, Deck

? Enter these features for the subject and comparable sales if they
exist. Base any adjustments on local market expectations.

Blank Lines

? ?hree blank lines are provided for the appraiser\'s use to describe
additional amenities, features or individual characteristics not listed
or addressed elsewhere in the sales grid, e.g. woodstove, fireplace,
fencing, pool or other.

\* Enter appropriate adjustments. For example, a pool located in an area
that expects pools might bring a dollar premium in comparison to a
comparable without a pool.

Net Adjusted (Total)

? Mark either \[+\] or \[-\] box to indicate if the total net
adjustments will increase or decrease the value and note by how much. If
any adjustment is excessive, review the comparable sales to determine if
the best ones were selected. If the total adjustments appear excessive
in relation to the sale price; the appraiser should reexamine the
comparability of that sale.

? Explain any adjustment that appears to be excessive.

Adjusted Sale Price of Comparables

? Total all of the adjustments and add them to or subtract them from the
sales price of each comparable. Generally, adjustments should not exceed
10% for line items, 15% for net adjustments and 25% for gross
adjustments. If any adjustments exceed stated guidelines an explanation
must be provided including reasons for not using more similar comparable
sales.

Research sale or transfer history of subject & comps

\* Enter an \"X \" in the applicable box indicating whether you \"did\"
or \"did not\" research the sale or transfer history of the subject
property and comparable sales. If not, provide explanation. Research
prior sales or transfers of subject property

\* Enter an \"X \" in the applicable box indicating whether your
research \"did\" or \"did not\" reveal any prior sales or transfers of
the subject property for the three years prior to the effective date of
this appraisal.

Data Source(s)

\* Enter data source(s) used for sales and transfer information.

\* Appraisers are to be familiar with the data source(s), e.g. how the
data is gathered and how often it is updated

Research prior sales or transfers of comparable sales

\* Enter an \"X \" in the applicable box indicating whether your
research \"did\" or \"did not\" reveal any prior sales of transfers of
the comparable sales for the year prior to the date of sale of the
comparable sale.

Data Source(s)

\* Enter data source(s) used for sales and transfer information. Two
sources are recommended for researching prior sales and transfers, local
MLS and local public records at a minimum.

\* Appraisers should be familiar with the data source(s), e.g. how the
data is gathered and how often it is updated.

Report the results of the research and analysis of the prior sale or
transfer history of the subject property and comparable sales (report
additional prior sales in the \"Additional Comments\" section or an
addendum).

Field

Protocol

Date of Prior Sale / Transfer

\* Report the date(s) of prior sale(s) or transfer(s) of the subject
that occurred within three years of the effective date of the appraisal.

\* Report the date(s) of prior sale(s) or transfer(s) of each comparable
sale for the year prior to the date of the comparable sale.

Price of Prior Sale /

Transfer

\* Report the price of the prior sale(s) or transfer(s) of the subject
that occurred within three years of the effective date of the appraisal.

\* Report the price of the prior sale(s) or transfer(s) of each
comparable for the year prior to the date of the comparable sale.

Data Source(s)

\* Identify data source(s) used.

Effective Date of Data Source(s)

\* Enter the date the data was published or updated by the source. For
example, the local MLS may update their database multiple times during
the week or month whereas property transfers recorded at the local land
records office may take six or eight weeks after settlement. The
property transfer records may have an effective date that is eight weeks
earlier than the appraisal date and the MLS data is within one week of
the appraisal date.

Narrative Comments

Field

Protocol

Analysis of prior sale or transfer history of subject and comparable
sales

\* Provide analysis of prior sale or transfer history of the subject and
comparable sales.

\* Analysis may address changes in property conditions between sale
dates or verifying if prior sale was an arm\'s-length transaction.

Narrative Comments

Field

Protocol

Summary of Sales Comparison Approach

\* Explain comparable selection and any necessary explanation of
adjustments.

\* Explain any adjustments exceeding guidelines.

\* Explain which comparable sale or sales is/are given most weight or
consideration and why.

Indicated Value by Sales Comparison Approach

\* Enter the Indicated Value

Section 7 - Reconciliation

The appraiser should consider all appropriate approaches to value and
all information relevant to the subject property and the market
conditions in the opinion of market value.

If there is insufficient space in the reconciliation section to list and
describe any \"repairs, alterations or required inspections\" noted,
then the appraiser is instructed to insert a reference in the
reconciliation section \"see Additional Comments section on the next
page\" and list and describe the items under the heading \"Repairs,
Alterations, Required Inspections\". If necessary, due to space
limitations, use an addendum with the same heading.

Field

Protocol

Indicated Value by:

\* Enter the Indicated Value for each of the approaches to value
developed. If the approach was not developed, enter \"ND or \"Not Dev\"
for not developed.

\* Reconcile the three approaches to value with a brief description of
the validity of each approach with respect to the appraisal assignment.

This appraisal is made

Field

Protocol

Mark this box

\"as is\"

when:

\* There is/are no repair(s), alteration(s) or required inspection
condition(s) noted.

\* Establishing the \"as is\" value for a regular 203(k) when needed.

\* The property is ineligible for FHA financing and is being rejected.

This appraisal is made

Field

Protocol

Mark this box

\"per plans & specs\"

when the appraisal involves:

\* Proposed construction, or

\* Under construction, less than 90% complete, or a

\* 203(k) with a Plan Review and Specification of Repairs prepared by a
203(k) Consultant.

This appraisal is made

Field

Protocol

Mark this box

\"subject to repairs or alterations\"

when the appraisal involves existing housing, or new construction more
than 90% complete with only buyer preference items remaining (floor
coverings, appliances, landscaping packages (soil must be stabilized to
prevent erosion)), requiring repairs or alterations to:

\* Protect the health and safety of the occupants

\* Protect the security of the property

\* Correct physical deficiencies or conditions affecting structural
integrity

\* Complete buyer preference items for new homes, or to

\* Complete repairs/improvements noted in work order or contractor
estimates for the Streamline K

\* Meet FHA Minimum Property Requirements

The appraiser must indicate the extent of repairs and note this in the
appropriate section of the appraisal, or in the \"additional comments\"
section, or in an addendum, under the heading of \"Reconciliation --
Required Repairs\" listing the repairs noted together with an estimated
cost to cure.

This appraisal is made

Field

Protocol

Mark this box

\"subject to a required inspection\"

when the appraisal calls for a required inspection to:

\* Certify the condition and/or status of a mechanical or structural
element of the property

\* Protect the health and safety of the occupants

\* Protect the security of the property

\* Meet FHA Minimum Property Requirements or Minimum Property Standards

The appraiser must indicate the reasoning for any required inspections
and note this in the appropriate section of the appraisal, or in the
\"additional comments\" section, or in an addendum, under the heading of
\"Reconciliation - Required Inspection \" listing the required
inspections.

The value \"subject to completion per plans and specifications\",
\"subject to the following repairs or alterations\", or \"subject to the
following required inspection\" must be consistent with the subject
property condition(s) described.

Opinion of Market Value

\* Enter the opinion of Market Value

Final Reconciliation

? This entry should contain the appraiser\'s reasoning for arriving at
the final value.

Date of Value

? Enter the date when the property was inspected.

More than one box may be marked in the reconciliation section depending
on the assignment and property conditions.

Section 8 - Additional Comments

These comment lines provide additional space for the appraiser to fully
describe any item, area or condition where the commentary exceeds the
space provided in other sections of the report. It is recommended that
any information carried forward to the additional comments section, or
an addendum if needed, follow the sequence of the form with a proper
heading identifying said section.

For example, the neighborhood \"market conditions\" comments exceed the
space provided on the form. In that case, on page one in neighborhood
market conditions enter \"See additional comments\", in the \"additional
comments\" section enter the heading \"Neighborhood Market Conditions\"
and provide the narrative in this section.

Follow the same procedure for any section of the report where commentary
exceeds space provided. This will provide the reader with the proper
identification and linkage of additional comments together with a
logical flow of information in a standardized reporting format.

Section 9 - Cost Approach

If the subject property is new construction (less than one year old), or
the Cost Approach is recognized in the market as a basis for pricing,
the appraiser may complete the Cost Approach; however, it is not
required for an FHA appraisal. If, however, the subject is a unique
property, has specialized improvements, is manufactured housing, or the
client requests the Cost Approach be completed, then the Cost Approach
is required and must be

completed. The square foot method is to be used.

\* State the Remaining Economic Life as a single number or as a range.
This line must be completed for every FHA appraisal whether or not the
cost approach is completed. An explanation is required if the remaining
economic life is less than 30 years.

Cost Approach To Value

Provide adequate information for the lender/client to replicate the
below cost figures and calculations.

Field

Protocol

Support for opinion of site value

\* Provide a summary of the comparable land sales or other methods
(abstraction, allocation, land residual, extraction) of estimating site
value in support of the opinion of site value.

Reproduction or Replacement Cost

\* Mark the box indicating which cost estimating method was used

\* Reproduction Cost - exact duplicate with all deficiencies and
obsolescence

\* Replacement Cost - cost at current prices with equivalent utility.

Source of Cost Data

\* Provide the name of the cost service and reference page numbers of
cost tables or factors. Reviewer or reader must be able to replicate.

Quality Rating

\* Enter the quality rating of the cost tables or factors referenced.

Effective Date

\* Enter the edition and date of latest updates referenced.

Comments

\* Describe how physical depreciation was calculated

\* Describe functional or external obsolescence,

\* Enter gross living area calculations or refer to property sketch.

Economic Life

\* Enter remaining economic life of improvements (required for all FHA
appraisals).

Provide adequate information for the lender/client to replicate the
below cost figures and calculations.

Field

Protocol

Opinion of Site Value

\* Enter the Opinion Of Site Value

Dwelling Sq. Ft. @ \$

\* Enter the GLA, multiply it by the square foot factor - enter result.

Basement Sq. Ft. @ \$

\* Enter basement square feet, multiply it by square foot factor --
enter result.

Blank Line

\* Use this line for lump sum adjustments for plumbing fixtures,
dormers, fireplaces, built-in appliances, pools, etc. Add together -
enter the sum.

Gar/Crprt Sq. Ft @ \$

\* Enter the car storage square feet, multiply it by square foot factor
-- enter result.

Total Cost New

\* Add the results of the first five lines together - enter the sum.

Less Depreciation

\* Enter the amount of estimated depreciation as a specific dollar
amount, as a percentage or as a combination of both. Entries made in
either functional or external depreciation require explanation in the
comments section. Add together all forms of depreciation - enter the sum
and deduct this total from the total cost new.

Depreciated Cost

\* Enter the difference from the total cost new less depreciation.

\"As-is\" Value of Site Improvements

\* Enter the \"as-is\" value of site improvements

Blank Line

\* Enter marketing costs here; generally averages 6%. Also, if
applicable, identify and include impact fees.

Indicated Value

\* Add together depreciated cost of improvements, \"as-is\" value of
site improvements, marketing expense and/or impact fees - enter the
total.

Section 10 - Income Approach

In a single-family residential property, the Income Approach is
generally not recognized as a basis for buying by the market. The
approach typically provides minimal applicability in the opinion of
market value. Therefore, the Income Approach is not required for FHA
appraisals completed on the Uniform Residential Appraisal Report, Fannie
Mae Form 1004.

Income Approach To Value (not required for FHA appraisals)

Field

Protocol

Income Approach

? Enter \"N/A\" in each blank field in this section of the report.

Section 11 - PUD Information

A PUD is a project that includes common property and improvements owned
and maintained by an owners\' association for the use and benefit of the
individual units in the subdivision. If not applicable, leave blank.

Project Information for PUDs (if applicable)

Field

Protocol

Developer/Builder in

control of HOA

? Enter an \"X\" in the box indicating whether or not the
developer/builder is in control of the Home Owners\' Association (HOA).

Unit Type(s)

\* Enter an \"X\" in the box indicating unit type, Detached or Attached.

Provide the following information for PUDs only if the developer is in
control of the HOA and the subject property is an attached dwelling
unit.

The information requested is self-explanatory. Appraisers may choose to
answer the last question referencing common elements and recreational
facilities in support of a location adjustment regardless of dwelling
style.

Field

Protocol

Legal name of project

Total number of phasesTotal number of units

Total number of units sold

Total units rented

Total units for sale

Data source(s)

\* Provide source(s) of information, e.g. HOA board, management company,
etc.

Was the project created by the conversion of an existing building(s)
into a PUD? If Yes, date of conversion. Does the project contain any
multi-dwelling units? Yes NoData

source(s) Are the units, common elements, and recreation facilities
complete? Yes No

If no, describe the status of completion.

Describe common elements and recreational facilities.

D-2 Manufactured Home Appraisal Report [\<TOP\>](#TableofContents)

This section provides specific instructions for completing the
Manufactured Home Appraisal Report (Fannie Mae Form 1004C March 2005).

This report form is designed to report an appraisal of a one-unit
manufactured home; including a unit in a planned unit development (PUD),
based on an interior and exterior inspection of the subject property.
This form is not designed to report an appraisal of a conventionally
constructed \"stick\" or \"site\" built home or a unit in a condominium
or cooperative project. Manufactured homes within a condominium regime
or a cooperative

project are not eligible as collateral for a FHA-insured loan.

A manufactured home is defined as a structure that is transportable in
one or more sections. In the traveling mode, the home is eight feet or
more in width and forty feet or more in length and is built on a
permanent chassis and designed to be used as a dwelling when connected
to the required utilities, which includes the plumbing, heating,
air-conditioning and electrical systems contained therein. A
manufactured home is designed and constructed to the Federal
Manufactured Home Construction and Safety Standards (MHCSS) as evidenced
by an affixed certification label. Manufactured homes may also be
referred to as mobile homes, sectionals, multi-sectionals, double-wides,
triple-wides or single wides. Modular housing is built to the
local/state codes and is not to be considered manufactured housing. When
erected on site, to be eligible for FHA insurance the manufactured home
is:

\* Built on or after June 15, 1976 based on MHCSS,

\* At least 400 square feet in gross living area,

\* Built and remains on a permanent chassis,

\* Designed to be used as a dwelling with a permanent foundation which
is designed and constructed to HUD/FHA criteria and,

\* Have a HUD Certification Label/Seal affixed to the exterior of the
home.

Appraisers are reminded to pay particular attention to Appraiser\'s

Certifications #8 and #11 of the Manufactured Home Appraisal Report and

the Competency Rule of USPAP which addresses an appraiser\'s familiarity

with a specific property type.

Section 1 - Subject

This section provides the factual data to identify the property and the
parties to the appraisal process. The \*FHA case number together with
\*borrower and/or \*property information will be supplied by the
lender/client who engages the appraiser.

Field

Protocol

\*File Number

? Insert the FHA Case Number at the top right corner of the page.

\* The FHA appraisal may not be transmitted to the lender without a case
number.

\*Property Address

? Enter the property street number and name, city, state and zip code
for the property. A post office box number is not acceptable. Enter the
nearest intersection if a house number is not available.

\*Borrower

\* Enter the name of the borrower/mortgagor.

Owner of Public Record

\* Enter the name of the owner as listed in public records. If the
seller is not the owner of public record the appraiser must explain.

County

\* Enter the name of the county in which the property is located. It
further provides locational parameters. If not applicable enter \"N/A\".

Legal Description

? Enter the legal description of the property. The four types of legal
descriptions are: lot and block system, geodetic survey, government
survey system and metes and bounds system. If the space provided is
insufficient, enter this information with the heading \"Legal
Description\" in the \"Additional Comments\" section of the form report
or attach this information as an addendum.

Assessor\'s Parcel \#

\* Enter the parcel number assigned by the local tax assessor. For those
areas that do not have an assessor\'s parcel number, enter the tax
identification number.

Tax Year

\* Enter the current tax year used by the locale, e.g. fiscal year or
actual year.

R. E. Taxes \$

\* Enter the dollar amount of the annual real estate taxes, including
all relevant taxes (school district tax, fire district tax, etc.).
Manufactured homes must be taxed as real estate to be eligible for Title
II FHA insurance.

Neighborhood Name

\* Enter the name of the subdivision, if applicable, or the commonly
known local neighborhood designation. If the subject property is in a
planned unit development or manufactured housing park, provide the name
of the development.

Map Reference

\* Enter location map reference, page number and coordinates, from
source used. This reference should relate to the location maps most
commonly used in the locale.

Census Tract

\* Enter the census tract number. The census tract number must be
provided.

\* Census tract numbers have four digits and may have a two digit
decimal suffix. Where the basic census tract number is less than four
digits, the Census Bureau includes leading zeros except when displaying
numbers on maps or printed reports. To uniquely identify a census tract,
a two-digit state code and three-digit county code precede the four-or
six-digit census tract number. The Census Bureau has an internet
resource guide for locating census information. It can be found at URL:
www.census.gov

Occupant

\* Mark the box signifying the occupancy status at the time of the
appraisal.

If vacant, the appraiser should note in the \"Improvements\" section
under \"condition of property\" whether the utilities were on or off at
the time of the appraisal. If off, condition the appraisal on a
satisfactory re-inspection that the utility that was off at the time of
the appraisal does not require alteration, repair or further inspection.

Special Assessments \$

\* Report the dollar amount of special assessments for the subject
property, if any, and provide a brief explanation for the assessment.
Special assessments can include municipal bond debt for off-site
improvements. Larger than typical special assessments may affect
marketability. If not applicable enter \"N/A\".

PUD HOA\$

? Enter the dollar amount of the HOA fee and mark the box indicating if
the fees are paid \"per year\" or \"per month\".

Property Rights Appraised

? Mark the appropriate box indicating the property rights appraised for
the subject property as of the date of the appraisal. \"Other\" includes
Land Trust.

Assignment Type

\* Mark the appropriate box indicating the assignment type.

Lender/Client

Address

? Enter the name of the lender/client who ordered and will receive the
appraisal report. After the client\'s name add \"its successors or
assigns\".

\* The use of the appraisal is to support FHA\'s decision to provide
mortgage insurance on the real property that is the subject of the
appraisal; therefore, intended users include the lender/client and FHA.

\* Enter the lender/client\'s address. Currently offered for sale or
offered for sale in last 12 months.

\* The appraiser\'s certification states in part \"I have researched,
verified, analyzed and reported on any current agreement of sale of the
subject property, any offering for sale of the subject property in the
twelve months prior to the effect date of the appraisal\...\"

\* Mark the appropriate box indicating whether the subject is currently
offered for sale or has been offered for sale in the 12-month period
prior to the effective date of the appraisal. If there are multiple
actions, report each instance. Research may reveal an expired or
withdrawn listing. The prior listing may provide a good indication of
the upper limit of value. Report data source(s) used, offering price(s),
and date(s)

\* Complete this field regardless of whether the property is currently
offered for sale or has been for sale in the 12 months preceding the
date of the appraisal.

\* Identify source(s) used, price(s) and date(s) of current or prior
listings.

Section 2 - Contract

This section must be completed when the appraisal assignment involves a
purchase transaction, otherwise enter \"N/A\" for not applicable. FHA
requires that the appraiser be provided with a complete copy of the
ratified sales contract, including all addenda, for the subject
property. It provides the agreed-on contract price (accepted offer),
date of sale, and all financial terms implicit in the offer. If unable
to obtain this information, the appraiser is to state what efforts were
made to obtain it.

Field

Protocol

Analyze Contract of Sale

\* Explain the results of the analysis (terms and conditions) of the
contract of sale or why the analysis was not performed.

\* The analysis may include a reference to the number of pages contained
in the contract for sale provided.

\* The analysis should include a description of any non-realty items
included in the contract

Contract Price \$

? Enter the final agreed upon contract price? for purchase transaction.

\* If the manufactured home is new construction, does the contract price
include: all delivery, installation and setup costs.

Date of Contract

? Enter the date of the contract. This is the date when all parties have
agreed to the terms of, and signed the contract.

Is The Property Seller The Owner of Public Record

Data Source(s)

?????Mark the appropriate box indicating whether or not the seller is
the owner of public record. The appraiser is instructed to contact the
lender/client if the seller is someone other than the owner of record.
The property may not be eligible for FHA financing if it involves
flipping (resale in less than 90 days). The lender will make a
determination for any exceptions to FHA\'s Flipping Rule and advise the
appraiser.

? Report where the information was obtained.

Sales Concessions Downpayment Assistance

\* Mark the appropriate box indicating whether or not there is any
financial assistance (loan charges, sales concessions, gift or down
payment assistance, etc.) paid by any party on behalf of the borrower.
If necessary, use the \"Additional Comments\" section of the appraisal
reporting form or an addendum and enter the heading \"Sales
Concessions\" completing the description.

\* If yes, the appraiser is to report the total dollar amount and
describe the items to be paid. If the sale involves personal property
(e.g. above ground pool, lawn mower, furniture, etc.) it should be
identified and excluded from the valuation.

Manufacturer\'s

Invoice

\* Applies only to new construction (initial sale from manufacturer).
Mark the appropriate box and explain the results of the analysis (terms
and conditions) of the manufacturer\'s invoice or why the analysis was
not performed.

\* If the invoice is not available, the appraiser is to note the
unavailability.

Retailer\'s Name

\* Applies only to new construction (initial sale from manufacturer).
Provide name of retailer or distributor who sold unit.

Section 3 - Neighborhood

This section should reflect the area surrounding the subject property.
The appraiser must observe neighborhood characteristics and surrounding
properties to make determinations that will be incorporated into the
valuation of the subject property. In all instances, the appraiser must
mark the appropriate box for each line in neighborhood characteristics
and housing trends. Failure to note conditions that may adversely affect
the value of the property is poor appraisal practice and violates the
Uniform Standards of Professional Appraisal Practice.

NOTE: Race and the racial composition of the neighborhood are not
appraisal

factors.

Neighborhood Characteristics

Field

Protocol

Location

? Enter the type of area surrounding the subject property.

Urban - relates to a city

Suburban - relates to an area adjacent to a city

Rural - relates to the country or beyond the suburban area

Built-up

? Enter the built-up percentage - the percentage of available land that
has been improved. Land such as a state park would not be considered
available land.

Growth

? Enter the growth rate. If many lots are available, the growth rate may
be rapid, stable or slow, but if the neighborhood is fully developed,
select the \"stable\" box.

Manufactured Housing Trends

Field

Protocol

Property Values

? Mark the box describing the current trend in property values for
manufactured housing in the community. Comparing manufactured housing
units that have been sold and resold in recent years is an effective way
to determine market trends. Appraisers who use this method, however,
should make sure to factor in any improvements or changes made to the
property

between sales.

Manufactured Housing Trends

Field

Protocol

Property Values

\* If the subject property is one of few manufactured homes in the
neighborhood, indicate this scarcity in market conditions, identify the
most predominant housing type within neighborhood and address trends in
value for that identified type.

Demand/Supply

? Mark the appropriate demand/supply trend. To determine the equilibrium
status of supply and demand in the neighborhood, compare the number of
houses sold to the number of houses listed for sale in a recent time
period. The similarity or difference between the number of houses sold
and listed, not the absolute numbers, should determine the demand/supply
level.

\* If the subject property is one of few manufactured homes in the
neighborhood, indicate this scarcity under market conditions, identify
the most predominant housing type within neighborhood and address trends
in demand/supply for that identified type.

Marketing Time

? Mark the appropriate marketing time - the typical length of time a
property most similar to the subject property would have to stay on the
market before being sold at a price near its market value.

Manufactured Housing

Price Age

? Indicate the low and high neighborhood prices and ages as well as the
predominant value and age of manufactured housing. The high and low for
both price and age should exclude the extreme. If the subject property
is one of few manufactured homes in the neighborhood, indicate this
paucity under market conditions, identify the most predominant housing
type/style within neighborhood and address prices and ages for that
identified type.

Present Land Use %

One-Unit, 2-4 Unit, Multi-Family, Commercial, Other

? Estimate each type of land usage in the neighborhood. If there is no
land in the neighborhood with one of the designated classifications,
enter a \"0\". If a portion of the land consists of parks or other
unspecified classifications, enter the estimated percentages on the
\"Other\" line and explain in the neighborhood description section.

Neighborhood Boundaries

? The appraiser must clearly define the boundaries - north, south, east
and west - of the subject\'s neighborhood. Providing a description of
neighborhood boundaries by physical features such as streets, rail
lines, other man-made barriers or well defined natural barriers (i.e.
rivers, lakes, etc.) details the make up and understanding regarding
neighborhood

composition.

Neighborhood Narrative

Neighborhood Description

? Discuss factors that would attract residents or cause them to reject
the neighborhood. These are typical factors important to discuss:

o Level of maintenance and condition of homes

o Housing styles, ages, sizes, etc.

o Land uses

Neighborhood Narrative

Neighborhood Description

o Proximity to employment and amenities, including travel distance and
time to local employment sources and community amenities

o Employment stability, in terms of variety of employment opportunities
and industries

o Overall appeal of the neighborhood as compared to competitive
neighborhoods in the same market

o Convenience to shopping with respect to distance, time and required
means of transportation

o Convenience to schools in terms of the distance and time for travel to
school Market Conditions (including support for the above conclusions)

\* Provide relevant information in support of conclusions relating to
trends in property values, demand/supply and marketing time.

\* Provide a description of the prevalence and impact of sales and
financing concessions and/or down payment assistance in the subject\'s
market area.

\* Other areas of discussion may include days on market, list to sale
price ratios, and/or financing availability.

Section 4 - Site

This information provides the description of the land underlying the
subject property. Insert factual information on each of the lines
provided and report the conclusions as directed. Consider all aspects of
the physical description and reconcile them in the opinion of market
value. This section of the appraisal requires the appraiser to consider
any adverse site conditions or adverse external factors that may impact
value.

Field

? Protocol

Dimensions

? List all dimensions of the site beginning with the frontage. If the
shape of the site is irregular, show the boundary dimensions (85\' X
150\' X 195\' X 250\'), or attach a property survey, site plan or plat
or legal description with the comment, \"see attached.\" Do not list
site area on the dimensions line.

Area

? Enter the site area in square feet or acres. This entry must be
consistent with the dimensions provided in the \"Dimensions\" field.

Shape

? Describe the shape of the site, e.g. triangular, square, rectangular,
irregular, flag lot.

View

? Briefly describe the view from the property (None is not an acceptable
response).

\* Identify a view with a significant positive or negative influence on
the value.

\* Photographs are recommended for any negative or positive view
influences affecting value or marketability.

Specific Zoning Classification

? Enter the specific zoning classification used by the local
municipality or jurisdiction, e.g., R-1

\* If none exists enter \"None Exists\"

Zoning Description

\* Describe what the specific classification means. Include a general
statement describing what the zoning permits. For example: R-1 =
Residential-Single Family

\* If \"None Exists\" describe the prevalent use of sites in the
neighborhood.

Field

? Protocol

Zoning Compliance

? Determine whether the current use is in compliance with the zoning
ordinances. Mark the box indicating whether the use is Legal, Legal
Non-Conforming (Grandfathered Use), No Zoning, or Illegal Use.

? If the existing property does not comply with all of the current
zoning regulations (use, lot size, improvement size, off street parking,
etc.) but is accepted by the local zoning authority, enter \"Legal
Non-Conforming\" and provide a brief explanation.

\* If the use is not legal, the property is not eligible for FHA
mortgage insurance.

Highest and

Best Use

? Mark the appropriate box. This entry represents the highest and best
use of the site, as improved, in relation to the neighborhood and
current market conditions.

? If current use represents the highest and best use, mark \"yes\".

? If it does not, mark \"no\" and provide a detailed explanation.

Utilities

? Mark either \"Public\" or \"Other.\" If \"Other\" is marked, describe.

Public utilities mean governmentally supplied and regulated. Public does
not

include any community systems sponsored, owned or operated by the

developer or a private company not subject to government regulation or

financial assistance.

? Note if there are mechanical chlorinators or water-flow that decreases
noticeably while running simultaneous plumbing fixtures. ?????Visually
inspect the septic system and its surrounding area. If there are obvious
or readily observable signs of system failure, \"require inspection\" to
ensure that the system is in proper working order.

Note: The appraiser shall indicate whether a public water or sewage
disposal system is available to the site. If available, connection must
be made to public or community water/sewage disposal system if
connection costs are reasonable. The lender will determine whether
connection is feasible.

Off-site Improvements-Type

? Briefly describe the off-site improvements under \"Type\" and mark
Public or Private. For example: \"Street-Asphalt; Public\",
\"Alley-None\"

? Public refers to an improvement dedicated to and accepted by a unit of
government - not including Home Owner\'s Associations.

FEMA Special Flood Hazard Area

? FEMA (Federal Emergency Management Agency) is responsible for mapping
flood hazard areas. If the property is within a Special Flood Hazard
Area, mark \"YES\". Otherwise, mark \"NO\".

? Attach a copy of the flood map panel for properties located within an
identified flood hazard area.

Note: To be eligible for FHA-insurance, the finished grade level beneath
a manufactured home must be at or above the 100-year return frequency
elevation. If the site supporting a manufactured home is within a FEMA
designated flood hazard area, the lender should order a FEMA Elevation
Certificate to determine whether the manufactured home qualifies for

FHA-insurance.

Field

? Protocol

FEMA Flood Zone

? Enter the FEMA Zone designation. Only properties within Special Flood
Hazard Areas, such as zones \"A\" a special flood hazard area and \"V\"
a coastal area, require flood insurance. Zones \"B\" \"C\" and \"X\" do
not.

FEMA Map \# and FEMA Map Date

? Enter the FEMA Map number and map date. If it is not shown on any map,
enter \"Not Mapped.\" Are utilities and off site improvements typical
for the market area?

\* Mark the appropriate box indicating whether the utilities and
off-site improvements are typical for the market area.

\* If \"No\" is marked, explain why the utilities and/or off site
improvement are not typical.

Is site size, shape and topography conforming?

\* Mark the appropriate box indicating whether the site size, shape and
topography are generally conforming to and acceptable in the market
area.

\* If \"no\" is marked, explain why and its impact on value and/or
marketability.

Vehicular access

\* Mark the appropriate box indicating whether there is adequate
vehicular access to the subject property.

\* If \"no\" is marked, provide explanation.

Street maintenance

\* Mark the appropriate box indicating whether the street is properly
maintained.

\* If \"no\" is marked, describe the condition of the street, lack of an
all weather surface and/or adequacy maintenance.

Any adverse site conditions or external factors

? Mark the appropriate box indicating whether there are any adverse site
conditions or external factors (easements, encroachments, environmental
conditions, land uses, etc.).

\* If \"No\" is marked, no comment is necessary, if \"Yes\" is marked, a
detailed explanation is required.

\* Describe any adverse site conditions or adverse factors. Consider
easements affecting the functional utility of the property in the
conclusions of both the highest and best use and market value. For
example, discuss adverse easements, encroachments, slide areas, illegal
or non-conforming zoning use, etc. Consider surface, sub-surface and
overhead easements.

\* List any adverse environmental conditions, including hazardous
wastes, toxic substances and others.

\* Explain all deficiencies that do not require repair (extreme slope,
etc.) and consider them in the opinion of value.

? Discuss the observations with direct relationship to value and
consider

them in the approaches to value.

Section 5 - HUD Data Plate

The Federal Manufactured Home Construction and Safety Standards, Part 24
of the Code of Federal Regulations (CFR) 3280, requires that \"each
manufactured home shall bear a data plate affixed in a permanent manner
near the main electrical panel or other readily accessible or visible
location.\" Typically, the HUD Data Plate is adjacent to the electric
service panel, the utility room or within a cabinet in the kitchen. Over
time, homeowners often remove this sheet and it is common for the data
plate to be missing from a manufactured home.

Copies of the data plate are generally available only from the
manufacturer of the home or the in-plant inspection agency responsible
for inspecting the home prior to its shipment from the manufacturing
plant. If the data plate is missing, locating a replacement or the
specific data plate information from the manufacturer or in-plant
inspection agency may be impractical or expensive. Some manufacturers
are no longer in business or the in-plant

inspection agency may no longer have the information.

The HUD Data Plate (Manufacturer\'s Data Plate) provides information on:

1\. Name and address of the manufacturing plant where the home was
constructed;

2\. Serial number, model designation and date of manufacture (date the
certification label was applied to the home).

3\. Compliance statement;

4\. List of certification label(s) number(s);

5\. List of major factory installed equipment, and

6\. Roof zone and wind zone maps designating the zones for which the
home has been constructed.

The heating/cooling certification and insulation maps may be on the data
plate, or may be in separate documentation provided with the home. The
data plate is not required to include the heating and cooling
certification. Manufacturers and in-plant inspection agencies are not
required to maintain the heating and cooling certification information.

The Certification Label (aka HUD Seal) is a 2 inch by 4 inch aluminum
plate, permanently attached to the home, located at one end of each
section of the home, approximately one foot up from the floor and one
foot in from the road side, or as near that location on a permanent part
of the exterior of the home as practicable. This Certification Label is
often referred to as the HUD Label, or the HUD Tag. Etched on the
Certification Label is the Certification Label Number, also referred to
as the HUD Label Number. Label numbers are not required to be sequential
on multi-section homes.

Verifications of the Certification Label Numbers are available from the
manufacturer, the in-plant inspection agency, and HUD, sometimes
at-cost. Contacts for the in-plant inspection agencies are available on
HUD\'s manufactured housing website. Information on requesting these
verifications is available at the website for the manufactured housing
program at

http://www.hud.gov/offices/hsg/sfh/mhs/mhslabels.cfm.

Field

? Protocol

HUD Data Plate

? Mark the appropriate box to indicate if the Data Plate is attached. If
the Data Plate is missing and/or the appraiser is unable to locate it,
the appraiser only needs to report this fact and is not required to
secure the

Data Plate information from another source.

Certification Label

(aka HUD Seal)

? To be eligible for FHA-insured financing, the manufactured home must
have a HUD Certification Label affixed to the tail-light end of each
transportable section.

\* If the appraiser is unable to locate the HUD Certification Label (HUD
Seal), the lender must be notified.

Manufacturer\'s Serial \# or VIN \#

?????Enter the manufacturer\'s serial number or VIN \# which can be
found on the HUD Data Plate. If the Data Plate is missing, the serial
number is stamped on the foremost cross member of the supporting frame
of the hitch-end of the manufactured home.

HUD Certification Label #(s)

\* Enter the label #s for each section.

Field

? Protocol

Manufacturer\'s Name, Trade/Model, and date of Manufacture

? Provide the manufacturer\'s name, model name of the subject unit and
date of manufacturer. This information can be found on the HUD Data
Plate.

Wind, Roof Load and Thermal Zones

\* The HUD Data Plate contains wind, roof load and thermal zone maps
which designate the zone for which the home was constructed. Mark the
appropriate box.

\* Mark the appropriate box indicating whether the subject meets zone
requirements for its location.

\* Marked \"no\" if the zone map indicates the manufactured home was
constructed for a geographic area different from where the home is
located, the appraiser should note and highlight this discrepancy.

\* Mark \"no\" if the Data Plate is missing. The appraiser should note:
Date plate missing, unable to determine compliance with wind, roof load
and thermal zones requirements.

Section 6 - Improvements

This section describes the subject improvements. Accurately report the
conditions observed. Describe needed repairs, or the existence of any
functional or external obsolescence. Enter factual information on each
of the lines provided and report the conclusions. Consider all aspects
of the physical description and reconcile them in the opinion of market
value.

General Description

Field

Protocol

Units/Additions

? Mark the appropriate box. The Manufactured Home Appraisal Report is
designed solely for the valuation of a one-unit manufactured home. The
appraiser is to indicate if the original manufactured home (as delivered
and installed) to the site has been altered or added on to by marking
the box for additions.

\# of Stories

? Enter the number of stories above grade, including half stories. Do
not include the basement.

Design (Style)

? Enter a brief description of the house design style using historical
or contemporary fashion. For example: Cape Cod, bi-level, split level,
split foyer, colonial, town house, etc. Do not use builder\'s model
name. Avoid generic descriptions such as Traditional or Conventional.

\# of Sections

? Mark the appropriate box denoting the number of sections. Mark
\"Other\" if subject made up of four or more sections.

Type

? Mark the box that identifies the type of dwelling, \"Det.\"
(Detached), \"Att.\" (Attached), \"S-Det.\" (Semi-Detached) or \"End
Unit\" (End unit of a group of rowhouses or townhouses).

Stage of Construction

? Mark the box signifying the stage of construction, Existing, Proposed
or New Construction (new construction would only apply to foundation).

Year Built

? If the manufactured home is less than one year old, include both the
month and year completed.

? If it is over one year old, insert the year built.

Effective Age (Yrs)

? Enter the effective age of the improvements. A range is acceptable.
The effective age reflects the condition of the property relative to
similar competitive properties. The effective age may be greater than,
less than or equal to the actual age.

? Note any significant difference between the actual and effective ages
and explain in the \"condition of property\" comments section.

Attic - Enter the attic and observe the interior roofing for insulation,
deficient materials, leaks or readily observable evidence of significant
water damage, structural problems, previous fire damage, FRT sheathing,
exposed and frayed wiring and adequate ventilation by vent, fan or
window. If any of these deficiencies exist, condition the appraisal on
their repair and prepare the appraisal \"subject to repairs\" and/or
\"subject to inspection\".

The attic must be entered, at a minimum, by head and shoulders, whether
access is by pull-down stairway or scuttle. Size of the scuttle and
accessibility of the attic dictate the level of entry.

Field

Protocol

None

Enter \'X\" if there is no attic.

Drop Stair

Enter \"X\" if this item exists.

Stairs

Enter \"X\" if this item exists.

Floor

Enter \"X\" if this item exists.

Scuttle

Enter \"X\" if this item exists.

Finished

Enter \"X\" if this item exists.

Heated

Enter \"X\" if the attic is heated.

Foundation

The appraiser is required to inspect the foundation and basement. The
appraiser must address all visible deficiencies and may require a
recommendation for an inspection. Consider deferred maintenance and
physical deterioration in the valuation process.

Basement

Generally, may be partially or completely below grade (ground level). Do
not count the basement in the finished gross living area at the grade
level. The information provided must be consistent with the description
in the Foundation section.

Foundation

Field

Protocol

Poured Concrete

\* Mark this box if any part of the foundation system has a concrete
slab.

Concrete Runners

\* Mark this box if any part of the foundation system has concrete
runners upon which the manufactured home rests in some fashion.

Block & Pier

?????Mark this box if the manufactured home is supported by
concrete/masonry blocks constructed on free standing piers or by a
continuous perimeter enclosure.

Other-Att. Description

\* Mark this box if the foundation supporting the manufactured home does
not fall under the above types and describe the foundation supporting
the manufactured home.

Full Basement

\* Mark this box if there is a full basement.

Partial Basement

\* Mark this box if there is a partial basement.

\* For a dirt basement floor, determine whether such a property is
typical for the area and is readily marketable. If so, it is not
required that a concrete basement floor be installed. Mechanical
equipment, however, must be located on a concrete pad.

Basement Area Sq Ft

\* Enter the square footage of the basement area using exterior
dimensions.

Basement Finish %

\* Enter the percentage of basement (figure above) that is finished.

Outside Entry/Exit

\* Mark this box only if there is an outside entry/exit, otherwise leave
blank.

\* In there is an entry, make sure door is operable.

Sump Pump

? Mark this box only if there is a sump pump, otherwise leave blank.

Evidence of

Infestation

\* Mark this box if there is evidence of infestation, including the
house and/or other structures within the legal boundaries of the
property, otherwise leave blank.

? Examine the subject property for readily observable evidence of wood
boring insects.

\* Do not require a pest inspection based solely on the age of a
property. Inspections are necessary whenever there is evidence of decay,
pest infestation, suspicious damage or when it is customary to the area
or required by state law.

Evidence of Dampness

\* Basement or crawl space area must not have excessive dampness or
ponding of water.

\* If any of these inadequacies exist, condition the appraisal \"subject
to repairs\" to correct the condition, or \"subject to inspection\" to
determine the source of problem and corrective measures necessary by a
qualified party.

Evidence of Settlement

?????Mark this box if there is evidence of settlement, otherwise leave
blank.

?????Examine foundation for readily observable evidence of settlement.

\* Hairline step-cracks are common, however, horizontal cracks, bulging
walls or separation of sill plate from top of foundation wall are
critical and require inspection.

Mechanical Systems

An appraiser must examine mechanical, plumbing and electrical systems of
the subject property to ensure that they are in proper working order.
This examination entails turning on the applicable systems and observing
their performance. Electrical, plumbing and/or heating certifications
may be called for by the appraiser when he/she cannot determine if one
or all of these systems are working properly. An appraiser should not
arbitrarily call for such certifications. However, they are still
responsible for checking on the adequacy of these systems at the time of
appraisal.

Heating and Cooling Systems

Field

Protocol

Heating

? Enter an \"X\" in the box indicating the type of heating system: FWA
(forced warm air), HWBB (hot water baseboard), Radiant or \"Other\". If
\"Other\" is marked, provide a brief description, e.g. EBB (for electric
baseboard).

\* Turn on the furnace/heating system to test functionality, weather
permitting, and that no unusual noises are heard, no odors or smoke are
emitted indicating a defective unit, etc. However, do not operate the
systems if doing so may damage equipment or when outside temperatures
will not allow system to operate.

\* Note significant holes/deterioration on the unit.

\* Determine whether there is an installed heat or cool-air source in
each room by using the system\'s normal operating controls. It is not
necessary to observe the uniformity of heat or cool-air to various
rooms.

\* Turn on the hot water to ensure that the water heater is operating
appropriately.

Fuel

? Enter type of fuel used: coal, gas, oil, propane, electric, etc.

Cooling

\* Enter an \"X\" in the box indicating the type of cooling system:
Central Air Conditioning, Individual or Other. If \"Other\" is marked,
provide a brief description, e.g. permanently affixed fans, zoned
air-conditioning, etc.

\* Turn on air conditioning system to test functionality, weather
permitting, and that no unusual noises are heard, no odors or smoke are
emitted indicating a defective unit, etc. However, do not operate the
systems if doing so may damage equipment or when outside temperatures
will not allow system to operate.

\* Note significant holes/deterioration on the unit

Exterior Materials/Condition

Enter the types of Materials and rate the observed Condition of the
Materials (Good, Average, Fair, and Poor). Make every effort to describe
accurately and explain in detail \"Fair\" and \"Poor\" ratings and
whether or not the item(s) described require repair, replacement or
further inspection. The rating must relate to the habitability of the
house given local standards (Photo documentation of property condition
is always advisable).

Exterior Description

materials/condition

Field

Protocol

Skirting

\* If the manufactured home features skirting placed between the bottom
of the home and the grade of the supporting ground, indicate the
material type of the skirting. Note that FHA requires a properly
enclosed crawl space (if crawl area with no basement) with a continuous
perimeter enclosure of a permanent foundation-type construction i.e.,
poured concrete, block, brick, stone, treated wood, etc.) and rate the
observed condition.

\* If the manufactured home has a crawl space and lacks a continuous
perimeter enclosure of a permanent nature, note and highlight this
absence. Note whether enclosed crawl area has adequate access and
ventilation.

Exterior Walls

? Enter the material type: aluminum, vinyl or wood siding, brick veneer,
stucco, stone, etc.

\* If a combination of materials, show the predominant portion first and
rate the observed condition.

Exterior Description

materials/condition

Field

Protocol

Roof Surface

\* Enter the material type: composition shingle, asphalt shingle, wood,
slate, clay tile, aluminum, built-up, etc. and rate the observed
condition.

\* View the roof from ground level to determine if the integrity of the
roof is sufficient.

\* Observe roof coverings, roof drainage systems, flashing, skylights,
or chimneys for readily observable evidence of leakage or abnormal
condensation on building components.

\* Note any evidence of deterioration of roofing materials (missing
tiles, shingles, flashing). Deteriorated roofing materials include those
that are worn, cupped, or curled.

\* If the roof is otherwise unobservable, look for telltale signs of
roof problems on the interior, such as damage or water stains to the
ceiling area of a room or closet.

\* The appraiser must note in the appraisal that he/she could not
adequately observe the entire roof area (state which area(s) were
unobservable). Based on the information reported by the appraiser, the
underwriter will determine whether or not a roofing inspection is
required.

Gutters and Downspouts

? Enter the material type: galvanized, aluminum, plastic, vinyl, PVC,
etc. and rate the condition observed.

Window Type

? Enter window type: Double Hung, Single Hung, Casement, Sliders, etc.
and identify the window frame material: wood, aluminum, steel, vinyl,
etc.

Rate the condition observed.

\* Bedroom windows with security bars require a quick release mechanism
for emergency egress. If not so equipped, condition the appraisal on a
\"required repair\".

Storm Sash / Insulated

? Describe storm sash material or state if windows are double glazed,
etc. or a combination of the two. Rate the condition observed. If none,
so state.

Screens

\* Describe style (full, half, none) and rate the condition observed.

Doors

\* Describe exterior doors (type and material, i.e., wood, metal,
fiberglass, etc.)

A brief description of an amenity may include its material type and/or
size and/or dimensions.

Amenities

Field

Protocol

Woodstove \#

\* Enter \"X\" if this amenity exists and provide a specific number.

Fireplace(s) \#

\* Enter \"X\" if this amenity exists and provide a specific number

Fence

\* Enter \"X\" if this amenity exists. Describe material/type in
additional features

Patio/Deck

\* Enter \"X\" if this amenity exists. Describe material/type in
additional features

Porch

\* Enter \"X\" if this amenity exists. Describe material/type in
additional features

Pool

\* Enter \"X\" if this amenity exists. Describe in additional features.
Specify whether in-ground or above-ground. Above-ground pools are
considered personal property and are not to be included in the value.

Other

\* Enter \"X\" if this line is used to report another amenity or salient
feature not listed above that has contributory value. Describe \"Other\"
in additional features. Be sure to compare the subject and comparable
sales in relation to that amenity or feature and make the appropriate
adjustments.

Interior Materials/Condition

Enter the types of materials and rate the observed Condition of the
Materials (Good, Average, Fair, and Poor) and whether or not the item(s)
described require repair, replacement or further inspection. Make every
effort to describe accurately and explain in detail \"Fair\" and
\"Poor\" ratings. The rating must relate to the habitability of the
house given local standards.

Interior

materials/condition

Field

Protocol

Floors

\* Enter material type - tile, hardwood, carpet, etc.- and rate
condition observed

Walls

?????Enter material type-plaster, drywall, paneled etc.- and rate
condition observed

Trim/Finish

? Enter material type - wood, metal, vinyl, etc.- and rate condition
observed

Bath Floor

? Enter material type-ceramic tile, vinyl, carpet,etc.- and rate
condition observed

Bath Wainscot

? Enter material type that protects walls from moisture - ceramic tile,
fiberglass, etc. - and rate condition observed.

Car Storage

Field

Protocol

None

\* If the property does not have a garage, carport or driveway, mark
\"NONE\".

Driveway \# of Cars

\* If applicable, mark this box and enter the number of cars that can be
parked. A single lane driveway is considered to be a one-car driveway.
It would be considered a two car driveway if either car can be moved
without disturbing the other.

Driveway Surface

\* Enter surface type: concrete, gravel, macadam, etc., if none so
state.

Garage \# of Cars

\* Enter the number of cars the structure can accommodate.

Carport \# of Cars

\* Enter the number of cars the structure can accommodate.

Garage/Carport Type

\* If there is a garage, designate whether it is \"Attached\",
\"Detached\" or \"Built-in\" and Enter an \"X\" in the box(es)
indicating the style \"Att.\", \"Det., \"Built-in\"

Appliances

Make an entry \[X\] in the boxes to indicate that these items exist. An
entry in a box means that the item was considered part of the real
estate and is included in the value. If an item is personal property,
put a \"P\" in the box and do not include it in the opinion of value.

Field

Protocol

Refrigerator

Enter \"X\" if this item exists. Enter \"P\" if personal property.

Range/Oven

Enter \"X\" if this item exists. Enter \"P\" if personal property.

Dishwasher

Enter \"X\" if this item exists. Enter \"P\" if personal property.

Disposal

Enter \"X\" if this item exists. Enter \"P\" if personal property.

Fan/Hood

Enter \"X\" if this item exists. Enter \"P\" if personal property.

Microwave

Enter \"X\" if this item exists. Enter \"P\" if personal property.

Washer/Dryer

Enter \"X\" if this item exists. Enter \"P\" if personal property.

Other

Enter \"X\" for existing item not listed above and describe. Do not
include personalty.

Gross Living Area

Room design and count should reflect local custom. A dining area built
as an L-shape off the kitchen may or may not be considered a room
depending on the size. To determine whether one or two rooms should be
counted, hypothetically insert a wall to separate the two areas that
have been built as one: if the residents can use the resulting two rooms
with the same or more utility without increased inconvenience, count the
room as two. If the hypothetical wall would result in a lack of utility
and increased inconvenience, count the room as one. The room count
typically includes a living room (LR), dining room (DR), kitchen (KT),
den (DN), recreation room (REC) and one or more bedrooms (BR).
Typically, the foyer, bath and laundry room are not counted as rooms. A
room is a livable area with a specific use.

Note: To be eligible for FHA financing, a manufactured home must have a
gross living area of no less than 400 square feet.

Room Count and Gross Living Area

Field

Protocol

Finished area above grade contains

? To complete this section, enter the total number of above grade rooms,
the total number of bedrooms above grade, and the total number of
bathrooms above grade. Do not include foyers, basement finished rooms or
unfinished attic space.

\* Enter the total square footage of the gross living area above grade.

Narrative Comments Section

The completion of this section is critical to the opinion of market
value. The appraiser must discuss all adverse conditions and observed
physical and functional deficiencies noted. If necessary, use the
Additional Comments section of the form report, or an addendum, for
additional discussion or description.

Field

Protocol

Additions or modifications

? Describe any additions or modifications made to the manufactured home
since its initial placement on the site. Any subsequent additions or
modifications should not take the home out of compliance with the
Manufactured Home Construction and Safety Standards (MHCSS). If the
appraiser suspects that an addition or modification to the home poses a
risk to the structural integrity of the home, the appraiser is to notify
the lender.

Installer\'s Name

Date Installed

Model Year

\* If available, indicate the name of the person or company that
installed the manufactured home, the date of installation and the model
year of the manufactured home. If information not readily available, the
appraiser is to note such.

Field

Protocol

Permanent Foundation System

\* Mark the applicable box. To be eligible for a FHA-insured financing,
the design of the permanent foundation must be in compliance with FHA
criteria as evidenced by an engineer\'s certification verifying such
compliance.

\* The appraiser should indicate if a copy of the required engineer\'s
certification of compliance of the design of the permanent foundation
was provided.

Removal of towing hitch, wheels and axels

\* Mark the appropriate box. The appraiser must inspect the underside of
the manufactured home and determine if the towing hitch, running gear
(wheels and axels) have been removed. If not removed, or unable to
determine due to lack of access, the manufactured home is not eligible
for FHA-insured financing and the lender must be notified.

Utility Connections

\* Mark the appropriate box indicating whether the manufactured home is
permanently connected to public water and sewer or well and septic and
other utilities.

\* If \"no\" is marked, the manufactured home is not eligible for
FHA-insured financing and the appraiser must notify the lender.

Gross Living Area Acceptable to Market

\* Mark the appropriate box indicating whether the living area of the
manufactured home is in concert with market expectations for overall
living size, room size and layout.

\* If \"no\" is marked, an explanation is required. The analysis should
reveal the living size and dimensions are not in keeping with market
expectations for the neighborhood (substandard) and factor this
deficiency in the opinion of value. If the gross living area of the
manufactured home is less than 400 square feet, the home is not eligible
for FHA-insured financing and the appraiser must notify the lender.

Additional Features

? Use this space to describe special energy efficient features such as
solar energy or geothermal systems and/or to further describe the
additional features,

? Please elaborate on any special or unusual aspects of items, e.g. gas
fireplace or wood burning fireplace, 16\' X 32\' inground pool, etc.

Rate quality of construction

\* Rate the quality of construction of the manufactured homes by marking
the appropriate box and identify cost service used.

\* Report the source of the rating determination, e.g. Nationally
published cost services such as the N.A.D.A. Manufactured Housing
Appraisal Guide or the Marshall & Swift Residential Cost Handbook
Condition of the property (including needed repairs, deterioration,
renovations, remodeling, etc.)

? Describe any physical deterioration and/or functional or external
depreciation noted at the property.

? Provide a conclusion as to the overall condition of the improvements
that is supported by the previous descriptive sections.

\* Describe needed repairs.

Field

Protocol

Physical deficiencies or adverse conditions

\* Enter an \"X \" in the applicable box indicating whether or not there
are any physical deficiencies or adverse conditions that affect the
livability, soundness, or structural integrity of the property. If the
response is \"No\", no explanation is required or needed. However, if
the response is \"Yes\", a full and detailed explanation is required
and, if necessary, condition the appraisal on the \"repair or alteration
of the condition\" or a \"required inspection\" by appropriately
qualified individuals or entities, which may include professional
engineers, tradespersons, HUD Fee Inspectors.

Lead-Based Paint Hazard

\* If the manufactured home was built before 1978, this may indicate a
lead paint hazard. For all FHA insured properties, correction is
required to all defective paint in or on structures and/or property
improvements built before January 1, 1978 in accordance with 24 CFR Part
35.

\* Observe all interior and exterior surfaces, such as walls, stairs,
deck porch, railing, windows or doors for defective (chipping, flaking
or peeling) paint. (Exterior surfaces include surfaces on fences,
detached garages, storage sheds and other outbuildings and appurtenant
structures.). Note any areas affected (be specific) and condition the
appraisal on their repair subject to the satisfaction of the condition.

Property conformity

\* Enter an \"X \" in the applicable box indicating whether or not the
subject generally conforms to the neighborhood (functional utility,
style, condition, use, construction, etc.). If the response is \"Yes\",
no explanation is required or needed. However, if the response is
\"No\", an explanation is required.

Section 7 - Cost Approach

The appraiser is only required to complete the cost approach if the
manufactured home is new construction (initial sale from manufacturer).
If the manufactured home is over one year old and the retailer\'s
invoice, stating the retail purchase price of the home, is available, a
copy of the invoice should be appended to the appraisal report. If the
manufactured

home is new construction less than one year old but title has been
re-conveyed after the initial sale or if the home is over a year old,
the cost approach is not required by FHA. For cost estimates, the
appraiser must rely upon a nationally published cost service such as the
N.A.D.A. Manufactured Housing Appraisal Guide or the Marshall & Swift
Residential Cost Handbook. The use of a nationally published cost
service will enable a reader/reviewer of the appraisal to replicate the
appraiser\'s estimate.

If the manufactured home is new construction (an initial sale from
manufacturer) and the retail purchase price, including delivery,
installation and set up costs, of the home is available, the appraiser
may rely upon the retail purchase price and exclude reliance upon a cost
service. An opinion of value of the supporting site is still required. A
copy of the invoice stating the retail purchase price and all delivery,
installation and set up costs must be appended to the appraisal report.
The validity and reliability of the value of the manufactured home
derived by the cost approach must be discussed in the reconciliation
section.

State the Remaining Economic Life as a single number or as a range. This
line must be completed for every FHA appraisal whether or not the cost
approach is completed. An explanation is required if the remaining
economic life is less than 30 years.

Cost Approach To Value

Provide adequate information for the lender/client to replicate the
below cost figures and calculations.

Field

Protocol

Support for opinion of site value

\* Provide a summary of the comparable land sales or other methods
(abstraction, allocation, land residual, extraction) of estimating site
value in support of the opinion of site value.

Reproduction or Replacement Cost

\* Mark the box indicating which cost estimating method was used

\* Reproduction Cost - exact duplicate with all deficiencies and
obsolescence

\* Replacement Cost - cost at current prices with equivalent utility.

Source of Cost Data

\* Provide the name of the cost service and reference page numbers of
cost tables or factors. Reviewer or reader must be able to replicate. If
retail purchase price is available, append a copy of the retail purchase
price invoice, including all delivery, installation and set up costs, to
the appraisal report.

Effective Date of Cost data

\* Enter the edition and date of latest updates referenced

Quality Rating

\* Enter the quality rating of the manufactured home derived from the
cost service.

Opinion of Site Value

\* Enter the Opinion Of Site Value based on recent comparable land sales
provided above

Cost Approach using Marshall & Swift

Field

Protocol

Section (width)

Marshall & Swift

\* Determine how many sections (single wide = one section, double wide =
two sections, etc) make up the subject manufactured home.

\* Based upon the selected quality rating of the manufactured home,
choose the corresponding page of square foot costs for that quality
rating. Compute the GLA (Gross Living Area) for home (width multiplied
by length) and multiply by appropriate rate per square foot from the
square foot costs table.

\* Make any square foot or lump sum adjustments to reflect value of
items of home that are above and beyond those detailed basic description
for the selected quality square foot costs.

Subtotal

\* Enter the total of the selected quality rating per square foot times
the GLA and any square foot and lump sum adjustments

Cost Multiplier

\* Enter the appropriate cost multiplier factor, if applicable.

Modified Cost Multiplier Subtotal

\* Multiply the Cost Multiplier times the subtotal of the square foot
cost new

\- enter result.

Physical Depreciation or Condition Modifier

\* If applicable, enter the amount of estimated depreciation as a
specific dollar amount.

Functional Obsolescence

\* Enter the amount of estimated depreciation as a specific dollar
amount.

Provide an explanation in the \"comments section\" if functional
obsolescence is present and adjusted for.

External Obsolescence

\* Enter the amount of estimated depreciation as a specific dollar
amount.

Provide an explanation in the comments section if external obsolescence
present and adjusted for.

Cost Approach using Marshall & Swift

Field

Protocol

Depreciated Modified Subtotal

(not shown on 1004C form)

\* Add the total estimated physical, functional and external
depreciation and subtract from the amount entered for Modified Cost
Multiplier Subtotal Delivery, Installation and Setup

\* If applicable, enter the deliver, installation and setup costs and
add to the cost new. Note: Marshall and Swift includes delivery,
installation and setup cost in the square foot.

Other Depreciated Site Improvements

\* Enter the depreciated value of any site improvement.

Market Value of Subject Site

\* Enter value site value from as provided above.

Indicated Value by the Cost Approach

\* Add any additional delivery, installation and setup costs from above
together with the depreciated value of site improvements and the market
value of the supporting site for a final indication of value by the Cost
Approach.

NOTE:

\* To property employ the Marshall & Swift Cost Guide, follow the
Marshall & Swift instructions.

Economic Life

\* State Remaining Economic Life as a single number or as a range.

Cost Approach using N.A.D.A. Appraisal Guide

Field

Protocol

Exterior Dimensions

\* Determine the length and width of the subject manufactured home.

N.A.D.A Data Identification

\* Enter the edition month(s) and year of the N.A.D.A Manufactured
Housing Appraisal Guide

MH State

\* Enter the state in which the manufactured home is located.

Region

\* Based upon the state in which the manufactured home is located and
using the Regional Code Map of the N.A.D.A Guide, enter the appropriate
region.

Size

\* Enter the exterior length and width of the manufactured home.

Gray Pages

\* Using the region code in the Gray Pages section of the N.A.DA. Guide,
find the Trade Name of the home. This will provide a page number. White
Pages Section (lists homes by manufacturer, model/trade name and by
regional location

\* Using the page number located in the Gray Pages section, go to that
page number in the White Pages Section, Part 1 of the N.A.D.A. Guide and
locatethe Trade Name and find the page number listed for the
Manufacturer\'s Name, Model name for the listed width and Region Code.

Yellow Pages

(not listed in 1004C Cost Chart, provides current depreciated
replacement

value)

\* Using the page number located in the White Pages section, go to that
page number in the Value Chart found in the Yellow Pages Section of the
N.A.D.A. Guide and, using the length and width of the subject
manufactured home, determine the base retail book value.

Black SVS pg.

\* Use the Black Pages SVS (Supplemental Value Section) section of the
N.A.D.A. Guide when a home is not listed in the Gray or White Pages
section.

Cost Approach using N.A.D.A. Appraisal Guide

Field

Protocol

Green Section

(not listed in 1004C Cost Chart, provides older home conversion chart,

condition modifier, accessory values, etc. )

\* Use the Green Pages section of the N.A.D.A. Guide section of the
N.A.D.A. Guide for older homes, to adjust for condition and add for
components and accessories not addressed in the Yellow Pages Section.

NOTE:

\* To property employ the N.A.D.A. Appraisal Guide, follow the N.A.D.A.
instructions.

Indicated Value by the Cost Approach

\* Add the value of the supporting site to final, modified value of the
manufactured home for the final indication of value.

Economic Life

\* State Remaining Economic Life as a single number or as a range.

Section 8 - Sales Comparison Approach

Comparable Data Pool

The appraiser is required to report the number of comparable properties
currently offered for sale, as of the effective date of the appraisal,
and the number of comparable sales in the subject neighborhood, within
12 months of the effective date of the appraisal, in this section.
Unlike the neighborhood price data, which includes all sales, this
section focuses only on those properties that are comparable to the
subject, not the universe of

sales.

If there was difficulty in locating comparable properties, i.e. the
subject is a manufactured home and one or more of the similar style
properties was a \"stick or site built \" home, then for purposes of
this section, all such properties in the subject\'s neighborhood are to
be treated as comparable and counted.

At least two of the comparable sale properties must be manufactured
homes. It may be necessary to expand search parameters outside the
immediate market area to locate truly comparable sales. If that is the
case, an explanation is required and should be consistent with the
neighborhood analysis provided.

Field

Protocol

Comparable properties offered for sale

\* Enter the number of comparable properties currently offered for sale,
including those under contract, within the subject neighborhood together
with the price range.

Comparable sales

\* Enter the number of comparable sales that occurred within the 12
month period preceding the effective date of the appraisal, and within
the subject neighborhood, together with the price range.

Enter factual data in each field or line.

Field

Protocol

Address

? Enter the address that can be used to locate each property. Enter
community, if needed, to identify property. For rural properties, list
location by road name, nearest intersection and side road.

Proximity to Subject

? Enter proximity in straight-line distance and direction. For example,
\"1.5 miles NE\" or \"3 blocks south\". If comparable distance from the
subject is more than a generally accepted distance, or located outside
the defined neighborhood boundaries, be sure to explain why the sale is
applicable in the \"Summary of Sales Comparison Approach\" section.

Sale Price

? Enter the purchase price (total paid) for the subject and each of the
comparable sales. This means the closed or settled price of the
comparable sale.

\* If the appraisal involves a refinance of the subject, enter \"Refi\"
as the subject\'s sale price,

\* If the assignment is for an REO appraisal, enter REO as the
subject\'s sales price.

Sale Price / Gross Liv. Area

? Enter price per square foot for the above grade living area for the
subject, if a purchase transaction, and each comparable sale.

Manufactured Home

\* Indicate whether the comparable sale is a manufactured home. At least
2 of the comparable sale properties must be manufactured homes.

Data Source(s)

\* Enter data source(s) used for sales and property information.

Verification Source(s)

\* Enter verification source(s). The document or organization from which
the additional proof was obtained.

\* Contacting someone with first-hand knowledge of the transaction
(agent, broker, buyer, seller, etc.) especially where it involves
confirmation of seller concessions, is the preferred method of
verification.

\* A single source may be used if the quality of data is such that sales
data are confirmed and verified by settled transactions. Information
provided should permit the reader of the report to locate the data from
the sources cited.

\* Do not use as market data sales that are not verified and adjusted to

reflect the terms and conditions of sale.

Value Adjustments

Adjustments are made to the prices of the sale properties for
price-influencing dissimilarities between each sale and the subject
property. Not all dissimilarities require adjustment because not all
dissimilarities achieve price differentials in the market. All
adjustments must be extracted from the market and supported by the
actions of the market.

For each adjustment item, enter the description of the adjustment and
whether it is an upward or downward adjustment. Do not make an
adjustment unless it has a material effect on value.

The value factors of Location, Site, View, Design, Quality of
Construction, Age, Condition and Functional Utility are all subjective
factors that require subjective adjustments. Be careful that adjustments
are reasonable and not excessive. If a property is overvalued, there is
a high probability that the reason can be traced to an excessive
adjustment somewhere in this section. Make adjustments only if the
dissimilarity has a noticeable effect on the value. Small differences do
not usually require adjustments. Always explain subjective adjustments.

VALUE ADJUSTMENTS

Field

Protocol

Sales or Financing Concessions

\* Report the type of financing such as Conventional, FHA or VA, etc.

\* Report the type and amount of sales concession for each comparable
sale listed. If no concessions exist, the appraiser must note \"none.\"

\* The appraiser is required to make market-based adjustments to the
comparable sales for any sales or financing concessions that may have
affected the sales price. The adjustment for such affected comparable
sales must reflect the difference between the sales price with the sales
concessions and what the property would have sold for without the
concessions.

Date of Sale / Time

? State month and year of settlement. Showing the contract date and
settled date is also acceptable.

\* Time adjustments, if any, must be supported by the market and
consistent with the neighborhood market conditions noted. If this is the
case, show both the contract date and settled date as any time
adjustment should be calculated using the contract date (meeting of the
minds) rather than the settled date. Explanation is required for any
time adjustments.

Location

\* Enter the name of the subdivision or PUD. If none is applicable enter
the neighborhood name that is commonly used to refer to the property\'s
location or,

\* Location adjustments may be warranted for positive or negative
factors that influence sales price such as busy street versus quiet
street.

\* Explain any adjustments made in this area.

Leasehold / Fee Simple

? State whether the property was sold as Fee Simple or as a Leasehold
Estate. An adjustment is required if the estate differs from the rights
appraised for the subject property.

Site

? Enter the site size. Make adjustments only for measurable differences.
Small differences in lot sizes do not usually call for an adjustment if
the size is typical.

? If necessary, consider the possibility of excess or surplus land.

View

? Describe the view from the site, i.e. similar homes, commercial area,
water view, scenic view, etc. Such terms as \"Average\" or \"Good\" are
only to be used as adjuncts, i.e. \"Residential/Average\", \"Water
view/Good\".

\* Make adjustments only if the view is superior or inferior to the
subject. If the subject has a superior view and adjustments are made, a
photograph of the view amenity is recommended.

Design (Style)

? Enter the style according to a description used by local custom. Be
consistent with improvement description.

Quality of Construction

? Enter \"Good\", \"Average\", \"Fair\", etc. using the quality rating
from your cost service subscription or provider.

\* Adjustments may also be warranted for interior construction quality
and should be explained.

Actual Age

? Enter only the actual age of the subject and each comparable sale.

Condition

? Enter the condition of the subject and comparable sales.

\* Only ratings to be used are: \"New\", \"Good\", \"Average\", \"Fair\"
and \"Poor\"

? Consider required repairs or alterations to the subject completed when
determining the need for adjustments to the comparable sales.

Above Grade Room Count

? Enter room count, consistent with the description of improvements on
the front of the appraisal form. Up to three adjustments may be entered:

\* The first line is for bathroom count differences. A deficiency or
surplus in the number of baths should be adjusted first.

\* The second line adjustment is for room count.

\* The third is for a difference in square footage.

? Explain any comparable property that has an adjustment in both square
feet and room count.

Gross Living Area

? Enter the total square footage of the above grade living areas.

Basement & Finished Rooms Below Grade

? Provide total square footage of basement area and/or enter percentage
of basement in relation to first floor area.

? Enter the type of rooms below grade: bedroom, recreation room,
laundry, full bath, etc.

? Explain any special features or finishes in the \"Summary of Sales
Comparison Approach.\"

Functional Utility

? Enter \"Equal\", \"Superior\" or \"Inferior\" as a total of the items
rated in the Improvement Analysis compared to the subject. Use the
\"Summary of

Sales Comparison Approach\" to explain differences.

? Adjust for functional obsolescence observed in the subject, recorded
on Page 1, and not found in the comparables.

\* Floor plan of the subject is required when functional obsolescence is
attributable to layout or poor floor plan.

Heating / Cooling

? Enter type of heating and cooling systems, e. g. Gas FWA C/Air.

\* Any adjustment for differences in heating and cooling systems should
be based on market expectations.

Energy Efficient Items

? Describe energy efficient items: storm windows and doors, solar
installations, replacement windows, etc. and enter an adjustment for
differences if warranted. If none, so state.

Garage / Carport

?????Enter description of garage/carport used car storage. Calculate
adjustments in accordance with market acceptance of carport value versus
garage and size (one car, two cars, etc.).

Porch, Patio, Deck

? Enter these features for the subject and comparables if they exist.
Base any adjustments on local market expectations.

Blank Lines

? ?hree blank lines are provided for the appraiser\'s use to describe
additional amenities, features or individual characteristics not listed
or addressed elsewhere in the sales grid, e.g. woodstove, fireplace,
fencing, pool or other.

\* Enter appropriate adjustments. For example, a pool located in an area
that expects pools might bring a dollar premium in comparison to a
comparable without a pool.

Net Adjusted (Total)

? Mark either \[+\] or \[-\] box to indicate if the total net
adjustments will increase or decrease the value and note by how much. If
any adjustment is excessive, review the comparable sales to determine if
the best ones were selected. If the total adjustments appear excessive
in relation to the sale price; the appraiser should reexamine the
comparability of that sale.

? Explain any adjustment that appears to be excessive.

Adjusted Sale Price of Comparables

? Total all of the adjustments and add them to or subtract them from the
sales price of each comparable. Generally, adjustments should not exceed
10% for line items, 15% for net adjustments and 25% for gross
adjustments. If any adjustments exceed stated guidelines an explanation
must be provided including reasons for not using more similar comparable
sales.

Research sale or transfer history of subject & comps

\* Enter an \"X \" in the applicable box indicating whether you \"did\"
or \"did not\" research the sale or transfer history of the subject
property and comparable sales. If not, provide explanation.

Prior sales or transfers of subject property

\* Enter an \"X \" in the applicable box indicating whether your
research \"did\" or \"did not\" reveal any prior sales or transfers of
the subject property for the three years prior to the effective date of
this appraisal.

Data Source(s)

\* Enter data source(s) used for sales and transfer information.

\* Appraisers are to be familiar with the data source(s), e.g. how the
data is gathered and how often it is updated

\* Be familiar with the data source(s), i.e. how the data is gathered
and how often it is updated, what is the publication date of the data,
what is the effective date of the data.

Prior sales or transfers of comparable sales

\* Enter an \"X \" in the applicable box indicating whether your
research \"did\" or \"did not\" reveal any prior sales of transfers of
the comparable sales for the year prior to the date of sale of the
comparable sale.

Data Source(s)

\* Enter data source(s) used for sales and transfer information. Two
sources are recommended for researching prior sales and transfers, local
MLS and local public records at a minimum.

\* Appraisers should be familiar with the data source(s), e.g. how the
data is gathered and how often it is updated.

Report the results of the research and analysis of the prior sale or
transfer history of the subject property and comparable sales (report
additional prior sales in the \"Additional Comments\" section or an
addendum).

Field

Protocol

Date of Prior Sale / Transfer

\* Report the date(s) of prior sale(s) or transfer(s) of the subject
that occurred within three years of the effective date of the appraisal.

\* Report the date(s) of prior sale(s) or transfer(s) of each comparable
sale for the year prior to the date of the comparable sale.

Price of Prior Sale /

Transfer

\* Report the price of the prior sale(s) or transfer(s) of the subject
that occurred within three years of the effective date of the appraisal.

\* Report the price of the prior sale(s) or transfer(s) of each
comparable for the year prior to the date of the comparable sale.

Data Source(s)

\* Enter data source(s) used.

Effective Date of Data Source(s)

\* Enter the date the data was published or updated by the source. For
example, the local MLS may update their database multiple times during
the week or month whereas property transfers at the local land records
office may take six or eight weeks to be recorded. The property transfer
records may have an effective date that is eight weeks earlier than the
appraisal date and the MLS data is within one week of the appraisal
date.

Narrative Comments

Field

Protocol

Analysis of prior sale or transfer history of subject and comparable
sales

\* Provide analysis of prior sale or transfer history of the subject and
comparable sales.

\* Analysis may address changes in property conditions between sale
dates or verifying if prior sale was an arm\'s-length transaction.

Summary of Sales Comparison Approach

\* Explain comparable selection and any necessary explanation of
adjustments.

\* Explain any adjustments exceeding guidelines.

\* Explain which comparable sale or sales is/are given most weight or
consideration and why.

Indicated Value by Sales Comparison Approach

\* Enter the Indicated Value

Section 9 - Reconciliation

The appraiser should consider all appropriate approaches to value and
all information relevant to the subject property and the market
conditions in the opinion of market value.

If there is insufficient space in the reconciliation section to list and
describe the valuation conditions noted, then the appraiser is
instructed to insert a reference in the reconciliation section \"see
Additional Comments section on the next page\" and list and describe the
items under the heading \"Required Repairs/Inspections\". If necessary,
due to space limitations, use an addendum with the same heading.

Field

Protocol

Indicated Value by:

\* Enter the Indicated Value for each of the approaches to value
developed. If the approach was not developed, enter \"ND or \"Not Dev\"
for not developed.

\* Reconcile the three approaches to value with a brief description of
the validity of each approach with respect to the appraisal assignment.

This appraisal is made

Field

Protocol

Mark this box

\"as is\"

when:

\* There is/are no Property Condition(s) noted.

\* Establishing the \"as is\" value for a regular 203(k) when needed.

\* The property is ineligible for FHA financing and is being rejected.

This appraisal is made

Mark this box

\"per plans & specs\"

when the appraisal involves:

\* Proposed construction, or

\* Under construction, less than 90% complete, or a

\* 203(k) with a Plan Review and Specification of Repairs prepared by a
203(k) Consultant.

This appraisal is made

Mark this box

\"subject to repairs or alterations\"

when the appraisal involves existing housing, or new construction more
than 90% complete with only buyer preference items remaining (floor
coverings, appliances, landscaping packages (soil must be stabilized to
prevent erosion)), requiring repairs or alterations to:

\* Protect the health and safety of the occupants

\* Protect the security of the property

\* Correct physical deficiencies or conditions affecting structural
integrity

\* Complete buyer preference items for new homes, or to

\* Complete repairs/improvements noted in work order or contractor
estimates for the Streamline K

\* Meet FHA Minimum Property Requirements

The appraiser must indicate the extent of repairs and note this in the
appropriate section of the appraisal, or in the \"additional comments\"
section, or in an addendum, under the heading of \"Reconciliation --
Required Repairs\" listing the repairs noted together with an estimated
cost to cure.

This appraisal is made

Field

Protocol

Mark this box

\"subject to a required inspection\"

when the appraisal calls for a required inspection to:

\* Certify the condition and/or status of a mechanical or structural
element of the property

\* Protect the health and safety of the occupants

\* Protect the security of the property

\* Meet FHA Minimum Property Requirements or Minimum Property Standards

More than one box may be marked depending on the assignment and property
conditions.

The appraiser must indicate the reasoning for any required inspections
and note this in the appropriate section of the appraisal, or in the
\"additional comments\" section, or in an addendum, under the heading of
\"Reconciliation - Required Inspection \" listing the required
inspections.

The value \"subject to completion per plans and specifications\",
\"subject to the following repairs or alterations\", or \"subject to the
following required inspection\" must be consistent with the subject
property condition(s) described.

Opinion of Market Value

\* Enter the opinion of Market Value

Final Reconciliation

? This entry should contain the appraiser\'s reasoning for arriving at
the final value.

Date of Value

? Enter the date when the property was inspected.

More than one box may be marked in the reconciliation section depending
on the assignment and property conditions.

Section 10 - Additional Comments

These comment lines provide additional space for the appraiser to fully
describe any item, area or condition where the commentary exceeds the
space provided in other sections of the report. It is recommended that
any information carried forward to the additional comments section, or
an addendum if needed, follow the sequence of the form with a proper
heading identifying said section.

For example, the neighborhood \"market conditions\" comments exceed the
space provided on the form. In that case, on page one in neighborhood
market conditions enter \"See additional comments\", in the \"additional
comments\" section enter the heading \"Neighborhood Market Conditions\"
and provide the narrative in this section. Follow the same procedure for
any section of the report where commentary exceeds space provided. This
will provide the reader with the proper identification and linkage of
additional comments together with a logical flow of information in a
standardized reporting format.

Section 11 - Income Approach

In a single-family residential property, the Income Approach is
generally not recognized as a basis for buying by the market. The
approach typically provides minimal applicability in the opinion of
market value. Therefore, the Income Approach is not required for FHA
appraisals completed on the Manufactured Home Appraisal Report, Fannie
Mae Form 1004C.

Income Approach To Value (not required for FHA appraisals)

Field

Protocol

Income Approach

? Enter \"N/A\" in each blank field in this section of the report.

Section 12 - PUD Information

A PUD is a project that includes common property and improvements owned
and maintained by an owners\' association for the use and benefit of the
individual units in the subdivision. If not applicable, leave blank.

Project Information for PUDs (if applicable)

Field

Protocol

Developer/Builder in

control of HOA

? Enter an \"X\" in the box indicating whether or not the
developer/builder is in control of the Home Owners\' Association (HOA).

Unit Type(s)

\* Enter an \"X\" in the box indicating unit type, Detached or Attached.

Provide the following information for PUDs only if the developer is in
control of the HOA and the subject property is an attached dwelling
unit.

The information requested is self-explanatory. Appraisers may choose to
answer the last question referencing common elements and recreational
facilities in support of a location adjustment regardless of dwelling
style.

Field

Protocol

Legal name of project

Total number of phases Total number of units

Total number of units sold

Total units rented

Total units for sale

Data source(s)

\* Provide source(s) of information, e.g. HOA board, management company,
etc.

Was the project created by the conversion of an existing building(s)
into a PUD? If Yes, date of conversion.

Does the project contain any multi-dwelling units? Yes NoData source(s)

Are the units, common elements, and recreation facilities complete? Yes
No

If no, describe the status of completion.

Describe common elements and recreational facilities.

D-3 Individual Condominium Unit Appraisal Report
[\<TOP\>](#TableofContents)

This section provides specific instructions for completing the
Individual Condominium Unit Appraisal Report (Fannie Mae Form 1073 March
2005, Condo).

This report form is designed to report an appraisal of a unit in a
condominium project or a condominium unit in a planned unit development
(PUD) based on an interior and exterior inspection of the subject
property. This form is not designed to report an appraisal of a
manufactured home or a unit in a cooperative project.

Section 1 - Subject

This section provides the factual data to identify the property and the
parties to the appraisal process. The \*FHA case number together with
\*borrower and/or \*property information will be supplied by the
lender/client who engages the appraiser.

Field

Protocol

\*File Number

? Insert the FHA Case Number at the top right corner of the page.

\* The FHA appraisal may not be transmitted to the lender without a case
number.

\*Property Address

? Enter the property street number and name, city, state and zip code
for the property. A post office box number is not acceptable.

\* Enter Unit \#

\*Borrower

\* Enter the name of the borrower/mortgagor.

Owner of Public Record

\* Enter the name of the owner as listed in public records. If the
seller is not the owner of public record the appraiser must explain.

County

\* Enter the name of the county in which the property is located. It
further provides locational parameters. If not applicable enter \"N/A\".

Legal Description

? Enter the legal description of the property. The four types of legal
descriptions are: lot and block system, geodetic survey, government
survey system and metes and bounds system. If the space provided is
insufficient, enter \"see attached addendum\" and create addendum with
the heading \"Legal Description\" and complete the legal description.

Assessor\'s Parcel \#

\* Enter the parcel number assigned by the local tax assessor. For those
areas that do not have an assessor\'s parcel number, enter the tax
identification number.

Tax Year

\* Enter the current tax year used by the locale, e.g. fiscal year or
actual year.

R. E. Taxes \$

\* Enter the dollar amount of the annual real estate taxes, including
all relevant taxes (school district tax, fire district tax, etc.).

Project Name

\* Enter the name of the condominium project. The name of the project
can

be obtained from the condominium documents or public records.

Phase \#

\* Enter the phase number of the subject, if applicable. Refer to
condominium documents, public records or confirm through Management
Company.

Map Reference

\* Enter location map reference, page number and coordinates, from
source used.

This reference should relate to the location maps most commonly used in
the locale.

Census Tract

\* Enter the census tract number. Census tract numbers must be provided.

\* The Census Bureau has an internet resource guide for locating census

information. It can be found at URL: www.census.gov

Occupant

\* Mark the box signifying the occupancy status at the time of the
appraisal.

If vacant, the appraiser should note in the \"Unit Description\" section
under \"condition of the property\" whether the utilities were on or off
at the time of the appraisal. If off, condition the appraisal on a
satisfactory re-inspection that the utility that was off at the time of
the appraisal does not require alteration, repair or further inspection.

Special Assessments \$

\* Report the dollar amount of special assessments for the subject
property, if any, and provide a brief explanation for the assessment.
Special assessments can include municipal bond debt for off-site
improvements. Larger than typical special assessments may affect
marketability. If not applicable enter \"N/A\".

HOA\$

? Enter the dollar amount of the HOA fee (Condo fee) and mark the box
indicating if the fees are paid \"per year\" or \"per month\".

Property Rights Appraised

? Mark the appropriate box indicating the property rights appraised for
the subject property as of the date of the appraisal. \"Other\" includes
Land Trust.

Assignment Type

\* Mark the appropriate box indicating the assignment type.

Lender/Client

Address

? Enter the name of the lender/client who ordered and will receive the
appraisal report. After the client\'s name add \"its successors or
assigns\".

\* The use of the appraisal is to support FHA\'s decision to provide
mortgage insurance on the real property that is the subject of the
appraisal; therefore, intended users include the lender/client and FHA.

\* Enter the lender/client\'s address.

Currently offered for sale or offered for sale in last 12 months.

\* The appraiser\'s certification states in part \"I have researched,
verified, analyzed and reported on any current agreement of sale of the
subject property, any offering for sale of the subject property in the
twelve months prior to the effect date of the appraisal\...\"

\* Mark the appropriate box indicating whether the subject is currently
offered for sale or has been offered for sale in the 12-month period
prior to the effective date of the appraisal. If there are multiple
actions, report each instance. Research may reveal an expired or
withdrawn listing. The prior listing may provide a good indication of
the upper limit of value.

Report data source(s) used, offering price(s), and date(s)

\* Complete this field regardless of whether the property is for sale or
has been for sale in the 12 months preceding the date of the appraisal.

\* Enter source(s) used, price(s) and date(s) of current or prior
listings.

Section 2 - Contract

This section must be completed when the appraisal assignment involves a
purchase transaction, otherwise enter \"N/A\" for not applicable. FHA
requires that the appraiser be provided with a complete copy of the
ratified sales contract, including all addenda, for the subject
property. It provides the agreed-on contract price (accepted offer),
date of sale, and all financial terms implicit in the offer. If unable
to obtain this information, the appraiser is to state what efforts were
made to obtain it.

Field

Protocol

Analyze Contract for Sale

\* Explain the results of the analysis (terms and conditions) of the
contract of sale or why the analysis was not performed.

\* The analysis may include a reference to the number of pages contained
in the contract for sale provided.

Contract Price \$

? Enter the final agreed upon contract price?.

Date of Contract

? Enter the date of the contract. This is the date when all parties have
agreed to the terms of, and signed the contract.

Is The Property Seller The Owner of Public Record

Data Source(s)

?????Mark the appropriate box indicating whether or not the seller is
the owner of public record. The appraiser is instructed to contact the
lender/client if the seller is someone other than the owner of record.
The property may not be eligible for FHA financing if it involves
flipping (resale in less than 90 days). The lender will make a
determination for any exceptions to FHA\'s Flipping Rule and advise the
appraiser.

? Report where the information was obtained.

Sales Concessions Downpayment Assistance

\* Mark the appropriate box indicating whether or not there is any
financial assistance (loan charges, sales concessions, gift or down
payment assistance, etc.) paid by any party on behalf of the borrower.
If necessary, use an addendum and enter the heading \"Sales
Concessions\" completing the description.

\* If yes, the appraiser is to report the total dollar amount and
describe the items to be paid. If the sale involves personal property
(e.g. above ground pool, lawn mower, furniture, etc.) is should be
identified and excluded from the valuation.

Section 3 - Neighborhood

This section should reflect the area surrounding the subject property.
The appraiser must observe neighborhood characteristics and surrounding
properties to make determinations that will be incorporated into the
valuation of the subject property. In all instances, the appraiser must
mark the appropriate box for each line in neighborhood characteristics
and housing trends. Failure to note conditions that may adversely affect
the value of the property is poor appraisal practice and violates the
Uniform Standards of Professional Appraisal Practice.

NOTE: Race and the racial composition of the neighborhood are not
appraisal factors.

Neighborhood Characteristics

Field

Protocol

Location

? Enter the type of area surrounding the subject property.

Urban - relates to a city

Suburban - relates to an area adjacent to a city

Rural - relates to the country or beyond the suburban area

Built-up

? Enter the built-up percentage - the percentage of available land that
has been improved. Land such as a state park would not be considered
available land.

Neighborhood Characteristics

Field

Protocol

Growth

? Enter the growth rate. If many lots are available, the growth rate may
be rapid, stable or slow, but if the neighborhood is fully developed,
select the \"stable\" box.

Condominium Unit Housing Trends

Field

Protocol

Property Values

? Mark the box describing the current trend in property values for
condominium units in the community. Comparing individual condominium
units that have been sold and resold in recent years is an effective way
to determine market trends. Appraisers who use this method, however,
should make sure to factor in any improvements or changes made to the
property between sales.

Demand/ Supply

? Mark the appropriate demand/supply trend. To determine the equilibrium
status of supply and demand in the neighborhood, compare the number of
condominium units sold to the number of condominium units listed for
sale in a recent time period. The similarity or difference between the
number of units sold and listed, not the absolute numbers, should
determine the demand/supply level.

Marketing Time

? Mark the appropriate marketing time - the typical length of time a
property similar to the subject property would have to stay on the
market before being sold at a price near its market value.

Condominium Housing

Price Age

? Indicate the low and high neighborhood prices and ages as well as the
predominant value and age. The high and low for both price and age
should exclude the extreme.

Present Land Use %

One-Unit, 2-4 Unit, Multi-Family, Commercial, Other

? Estimate each type of land usage in the neighborhood. If there is no
land in the neighborhood with one of the designated classifications,
enter a \"0\". If a portion of the land consists of parks or other
unspecified classifications, enter the estimated percentages on the
\"Other\" line and explain in the neighborhood description section.

Neighborhood Narrative

Neighborhood Boundaries

? The appraiser must clearly define the boundaries - north, south, east
and west - of the subject\'s neighborhood. Providing a description of
neighborhood boundaries by physical features such as streets, rail
lines, other man-made barriers or well defined natural barriers (i.e.
rivers, lakes, etc.) details the make up and understanding regarding
neighborhood composition.

Neighborhood Narrative

Neighborhood Description

? Discuss factors that would attract residents or cause them to reject
the neighborhood. These are typical factors important to discuss:

o Level of maintenance and condition of homes

o Housing styles, ages, sizes, etc.

o Land uses

o Proximity to employment and amenities, including travel distance and
time to local employment sources and community amenities

o Employment stability, in terms of variety of employment opportunities
and industries

o Appeal to market regarding the overall appeal of the neighborhood as
compared to competitive neighborhoods in the same market

o Convenience to shopping with respect to distance, time and required
means of transportation

o Convenience to schools in terms of the distance and time for travel to
school

Market Conditions (including support for the above conclusions)

\* Provide relevant information in support of conclusions relating to
trends in property values, demand/supply and marketing time.

\* Provide a description of the prevalence and impact of sales and
financing concessions and/or down payment assistance in the subject\'s
market area.

\* Other areas of discussion may include days on market, list to sale
price ratios, and/or financing availability.

Section 4 - Project Site

This information provides the description of the land underlying the
subject project. Insert factual information on each of the lines
provided and report the conclusions as directed. Consider all aspects of
the physical description and reconcile them in the opinion of market
value. This section of the appraisal requires the appraiser to consider
any adverse site conditions or adverse external factors that may impact
value.

Field

? Protocol

Topography

? Enter site topography, e.g. basically level, or it may be moderately
sloping, strongly sloping, or steeply sloped, hilly, rolling, flat, etc.
Provide an explanation regarding whether the topography affects
marketability and/or value.

Size

? Enter the project site area in square feet if less than one acre.
Enter the acreage only if more than one acre. How does size of subject
compare to typical sites in market area?

Density

\* Enter density classification as shown in zoning or other public
records for unit per acre, i.e. low density may be town houses or garden
style projects; high density may be mid-rise or high-rise projects.

View

? Briefly describe the view from the unit (None is not an acceptable
response).

\* Identify a view with a significant positive or negative influence on
the value.

\* Photographs are recommended for any negative or positive view
influences affecting value or marketability.

Specific Zoning Classification

? Enter the specific zoning classification used by the local
municipality or jurisdiction, e.g., R15, DR-3, etc.

\* If none exists, enter \"None Exists.\"

Zoning Description

\* Describe what the specific classification means. Include a general
statement describing what the zoning permits. For example: R15 = Low

Density Multi-Family Residential

\* If \"No Zoning\" exists, describe the prevalent use of sites in the
neighborhood.

Zoning Compliance

? Determine whether the current use is in compliance with the zoning
ordinances. Mark the box indicating whether it is Legal, Legal

Non-Conforming (Grandfathered Use), No Zoning, or Illegal Use.

? If the existing property does not comply with all of the current
zoning regulations (use, lot size, improvement size, off street parking,
etc.) but is accepted by the local zoning authority, enter \"Legal
Non-Conforming\" and provide a brief explanation.

\* Mark the appropriate box \"yes\" or \"no\" indicating that the zoning
regulations permit rebuilding to current density.

\* If the use is not legal, the property is not eligible for FHA
mortgage insurance.

Highest and

Best Use

? Mark the appropriate box. This entry questions the categorization as
the highest and best use of the site as improved or, as proposed and
completed, in relation to the neighborhood and current market
conditions.

? If current use represents the highest and best use, mark \"yes\".

? If it does not, mark \"no\" and provide an explanation.

Utilities

? Mark either \"Public\" or \"Other.\" If \"Other\" is marked, describe.
Public utilities mean governmentally supplied and regulated. Public does
not include any community systems sponsored, owned or operated by the
developer or a private company not subject to government regulation or
financial assistance.

? Note if there are mechanical chlorinators or water-flow that decreases
noticeably while running simultaneous plumbing fixtures.

?????Visually inspect the septic system and its surrounding area. If
there are obvious or readily observable signs of system failure,
\"require inspection\" to ensure that the system is in proper working
order.

Note: The appraiser shall indicate whether a public water or sewage
disposal system is available to the site. If available, connection must
be made to public or community water/sewage disposal system if
connection costs are reasonable. The lender will determine whether
connection is feasible.

Off-site Improvements-Type

? Briefly describe the off-site improvements by which the property is
accessed.

\* Under \"Type\", enter road surface material and mark Public or
Private. For example: \"Street-Asphalt; Public\", \"Alley-None\"

? Public refers to an improvement dedicated to and accepted by a unit of
government - not including Home Owner\'s Associations.

FEMA Special Flood Hazard Area

? FEMA (Federal Emergency Management Agency) is responsible for mapping
flood hazard areas. If the property is within a Special Flood Hazard

Area, mark \"YES\". Otherwise, mark \"NO\".

? Attach a copy of the flood map panel for properties located within an
identified flood hazard area.

FEMA Flood Zone

? ?nter the FEMA Zone designation. Only properties within Special Flood
Hazard Areas, such as zones \"A\" a special flood hazard area and \"V\"
a coastal area, require flood insurance, Zones \"B\" \"C\" and \"X\" do
not.

FEMA Map \# and FEMA Map Date

? Enter the FEMA Map number and map date. If it is not shown on any map,
enter \"Not Mapped.\"

Are utilities and off site improvements typical for the market area

\* Mark the appropriate box indicating whether the utilities and
off-site improvements are typical for the market area.

\* If \"No\" is marked, explain what is typical.

Any adverse site conditions or external factors

? Mark the appropriate box indicating whether there are any adverse site
conditions or external factors (easements, encroachments, environmental
conditions, land uses, etc.).

\* If \"No\" is marked, no comment is necessary, if \"Yes\" is marked,
an explanation is required.

\* Describe any adverse site conditions or adverse factors. Consider
easements affecting the functional utility of the property in the
conclusions of both the highest and best use and market value. For
example, discuss adverse easements, encroachments, slide areas, illegal
or non-conforming zoning use, etc. Consider surface, sub-surface and
overhead easements.

\* List any adverse environmental conditions, including hazardous waste,
toxic substances and others.

\* Explain all deficiencies that do not require repair (extreme slope,
etc.) and consider them in the opinion of value.

? Discuss the observations with direct relationship to value and
consider them in the final opinion of value.

Section 5 - Project Information

This section describes the subject condominium project information.
Accurately report the conditions observed including the overall
condition of the project and quality of construction. Enter factual
information on each of the lines provided and report the conclusions.
Consider all aspects of the project information and reconcile them in
the opinion of market value.

Field

Protocol

Data source (s) for project information

\* Enter the data source(s) for the project information, i.e. condo
documents, public records, property management company, board or
association officials, etc.

Project Description

\* Mark the box that best identifies the type of project description.
Some projects may contain more than one building type. In those cases,
mark the appropriate boxes. If \"other\" is marked, enter a brief
description for the project description.

General Description

Field

Protocol

\# of Stories

? Enter the number of stories for the project property type, i.e. number
of stories for garden, mid-rise, or high-rise projects, townhouse, etc.

\# of Elevator(s)

? Enter the number of elevators. If none, enter \"walk up\".

Stage of Construction

? Mark the box indicating the stage of construction, Existing, Proposed
or Under Construction. Properties that are either Proposed or Under
Construction require plans and specifications for the appraiser to
review.

Year Built

? Enter the year built.

Effective Age (Yrs)

? Enter the effective age of the improvements. A range is acceptable.

The effective age reflects the condition of the property relative to
similar competitive properties. The effective age may be greater than,
less than or equal to the actual age.

? Note any significant difference between the actual and effective ages
and explain in the \"condition of property\" comments section.

Exterior Walls

\* Enter the type of construction material: aluminum, vinyl, wood
siding, brick veneer, stucco, etc. If a combination of materials, show
the predominant portion first.

General Description

Field

Protocol

Roof Surface

\* Enter material type used for roof covering: composition shingle,
wood, slate, clay tile, gravel, built-up, etc.

Total \# Parking

\* Enter the total number of parking spaces for the condominium project.

Ratio (spaces/units)

\* Enter the ratio, total number of parking spaces divided by the total
number of units.

Type

\* Enter the type of parking in the condominium project, such as open,
garage, carport, or assigned.

Guest Parking

\* Enter the number of guest, visitor, or non-assigned parking spaces in
the condominium project.

Subject Phase

Field

Protocol

\# of Units

\* Enter the total number of units in the subject\'s phase.

\# of Units Completed

\* Enter the number of units in the subject phase that have been
completed.

\# of Units for Sale

\* Enter the number of units in the subject\'s phase currently offered
for sale.

\# of Units Sold

\* Enter the number of units in the subject\'s phase that have been
purchased.

\# of Units Rented

\* Enter the number of units in the subject\'s phase that are rented.

\# of Owner Occupied Units

\* Enter the number of units in the subject\'s phase that are owner
occupied.

If Project Completed

Field

Protocol

\# of Phases

\* Enter the total number of phases of construction in the subject
project.

\# of Units

\* Enter the total number of units in the subject project.

\# of Units for Sale

\* Enter the number for sale in the subject project.

\# of Units Sold

\* Enter the number of units sold in the subject project.

\# of Units Rented

\* Enter the number of units rented in the subject project.

\# of Owner Occupied Units

\* Enter the number of owner occupied units in the subject project.

If Project Incomplete

Field

Protocol

\# of Planned Phases

\* Enter the total number of planned phases for the subject project.

\# of Planned Units

\* Enter the number or planned units for the subject project.

\# of Units for Sale

\* Enter the number of units for sale in the subject project.

\# of Units Sold

\* Enter the number of units sold in the subject project.

\# of Units Rented

\* Enter the number of units rented in the subject project.

\# of Owner Occupied Units

\* Enter the number of owner occupied units in the subject project.

Field

Protocol

Project Primary Occupancy

\* Mark the box indicating the occupancy type for the project, i.e.
Principle Residence, Second Home or Tenant.

Is the developer/builder in control of the HOA

\* Mark the box indicating whether or not the developer/builder is in
control of the HOA.

Management Group

\* Mark the box identifying the type of management group. If management
agent is marked, provide name of management company and phone number.

Does any single entity own more than 10% of the total units in the
project ?

\* Enter an \"X\" in the applicable box indicating whether or not a
single entity owns more that 10% of the total units in the project. If
\"yes\", provide the name of the entity and the number of units owned.
It is possible to have multiple entities in this category.

Was the project created by conversion ?

\* Enter an \"X\" in the applicable box indicating whether or not the
project was created by a conversion. If \"yes\", describe the original
use and the date of conversion.

Are the units, common elements, and recreation facilities complete?

\* Enter an \"X\" in the applicable box indicating whether or not the
common elements and recreational facilities have been completed.

\* If \"no\", provide an explanation describing what remains to be
completed.

Is there any commercial space in the project?

\* Enter an \"X\" in the applicable box indicating whether or not there
is commercial space in the project. If \"yes\" describe the commercial
space and provide the overall percentage of commercial space.

Describe the condition of the project and quality of construction

\* Describe the overall condition and maintenance of the project.

\* Note any evidence of physical deterioration

\* Rate the project\'s condition (Good, Average, Fair, Poor).

\* Rate the quality of construction giving consideration to the
durability and quality of the materials and finish.

Describe the common elements and recreational facilities

\* Describe common elements and recreational areas such as parking
areas, pools, courts, club houses, fitness centers, etc.

Are any common elements leased to or by the HOA?

\* Enter an \"X\" in the box indicating whether or not any of the common
elements are leased to the HOA.

\* If \"yes\" provide a description of the rental terms and options and
comment on any effect on the marketability or value of the project.

Is the project subject to ground rent?

\* Enter an \"X\" in the box indicating whether or not the project is
subject to a ground rent.

\* If \"yes\", enter the dollar amount of the annual ground rent and
describe the terms, restrictions, and conditions of the lease agreement
and what effect, if any, it has on the marketability or value of the
project.

Are the parking facilities adequate for the project size and type?

\* Enter an \"X\" in the box indicating whether or not the parking
facilities are adequate for the project size and type.

\* If \"no\" describe and comment on the effect of value and
marketability. For example, projects of similar size, type and quality
have garage parking whereas the subject project has assigned open
spaces.

Section 6 - Project Analysis

Field

Protocol

Analyze the Condominium Project Budget

\* Explain the results of analysis of the condominium project budget or
why the analysis was not performed.

\* The analysis includes adequacy of the fees and reserves to meet
operating expenses which may include: legal and accounting, utilities,
trash removal, snow removal, repairs and maintenance, recreational areas
maintenance and upkeep, gardening and yard maintenance, taxes,
insurance, facility rentals, etc.

Are there any other fees for the use of the project facilities

\* Enter an \"X \" in the box indicating whether or not there are any
fees other than the regular HOA fee for use of the project facilities.

\* If \"yes\", report the charges and describe.

Compared to other competitive projects

\* Mark the box that best indicates the subject project\'s unit charge
comparability to competitive projects of similar quality and design.

\* If either the \"High\" or \"Low\" box is marked, an explanation is
required.

Are there any special or unusual characteristics of the project known to
appraiser?

\* Enter an \"X\" in the box indicating whether or not there are any
special or unusual characteristics of the project known to the appraiser
(information from condo documents, budget, HOA meetings, or other
sources.

\* If \"yes\", describe and explain the effect on value and
marketability. For example, condo increasing by 30% to cover major
repair due to lack of adequate reserves for building maintenance.

Section 7 - Unit Description

Mechanical Systems

An appraiser must examine mechanical, plumbing and electrical systems of
the subject property to ensure that they are in proper working order.
This examination entails turning on the applicable systems and observing
their performance. Do not operate the systems if doing so may damage
equipment, or when outside temperatures will not allow the system to
operate.

Field

Protocol

Unit Charge

\* Enter the monthly condo/HOA fee, multiply by 12 and enter result per
year.

Annual Assessment per Sq.Ft. of GLA

\* Divide the annual assessment charge per year by the GLA to compute
the assessment per square foot.

Utilities included in monthly assessment

\* Enter an \"X \" in the appropriate box or boxes identifying which
utilities are included in the unit monthly assessment.

\* It \"other\" is marked, please describe.

General Description

Field

Protocol

Floor \#

\* Enter the floor level location of the unit.

\# of levels

\* Enter the number of levels contained in the subject unit.

Heating Type

? Enter the type of heating system: FWA (forced warm air), HWBB (hot
water baseboard), HWRad (hot water radiant) EBB (for electric
baseboard), etc.

\* Turn on the furnace/heating system to test functionality, weather
permitting, and that no unusual noises are heard, no odors or smoke are
emitted indicating a defective unit, etc. However, do not operate the
systems if doing so may damage

\* Turn on the hot water to ensure that the water heater is operating
appropriately.

\* Note any significant deterioration to heating system.

Fuel

\* Enter type of fuel used: natural gas, oil, propane, electric, etc.

Cooling Type

\* Enter an \"X\" in the box indicating the type of cooling system:
Central Air Conditioning, Individual or Other. If \"Other\" is marked,
provide a brief description, e.g. permanently affixed fans, zoned
air-conditioning, etc.

\* Turn on the air conditioning system to test functionality, weather
permitting, and that no unusual noises are heard, no odors or smoke are
emitted indicating a defective unit, etc. However, do not operate the
systems if doing so may damage equipment or when outside temperatures
will not allow system to operate.

\* Note significant holes/deterioration on the unit

Interior Materials/Condition

Enter the types of Materials and the Condition of the Materials (Good,
Average, Fair, and Poor). Make every effort to describe accurately and
explain in detail \"Fair\" and \"Poor\" ratings. The rating must relate
to the habitability of the house given local standards.

Interior

materials/condition

Field

Protocol

Floors

\* Enter floor type - tile, hardwood, carpet, etc. - and note the
condition.

Walls

\* Enter type of walls - plaster, drywall, paneled, etc. - and note the
condition.

Trim/Finish

\* Enter type of molding - wood, metal, vinyl, etc. - and note the
condition.

Bath Wainscot

\* Enter type that protects walls from moisture - ceramic tile,
fiberglass, etc. - and note the condition.

Doors

\* Enter door types - wood, metal, hollow core, etc. - and note the
condition.

Amenities

Field

Protocol

Fireplace(s) \#

\* Enter \"X\" if this amenity exists and provide a specific number

Woodstove \#

? Enter \"X\" if this amenity exists and provide a specific number

Deck/Patio

\* Enter \"X\" if this amenity exists.

Porch/Balcony

\* Enter \"X\" if this amenity exists.

Other

\* Enter \"X\" in this box if applicable and describe amenity or
feature.

Appliances

Make an entry \[X\] in the boxes to indicate that these items exist. An
entry in a box means that the item was considered part of the real
estate and is included in the value. If an item is personal property,
put a \"P\" in the box and do not include it in the opinion of value.
Treat non-functioning equipment as existing, but as deferred maintenance
in the valuation process.

Field

Protocol

Refrigerator

Enter \"X\" if this item exists. Enter \"P\" if personal property.

Range/Oven

Enter \"X\" if this item exists. Enter \"P\" if personal property.

Disp / Microwave

Enter \"X\" if this item exists. Enter \"P\" if personal property.

Dishwasher

Enter \"X\" if this item exists. Enter \"P\" if personal property.

Washer/Dryer

Enter \"X\" if this item exists. Enter \"P\" if personal property.

Car Storage

Field

Protocol

None

\* Mark \"NONE\" if there is no car storage space.

Type of Space

\* Enter an \"X\" in the box or boxes signifying type of storage space,
if applicable.

\# of Cars

\* Enter the number of cars the space can accommodate, if applicable.

Assigned or Owned

\* Mark this box indicating whether, space(s) are assigned or owned, if
applicable.

Parking Space \#

\* Enter the parking space #/

Gross Living Area

The appraiser must attach a sketch of the subject unit that indicates
interior perimeter unit dimensions rather than exterior dimensions
(include the calculations to show how you arrived at the estimated gross
living area) or attach a copy of the floor plan (along with dimensions)
provided in the condo documents which also lists the square footage.

Room Count, Gross Living Area and Heating and Cooling separately metered

Field

Protocol

Finished area above grade contains

? To complete this section, enter the total number of above grade rooms,
the total number of bedrooms above grade, and the total number of
bathrooms above grade. Do not include foyers, basement finished rooms or
unfinished attic space.

\* Enter the total square footage of the gross living area above grade.

Are heating and cooling separately metered?

\* Enter an \"X\" in the box indicating whether or not the heating and
cooling for the individual units separately metered? \"

\* If \"No\", describe and comment on compatibility to other projects in
the market area.

Narrative Comments Section

The completion of this section is critical to the opinion of market
value. The appraiser must discuss all adverse conditions and observed
physical and functional deficiencies noted. If necessary, use the
Additional Comments section of the form report, or an addendum, for
additional discussion or description.

Field

Protocol

Additional Features

? Use this space to describe special energy efficient features such as
solar energy or geothermal systems and/or to further describe the
additional features,

? Please elaborate on any special or unusual aspects of items, e.g. gas
fireplace or wood burning fireplace. Condition of the property
(including needed repairs, deterioration, renovations, remodeling, etc.)

? Describe any physical deterioration and/or functional or external
depreciation noted at the property.

? Provide a conclusion as to the overall condition of the improvements
that is supported by the previous descriptive sections.

\* Describe needed repairs.

Physical deficiencies or adverse conditions

\* Enter an \"X \" in the applicable box indicating whether or not there
are any physical deficiencies or adverse conditions that affect the
livability, soundness, or structural integrity of the property. If the
response is \"No\", no explanation is required or needed. However, if
the response is \"Yes\", a full and detailed explanation is required
and, if necessary, condition the appraisal on the \"repair or alteration
of the condition\" or a \"required inspection\" by appropriately
qualified individuals or entities, which may include professional
engineers, tradespersons, HUD Fee Inspectors.

Field

Protocol

Physical deficiencies or adverse conditions

Lead-Based Paint Hazard

\* If the home was built before 1978, this may indicate a lead paint
hazard. For all FHA insured properties, correction is required to all
defective paint in or on structures and/or property improvements built
before January 1, 1978 in accordance with 24 CFR Part 35.

\* Observe all interior and exterior surfaces, such as walls, stairs,
deck porch, railing, windows or doors for defective (chipping, flaking
or peeling) paint. (Exterior surfaces include surfaces on fences,
detached garages, storage sheds and other outbuildings and appurtenant
structures.). Note any areas affected (be specific) and condition the
appraisal on their repair subject to the satisfaction of the condition.

Property conformity

\* Enter an \"X \" in the applicable box indicating whether or not the
subject generally conforms to the neighborhood (functional utility,
style, condition, use, construction, etc.). If the response is \"Yes\",
no explanation is required or needed. However, if the response is
\"No\", an explanation is required.

Section 8 - Prior Sale History

Field

Protocol

Research sale or transfer history of subject & comps

\* Enter an \"X \" in the applicable box indicating whether you \"did\"
or \"did not\" research the sale or transfer history of the subject
property and comparable sales. If not, provide explanation.

Prior sales or transfers of subject property

\* Enter an \"X \" in the applicable box indicating whether your
research \"did\" or \"did not\" reveal any prior sales or transfers of
the subject property for the three years prior to the effective date of
this appraisal.

Data Source(s)

\* Enter data source(s) used for sales and transfer information. Two
sources are recommended for researching prior sales and transfers, local
MLS and local public records at a minimum.

\* Be familiar with the data source(s), i.e. how the data is gathered
and how often it is updated, what is the publication date of the data,
what is the effective date of the data.

Prior sales or transfers of comparable sales

\* Enter an \"X \" in the applicable box indicating whether your
research \"did\" or \"did not\" reveal any prior sales of transfers of
the comparable sales for the year prior to the date of sale of the
comparable sale.

Data Source(s)

\* Enter data source(s) used for sales and transfer information. Two
sources are recommended for researching prior sales and transfers, local
MLS and local public records at a minimum.

\* Be familiar with the data source(s), i.e. how the data is gathered
and how often it is updated, what is the publication date of the data,
what is the effective date of the data.

Report the results of the research and analysis of the prior sale or
transfer history of the subject property and comparable sales (report
additional prior sales in the \"Additional Comments\" section or an
addendum).

Field

Protocol

Date of Prior Sale / Transfer

\* Report the date(s) of prior sale(s) or transfer(s) of the subject
that occurred within three years of the effective date of the appraisal.

\* Report the date(s) of prior sale(s) or transfer(s) of each comparable
sale for the year prior to the date of the comparable sale.

Price of Prior Sale / Transfer

\* Report the price of the prior sale(s) or transfer(s) of the subject
that occurred within three years of the effective date of the appraisal.

\* Report the price of the prior sale(s) or transfer(s) of each
comparable for the year prior to the date of the comparable sale.

Data Source(s)

\* Identify data source(s) used.

Effective Date of Data Source(s)

\* Enter the date the data was published or updated by the source. For
example, the local MLS may update their database multiple times during
the week or month whereas property transfers at the local land records
office may take six or eight weeks to be recorded. The property transfer
records may have an effective date that is eight weeks earlier than the
appraisal date and the MLS data is within one week of the appraisal
date.

Analysis of prior sale or transfer history of subject and comparable
sales

\* Provide analysis of prior sale or transfer history of the subject and
comparable sales.

\* Analysis may address changes in property conditions between sale
dates or verifying if prior sale was an arm\'s-length transaction.

Section 9 - Sales Comparison Approach

Comparable Data Pool

The appraiser is required to report the number of comparable properties
currently offered for sale, as of the effective date of the appraisal,
and the number of comparable sales in the subject neighborhood, within
12 months of the effective date of the appraisal, in this section.
Unlike the neighborhood price data, which includes all sales, this
section focuses only on those properties that are comparable to the
subject, not the universe of sales.

If there was difficulty in locating comparable properties, i.e. the
subject is a \"high-rise\" and it is the only sale within the project in
the past 12 months, and one or more of the comparable properties was a
\"mid-rise\" or \"garden style\", then for purposes of this section, all
such properties in the subject\'s neighborhood are to be treated as
comparable and counted.

Field

Protocol

Comparable properties offered for sale

Enter the number of comparable properties currently offered for sale,
including those under contract, within the subject neighborhood together
with the price range.

Comparable sales

Enter the number of comparable sales that occurred within the 12 month
period preceding the effective date of the appraisal, and within the
subject neighborhood, together with the price range.

Enter factual data in each field or line.

Field

Protocol

Address and unit \#

? Enter the address and unit number for the subject and each comparable
sale.

Project Name and Phase

\* Enter the project name and phase number for the subject and each
comparable sale.

Proximity to Subject

? Enter proximity in straight-line distance and direction. For example,
\"1.5 miles NE\" or \"3 blocks south\". If comparable distance from the
subject is more than a generally accepted distance, or located outside
the defined neighborhood boundaries, be sure to explain why the sale is
applicable in the \"Summary of Sales Comparison Approach\" section.

Sale Price

? Enter the purchase price (total paid) for the subject and each of the
comparable sales. This means the closed or settled price of the
comparable sale.

\* If the appraisal involves a refinance of the subject, enter \"Refi\"
as the subject\'s sale price.

Sale Price / Gross Liv. Area

? Enter price per square foot for the above grade living area for the
subject, if a purchase transaction, and each comparable sale.

Data Source(s)

\* Enter data source(s) used for sales information.

Verification Source(s)

\* Enter verification source(s), the document or party from which the
additional proof was obtained. MLS by itself is not considered a
verification source.

\* Contacting someone with first-hand knowledge of the transaction
(agent, broker, buyer, seller, etc.) especially where it involves
confirmation of seller concessions is the preferred method of
verification.

\* A single source may be used if the quality of data is such that sales
data are confirmed and verified by settled transactions. Information
provided should permit the reader of the report to locate the data from
the sources cited.

\* Do not use as market data sales that are not verified and adjusted to
reflect the terms and conditions of sale.

Value Adjustments

Adjustments are made to the prices of the sale properties for
price-influencing dissimilarities between each sale and the subject
property. Not all dissimilarities require adjustment because not all
dissimilarities achieve price differentials in the market. All
adjustments must be extracted from and supported by the actions of the
market.

For each adjustment item, enter the description of the adjustment and
whether it is an upward or downward adjustment. Do not make an
adjustment unless it has a material effect on value.

VALUE ADJUSTMENTS

Field

Protocol

Sales or Financing Concessions

\* Report the type of financing such as Conventional, FHA or VA, etc.

\* Report the type and amount of sales concession for each comparable
sale listed. If no concessions exist, the appraiser must note \"none.\"

\* The appraiser is required to make market-based adjustments to the
comparable sales for any sales or financing concessions that may have
affected the sales price.

\* The adjustment for such affected comparable sales must reflect the
difference between the sales price with the sales concessions and what
the property would have sold for without the concessions.

Date of Sale / Time

? State month and year of the sale. Showing the contract date and

settled date is also acceptable.

\* Time adjustments, if any, must be supported by the market and
consistent with the neighborhood market conditions noted. If this is the
case, show both the contract date and settled date as any time
adjustment should be calculated using the contract date (meeting of the
minds) rather than the settled date.

Location

\* Enter the name of the subdivision or PUD. If none is applicable enter
the neighborhood name that is commonly used to refer to the property\'s
location.

Leasehold / Fee Simple

? State whether the property was sold as Fee Simple or as a Leasehold
Estate. An adjustment is required if the estate differs from the rights
appraised for the subject property, and the difference is recognized by
the local market.

HOA Mo. Assessment

? Enter the monthly unit charges

\* Any adjustments made for value differences should be explained.

Common Elements

And Rec. Facilities

\* List the common elements and recreational facilities.

\* Adjust for differences where and if warranted.

Floor Location

\* Enter the floor location of the unit.

\* Adjust for any differences attributable to floor location within a
project if warranted.

View

? Describe the view from the unit, water view, skyline, etc. Such terms
as \"Average\" or \"Good\" are only to be used as adjuncts, i.e.
\"Skyline/Average\", \"Water view/Good\".

\* Make adjustments only if the view is superior or inferior to the
subject. If the subject has a superior view and adjustments are made, a
photograph of the view amenity is recommended.

Design (Style)

? Enter the style according to a project description used. Be consistent
with improvement description.

Quality of Construction

? Enter \"Good\", \"Average\", \"Fair\", etc. using the quality rating
from your cost service subscription or provider.

\* Adjustments may also be warranted for interior construction quality
and should be explained and justified.

Actual Age

? Enter only the actual age of the subject and each comparable sale.

Condition

? Enter the condition of the subject and comparable sales.

\* Only ratings to be used are: \"New\", \"Good\", \"Average\", \"Fair\"
and \"Poor\"

? Consider any assumed repairs or alterations to the structure and the
roof when determining the need for adjustments to the comparable sales.

Above Grade Room Count

? Enter room count, consistent with the description of improvements on
the front of the appraisal form. Up to three adjustments may be entered:

\* The first line is for bathroom count differences. A deficiency or
surplus in the number of baths should be adjusted first.

\* The second line adjustment is for room count.

\* The third is for a difference in square footage.

? Explain any property that has an adjustment in both square feet and
room count.

Gross Living Area

? Enter the total square footage of the above grade living areas.

Adjustments for differences in square footage should be market derived.

Basement & Finished Rooms Below Grade

? Show full or partial basement with basement finish percentage, i.e.
Full 75%, Partial 50%.

? Enter the type of rooms below grade: bedroom, recreation room,
laundry, full bath, etc.

\* Include below grade improvements found in the subject property or
comparable sales.

? Make appropriate adjustments to reflect differences between the
comparable sales and the subject property.

? Explain any special features or finishes in the \"Summary of Sales
Comparison Approach.\"

\* If no basement enter N/A

Functional Utility

? Enter \"Equal\", \"Superior\" or \"Inferior\" as a total of the items
rated in the Improvement Analysis compared to the subject. Use the
\"Summary of Sales Comparison Approach\" to explain differences.

? Adjust for functional obsolescence observed in the subject noted in
the unit description and not found in the comparable sales.

? Extract dollar adjustments from the market. For example, a poor floor
design that includes two bedrooms so that the entrance to one is gained
by passing through the other typically requires a negative adjustment
for functional obsolescence.

\* Floor plan of the subject is required when functional obsolescence is
attributable to layout or poor floor plan.

Heating / Cooling

? Enter an adjustment for differences in heating and cooling systems.

Any adjustment should be based on market expectations.

Energy Efficient Items

? Describe energy efficient items: storm windows and doors, solar
installations, replacement windows, etc. and enter an adjustment for
differences if warranted. If none, so state.

Garage / Carport

? Enter an adjustment for car storage. Calculate adjustments in
accordance with market acceptance of carport value versus garage and
size (one car, two cars, etc.).

Porch, Patio, Deck

? Enter an adjustment for these features. Base any adjustments on local
market expectations.

Blank Lines

? ?hree blank lines are provided for the appraiser\'s use to describe
additional amenities, features or individual characteristics not listed
or addressed elsewhere in the sales grid, e.g. woodstove, fireplace,
fencing, other.

\* Enter appropriate adjustments where warranted.

Net Adjusted (Total)

? Mark either \[+\] or \[-\] box to indicate if the total net
adjustments will increase or decrease the value and note by how much. If
any adjustment is excessive, review the comparable sales to determine if
the best ones were selected. If the total adjustments appear excessive
in relation to the sale price; the appraiser should reexamine the
comparability of that sale.

? Explain any adjustment that appears to be excessive.

Adjusted Sale Price of Comparables

? Total all of the adjustments and add them to or subtract them from the
sales price of each comparable. Generally, adjustments should not exceed
10% for line items, 15% for net adjustments and 25% for gross
adjustments. If any adjustments exceed stated guidelines a detailed
explanation must be provided including reasons for not using more
similar comparable sales.

Summary of Sales Comparison Approach

\* Use this section to explain comparable selection;

\* Use this section to provide required explanations for subjective
adjustments made in any of the following value factors: Location, Site,
View, Design, Quality of Construction, Age, Condition and Functional
Utility;

\* Use this section to explain any adjustments exceeding guidelines;

\* Use this section to explain which comparable sale or sales is/are
given most weight or consideration and why.

Indicated Value by Sales Comparison Approach

\* Enter the Indicated Value

Section 10 - Income Approach

In a single-family residential property, the Income Approach is
generally not recognized as a basis for buying by the market. The
approach typically provides minimal applicability in the opinion of
market value; therefore, the Income Approach is not required for FHA
appraisals completed on the Individual Condominium Unit Appraisal
Report, Fannie Mae Form 1073. However, if adequate data is available,
the Income Approach should be completed.

Income Approach To Value (not required for FHA appraisals)

Field

Protocol

Estimated Monthly

Market Rent

? Enter the subject\'s estimated market rent and multiply it by the
Gross Rent Multiplier (ratio between sales price and gross monthly
rental income.

Summary of Income Approach

\* Provide support for market rent and GRM if developed.

Section 11- Reconciliation

The appraiser should consider all appropriate approaches to value and
all information relevant to the subject property and the market
conditions in the opinion of market value.

If there is insufficient space in the reconciliation section to list and
describe the \"repairs, alterations or required inspections\" noted,
then the appraiser is instructed to insert a reference in the
reconciliation section \"see Attached Addendum\" and list and describe
the items under the heading \"Repairs, Alterations, Required
Inspections.\"

Field

Protocol

Indicated Value by:

\* Enter the Indicated Value for each of the approaches to value
developed. If the approach was not developed, enter \"ND or \"Not Dev\"
for not developed.

\* Reconcile the approaches to value with a brief description of the
validity of each approach with respect to the appraisal assignment.

This appraisal is made

Field

Protocol

Mark this box

\"as is\"

when:

\* There is/are no Property Condition(s) noted.

\* Establishing the \"as is\" value for a regular 203(k) when needed.

This appraisal is made

Mark this box

\"per plans & specs\"

when the appraisal involves:

\* Proposed construction, or

\* Under construction, less than 90% complete, or a

\* 203(k) with a Plan Review and Specification of Repairs prepared by a
203(k) Consultant.

This appraisal is made

Mark this box

\"subject to repairs or alterations\"

when the appraisal involves existing housing, or new construction more
than 90% complete with only buyer preference items remaining (floor
coverings, appliances, landscaping packages (soil must be stabilized to
prevent erosion)), requiring repairs or alterations to:

\* Protect the health and safety of the occupants

\* Protect the security of the property

\* Correct physical deficiencies or conditions affecting structural
integrity

\* Complete buyer preference items for new homes, or to

\* Complete repairs/improvements noted in work order or contractor
estimates for the Streamline K

\* Meet FHA Minimum Property Requirements

The appraiser must indicate the extent of repairs and note this in the
appropriate section of the appraisal, or in the \"additional comments\"
section, or in an addendum, under the heading of \"Reconciliation --
Property Conditions\" listing the repairs noted together with an
estimated cost to cure.

This appraisal is made

Field

Protocol

Mark this box

\"subject to a required inspection\"

when the appraisal calls for a required inspection to:

\* Certify the condition and/or status of a mechanical or structural
element of the property

\* Protect the health and safety of the occupants

\* Protect the security of the property

\* Meet FHA Minimum Property Requirements or Minimum Property Standards

More than one box may be marked depending on the assignment and property
conditions.

The appraiser must indicate the reasoning for any required inspections
and note this in the appropriate section of the appraisal, or in the
\"additional comments\" section, or in an addendum, under the heading of
\"Reconciliation - Valuation Conditions\" listing the required
inspections.

Field

Protocol

The value \"subject to completion per plans and specifications\",
\"subject to the following repairs or alterations\", or \"subject to the
following required inspection\" must be consistent with the subject
property conditions described.

Opinion of Market Value

\* Enter the opinion of Market Value

Final Reconciliation

? This entry should contain the appraiser\'s reasoning for arriving at
the final value.

Date of Value

? Enter the date when the property was inspected.

Additional Comments - Addendum

It may become necessary to include commentary that carries beyond the
provided space of the appraisal reporting form. The use of an addendum
provides the additional space for the appraiser to fully describe any
item, area or condition where the commentary exceeds the space provided
in other sections of the report. It is recommended that any information
carried forward to the addendum, if needed, follow the sequence of the
form with a proper heading identifying said section.

For example, the neighborhood \"market conditions\" comments exceed the
space provided on the form. In that case, on page one in neighborhood
market conditions enter \"See additional comments\", in the \"additional
comments\" section enter the heading \"Neighborhood Market Conditions\"
and provide the narrative in this section. Follow the same procedure for
any section of the report where commentary exceeds space provided. This
will provide the reader with the proper identification and linkage of
additional comments together with a logical flow of information in a
standardized reporting format.

D-4 Small Residential Income Property Appraisal Report

This section provides specific instructions for completing the Small
Residential Income Property Appraisal Report (Fannie Mae Form 1025 March
2005)

This report form is designed to report an appraisal of a two-four unit
property, including a two-four unit property in a planned unit
development (PUD), based on an interior and exterior inspection of the
subject property. A two-four unit property located in a condominium
project requires the appraiser to inspect the project and complete the
project information section of the Individual Condominium Unit Appraisal
Report. This form is not designed to report an appraisal of a
manufactured home, therefore, where one or more of the units is a
manufactured home, the appraiser is required to complete the following
sections of the Manufactured Home Appraisal Report: HUD Data Plate and
Improvements sections.

Section 1 - Subject

This section provides the factual data to identify the property and the
parties to the appraisal process. The \*FHA case number together with
\*borrower and/or \*property information will be supplied by the
lender/client who engages the appraiser.

Field

Protocol

\*File Number

? Insert the FHA Case Number at the top right corner of the page.

\* The FHA appraisal may not be transmitted to the lender without a case
number.

\*Property Address

? Enter the property street number and name, city, state and zip code
for the property. A post office box number is not acceptable. Enter the
nearest intersection if a house number is not available.

\*Borrower

\* Enter the name of the borrower/mortgagor.

Owner of Public Record

\* Enter the name of the owner as listed in public records. If the
seller is not the owner of public record the appraiser must explain.

County

\* Enter the name of the county in which the property is located. It
further provides locational parameters. If not applicable enter \"N/A\".

Legal Description

? Enter the legal description of the property. The four types of legal
descriptions are: lot and block system, geodetic survey, government
survey system and metes and bounds system. If the space provided is
insufficient, enter this information with the heading \"Legal
Description\" in the \"Additional Comments\" section of the form report
or attach this information as an addendum.

Assessor\'s Parcel \#

\* Enter the parcel number assigned by the local tax assessor. For those
areas that do not have an assessor\'s parcel number, enter the tax
identification number.

Tax Year

\* Enter the current tax year used by the locale, e.g. fiscal year or
actual year.

R. E. Taxes \$

\* Enter the dollar amount of the annual real estate taxes, including
all relevant taxes (school district tax, fire district tax, etc.).

Neighborhood Name

\* Enter the name of the subdivision, if applicable, or the commonly
known local neighborhood designation. If the subject property is in a
planned unit development, provide the name of the development.

Map Reference

\* Enter location map reference, page number and coordinates, from
source used. This reference should relate to the location maps most
commonly used in the locale.

Census Tract

\* Enter the census tract number. The census tract number must be
provided.

\* The Census Bureau has an internet resource guide for locating census
information. It can be found at URL: www.census.gov

Occupant

\* Mark the box signifying the occupancy status at the time of the
appraisal.

If vacant, the appraiser should note in the \"Improvements\" section
under \"condition of property\" whether the utilities were on or off,
for each of the units, at the time of the appraisal. If off, condition
the appraisal on a satisfactory re-inspection that the utility that was
off at the time of the appraisal does not require alteration, repair or
further inspection.

Special Assessments \$

\* Report the dollar amount of special assessments for the subject
property, if any, and provide a brief explanation for the assessment.
Special assessments can include municipal bond debt for off-site
improvements. Larger than typical special assessments may affect
marketability. If not applicable enter \"N/A\".

PUD HOA\$

? Enter the dollar amount of the HOA fee and mark the box indicating if
the fees are paid \"per year\" or \"per month\".

Property Rights Appraised

? Mark the appropriate box indicating the property rights appraised for
the subject property as of the date of the appraisal. \"Other\" includes
Land Trust.

Assignment Type

\* Mark the appropriate box indicating the assignment type.

Lender/Client

Address

? Enter the name of the lender/client who ordered and will receive the
appraisal report. After the client\'s name add \"its successors or
assigns\".

\* The use of the appraisal is to support FHA\'s decision to provide
mortgage insurance on the real property that is the subject of the
appraisal; therefore, intended users include the lender/client and FHA.

\* Enter the lender/client\'s address.

Currently offered for sale or offered for sale in last 12 months.

\* The appraiser\'s certification states in part \"I have researched,
verified, analyzed and reported on any current agreement of sale of the
subject property, any offering for sale of the subject property in the
twelve months prior to the effect date of the appraisal\...\"

\* Mark the appropriate box indicating whether the subject is currently
offered for sale or has been offered for sale in the 12-month period
prior to the effective date of the appraisal. If there are multiple
actions, report each instance. Research may reveal an expired or
withdrawn listing. The prior listing may provide a good indication of
the upper limit of value.

Report data source(s) used, offering price(s), and date(s)

\* Complete this field regardless of whether the property is currently
offered for sale or has been for sale in the 12 months preceding the
date of the appraisal.

\* Identify source(s) used, price(s) and date(s) of current or prior
listings.

Section 2 - Contract

This section must be completed when the appraisal assignment involves a
purchase transaction, otherwise enter \"N/A\" for not applicable. FHA
requires that the appraiser be provided with a complete copy of the
ratified sales contract, including all addenda, for the subject
property. It provides the agreed-on contract price (accepted offer),
date of sale, and all financial terms implicit in the offer. If unable
to obtain this information, the appraiser is to state what efforts were
made to obtain it.

Field

Protocol

Analyze Contract for Sale

\* Explain the results of the analysis (terms and conditions) of the
contract of sale or why the analysis was not performed.

\* The analysis may include a reference to the number of pages contained
in the contract for sale provided.

Contract Price \$

? Enter the final agreed upon contract price.

Date of Contract

? Enter the date of the contract. This is the date when all parties have
agreed to the terms of, and signed the contract.

Is The Property Seller The Owner of Public Record

Data Source(s)

?????Mark the appropriate box indicating whether or not the seller is
the owner of public record. The appraiser is instructed to contact the
lender/client if the seller is someone other than the owner of record.
The property may not be eligible for FHA financing if it involves
flipping (resale in less than 90 days). The lender will make a
determination for any exceptions to FHA\'s Flipping Rule and advise the
appraiser.

? Report where the information was obtained.

Sales Concessions Downpayment Assistance

\* Mark the appropriate box indicating whether or not there is any
financial assistance (loan charges, sales concessions, gift or down
payment assistance, etc.) paid by any party on behalf of the borrower.
If necessary, use the \"Additional Comments\" section of the appraisal
reporting form or an addendum and enter the heading \"Sales
Concessions\" completing the description.

\* If yes, the appraiser is to report the total dollar amount and
describe the items to be paid. If the sale involves personal property
(e.g. above ground pool, lawn mower, furniture, etc.) is should be
identified and excluded from the valuation.

Section 3 - Neighborhood

This section should reflect the area surrounding the subject property.
The appraiser must observe neighborhood characteristics and surrounding
properties to make determinations that will be incorporated into the
valuation of the subject property. In all instances, the appraiser must
mark the appropriate box for each line in neighborhood characteristics
and housing trends. Failure to note conditions that may adversely affect
the value of the property is poor appraisal practice and violates the
Uniform Standards of Professional Appraisal Practice.

NOTE: Race and the racial composition of the neighborhood are not
appraisal factors.

Neighborhood Characteristics

Field

Protocol

Location

? Enter the type of area surrounding the subject property.

Urban - relates to a city

Suburban - relates to an area adjacent to a city

Rural - relates to the country or beyond the suburban area

Built-up

? Enter the built-up percentage - the percentage of available land that
has been improved. Land such as a state park would not be considered
available land.

Neighborhood Characteristics

Field

Protocol

Growth

? Enter the growth rate. If many lots are available, the growth rate may
be rapid, stable or slow, but if the neighborhood is fully developed,
select the \"stable\" box.

Two-Four Unit Housing Trends

Field

Protocol

Property Values

? Mark the box describing the current trend in property values for
Two-Four Unit single family homes in the community. If the subject
property is the sole or one of only several 2-4 unit single family homes
in the neighborhood or marketplace, indicate this scarcity under market
conditions, identify the most predominate housing type in the
neighborhood and address trends in value for that identified type.
Comparing houses that have been sold and resold in recent years is an
effective way to determine market trends. Appraisers who use this
method, however, should make sure to factor in any improvements or
changes made to the property between sales.

Demand/ Supply

? Mark the appropriate demand/supply trend. If the subject property is
the sole or one of only several 2-4 unit single family homes in the
neighborhood or marketplace, indicate this scarcity under market
conditions, identify the most predominant housing type in the
neighborhood and address trends in demand/supply for that identified
type. To determine the equilibrium status of supply and demand in the
neighborhood, compare the number of 2-4 unit properties sold to the
number of 2-4 unit properties listed for sale in a recent time period.
The similarity or difference between the numbers of houses sold and
listed, not the absolute numbers, should determine the demand/supply
level.

Marketing Time

? Mark the appropriate marketing time - the typical length of time a
property similar to the subject property would have to stay on the
market before being sold at a price near its market value.

Two-Four Unit Housing

Price Age

? Indicate the low and high neighborhood prices and ages as well as the
predominant value and age. The high and low for both price and age
should exclude the extreme.

Present Land Use %

One-Unit, 2-4 Unit, Multi-Family, Commercial, Other

? Estimate each type of land usage in the neighborhood. If there is no
land in the neighborhood with one of the designated classifications,
enter a \"0\". If a portion of the land consists of parks or other
unspecified classifications, enter the estimated percentages on the
\"Other\" line and explain in the neighborhood description section.

Neighborhood Narrative

Neighborhood Boundaries

? The appraiser must clearly define the boundaries - north, south, east
and west - of the subject\'s neighborhood. Providing a description of
neighborhood boundaries by physical features such as streets, rail
lines, other man-made barriers or well defined natural barriers (i.e.
rivers, lakes, etc.) details the make up and understanding regarding
neighborhood

composition.

Neighborhood Description

? Discuss factors that would attract investors or cause them to reject
the neighborhood. Some typical factors important to discuss include:

o Vacancy / rent loss

o Level of maintenance and condition of homes

o Housing styles, ages, sizes, etc.

o Proximity to employment and amenities, including travel distance and
time to local employment sources and community amenities

o Employment stability, in terms of variety of employment opportunities
and industries

o Overall appeal of the neighborhood as compared to competitive
neighborhoods in the same market

o Convenience to shopping with respect to distance, time and required
means of transportation

o Convenience to schools in terms of the distance and time for travel to
school

Market Conditions (including support for the above conclusions)

\* Provide relevant information in support of conclusions relating to
trends in property values, demand/supply and marketing time.

\* Provide a description of the prevalence and impact of sales and
financing concessions and/or down payment assistance in the subject\'s
market area.

\* Other areas of discussion may include days on market, list to sale
price ratios, and/or financing availability.

Section 4 - Site

This information provides the description of the land underlying the
subject property. Insert factual information on each of the lines
provided and report the conclusions as directed. Consider all aspects of
the physical description and reconcile them in the opinion of market
value. This section of the appraisal requires the appraiser to consider
any adverse site conditions or adverse external factors that may impact
value.

Field

? Protocol

Dimensions

? List all dimensions of the site beginning with the frontage. If the
shape of the site is irregular, show the boundary dimensions (85\' X
150\' X 195\' X 250\') or attach a property survey or legal description
of the site.

Area

? Enter the site area in square feet or acres. This entry must be
consistent with the dimensions provided in the \"Dimensions\" field.

Shape

? Describe the shape of the site, e.g. triangular, square, rectangular,
irregular, flag lot.

View

? Briefly describe the view from the property (None is not an acceptable
response).

\* Identify a view with a significant positive or negative influence on
the value.

\* Photographs are recommended for any negative or positive view
influences affecting value or marketability.

Specific Zoning Classification

? Enter the specific zoning classification used by the local
municipality or jurisdiction, e.g., R-3, R-5.

\* If none exists enter \"None Exists.\"

Zoning Description

\* Describe what the specific classification means. Include a general
statement describing what the zoning permits. For example: R-3 = single
family and two-family, up to 3 dwelling units per acre

\* If \"No Zoning\" exists describe the prevalent use of sites in the
neighborhood.

Zoning Compliance

? Determine whether the current use is in compliance with the zoning
ordinances. Mark the box indicating whether it is a Legal, Legal
Non-Conforming (Grandfathered Use), No Zoning, or an Illegal Use.

? If the existing property does not comply with all of the current
zoning regulations (use, lot size, improvement size, off street parking,
etc.) but is accepted by the local zoning authority, enter \"Legal
Non-Conforming\" and provide a brief explanation.

\* If the use is not legal, the property is not eligible for FHA
mortgage insurance.

Highest and

Best Use

? Mark the appropriate box. This entry represents the highest and best
use of the site, as improved, in relation to the neighborhood and
current market conditions.

? If current use represents the highest and best use, mark \"yes\".

? If it does not, mark \"no\" and provide an explanation.

Utilities

? Mark either \"Public\" or \"Other.\" If \"Other\" is marked, describe.

Public utilities mean governmentally supplied and regulated. Public does
not include any community systems sponsored, owned or operated by the
developer or a private company not subject to government regulation or
financial assistance.

? Note if there are mechanical chlorinators or water-flow that decreases
noticeably while running simultaneous plumbing fixtures.

\* Visually inspect the septic system and its surrounding area. If there
are obvious or readily observable signs of system failure, \"require
inspection\" to ensure that the system is in proper working order.

Note: The appraiser shall indicate whether a public water or sewage
disposal system is available to the site. If available, connection must
be made to public or community water/sewage disposal system if
connection costs are reasonable. The lender will determine whether
connection is feasible.

Off-site Improvements-Type

? Briefly describe the off-site improvements under \"Type\" and enter
road surface material and mark Public or Private. For example:
\"Street-Asphalt; Public\", \"Alley-None\"

? Public refers to an improvement dedicated to and accepted by a unit of
government - not including Home Owner\'s Associations.

FEMA Special Flood Hazard Area

? FEMA (Federal Emergency Management Agency) is responsible for mapping
flood hazard areas. If the property is within a Special Flood Hazard
Area, mark \"YES\". Otherwise, mark \"NO\".

? Attach a copy of the flood map panel for properties located within an
identified flood hazard area.

FEMA Flood Zone

? ?nter the FEMA Zone designation. Only properties within Special Flood
Hazard Areas, such as zones \"A\" a special flood hazard area and \"V\"
a coastal area, require flood insurance. Zones \"B\" \"C\" and \"X\" do
not.

FEMA Map \# and FEMA Map Date

? Enter the FEMA Map number and map date. If it is not shown on any map,
enter \"Not Mapped.\"

Are utilities and off site improvements typical for the market area

\* Mark the appropriate box indicating whether the utilities and
off-site improvements are typical for the market area.

\* If \"No\" is marked, explain why the utilities and/or off site
improvement are not typical.

Any adverse site conditions or external factors

? Mark the appropriate box indicating whether there are any adverse site
conditions or external factors (easements, encroachments, environmental
conditions, land uses, etc.).

\* If \"No\" is marked, no comment is necessary, if \"Yes\" is mark, an
explanation is required.

\* Describe any adverse site conditions or adverse factors. Consider
easements affecting the functional utility of the property in the
conclusions of both the highest and best use and market value. For
example, discuss adverse easements, encroachments, slide areas, illegal
or non-conforming zoning use, etc. Consider surface, sub-surface and
overhead easements.

\* List any adverse environmental conditions, including hazardous
wastes, toxic substances and others.

\* Explain all deficiencies that do not require repair (extreme slope,
etc.) and consider them in the opinion of value.

? Discuss the observations with direct relationship to value and
consider them in the approaches to value.

Section 5 - Improvements

This section describes the subject improvements. Accurately report the
conditions observed. Describe needed repairs, or the existence of any
functional or external obsolescence. Enter factual information on each
of the lines provided and report the conclusions. Consider all aspects
of the physical description and reconcile them in the opinion of market
value.

General Description

Field

Protocol

Units

? Mark the appropriate box indicating number of units.

Accessory Unit

\* A 2-4 unit dwelling with an accessory unit is ineligible for FHA
financing.

\# of Stories

? Enter the number of stories above grade, including half stories. Do
not include the basement.

\# of Buildings

\* Enter number of buildings.

Type

? Mark the box that identifies the type of dwelling, \"Det.\"
(Detached), \"Att.\" (Attached), \"S-Det.\" (Semi-Detached) or \"End
Unit\" (End unit of a group of rowhouses or townhouses).

Stage of Construction

? Mark the box signifying the stage of construction, Existing, Proposed
or Under Construction. Properties that are either Proposed or Under
Construction require plans and specifications for the appraiser to
review.

Design (Style)

? Enter a brief description of the house design style using historical
or contemporary fashion. For example: Cape Cod, bi-level, split level,
split foyer, colonial, town house, rowhouse, etc. Do not use builder\'s
model name.

Avoid generic descriptions such as Traditional or Conventional.

Year Built

? If the property is less than one year old, include both the month and
year completed.

? If it is over one year old, insert the year completed.

Effective Age (Yrs)

? Enter the effective age of the improvements. A range is acceptable.

The effective age reflects the condition of the property relative to
similar competitive properties. The effective age may be greater than,
less than or equal to the actual age.

? Note any significant difference between the actual and effective ages
and explain in the \"condition of property\" comments section.

Attic - Enter the attic and observe the interior roofing for insulation,
deficient materials, leaks or readily observable evidence of significant
water damage, structural problems, previous fire damage, FRT sheathing,
exposed and frayed wiring and adequate ventilation by vent, fan or
window. If any of these deficiencies exist, condition the appraisal on
their repair and prepare the appraisal \"subject to repairs\" and/or
\"subject to inspection\".

The attic must be entered, at a minimum, by head and shoulders, whether
access is by pull-down stairway or scuttle. Size of the scuttle and
accessibility of the attic dictate the level of entry.

Field

Protocol

None

Enter \'X\" if there is no attic.

Drop Stair

Enter \"X\" if this item exists.

Stairs

Enter \"X\" if this item exists.

Floor

Enter \"X\" if this item exists.

Scuttle

Enter \"X\" if this item exists.

Finished

Enter \"X\" if this item exists.

Heated

Enter \"X\" if the attic is heated.

Foundation

The appraiser is required to inspect the foundation and basement. The
appraiser must address all visible deficiencies and may require a
recommendation for an inspection. Consider deferred maintenance and
physical deterioration in the valuation process.

Basement

Generally, may be partially or completely below grade (ground level). Do
not count the basement in the finished gross living area at the grade
level. The information provided must be consistent with the description
in the Foundation section. If basement is finished and has a grade walk
out entrance, count square foot GBA.

Foundation

Field

Protocol

Concrete Slab

\* Mark this box if any part of the foundation system has concrete slab.

Crawl Space

\* Mark this box if any part of the foundation system has crawl space.

\* Access to the space should be clear. Examine the crawl space for
inadequate access (minimum entry of the head and shoulders).

\* Check the distance from the bottom of floor joists to ground. Space
should be adequate for maintenance and repair. A minimum distance of 18
inches from the ground to the bottom of the joists is highly recommended
but not mandated.

\* Check for insulation, and ventilation or for any structural problems.
The support beams should be intact and of structural soundness.

Full Basement

\* Mark this box if there is a full basement.

Partial Basement

\* Mark this box if there is a partial basement.

\* For a dirt basement floor, determine whether such a property is
typical for the area and is readily marketable. If so, it is not
required that a concrete basement floor be installed. Mechanical
equipment, however, must be located on a concrete pad.

Basement Area Sq Ft

\* Enter the square footage of the basement area using exterior
dimensions.

Basement Finish %

\* Enter the percentage of basement (figure above) that is finished.

Outside Entry/Exit

\* Mark this box only if there is an outside entry/exit, otherwise leave
blank.

\* In there is an entry, make sure door is operable.

Sump Pump

? Mark this box only if there is a sump pump, otherwise leave blank.

Evidence of

Infestation

\* Mark this box if there is evidence of infestation, including the
house and/or other structures within the legal boundaries of the
property, otherwise leave blank.

? Examine the subject property for readily observable evidence of wood
boring insect.

\* Do not require a pest inspection based solely on the age of a
property. Inspections are necessary whenever there is evidence of decay,
pest infestation, suspicious damage or when it is customary to the area
or required by state law.

Evidence of Dampness

? Mark this box if there evidence of dampness, otherwise leave blank.

\* Examine the foundation/basement for dampness or readily observable
evidence of water damage. Signs of past water problems may include
efflorescence, mold, mildew or stains on walls or mechanical equipment.

\* Basement or crawl space area must not have excessive dampness or
ponding of water.

\* If any of these inadequacies exist, condition the appraisal \"subject
to repairs\" to correct the condition, or \"subject to inspection\" to
determine the source of problem and corrective measures necessary by a
qualified party.

Evidence of Settlement

? Mark this box if there is evidence of settlement, otherwise leave
blank.

?????Examine foundation for readily observable evidence of settlement.

\* Hairline step-cracks are common, however, horizontal cracks, bulging
walls or separation of sill plate from top of foundation wall are
critical and require inspection.

Mechanical Systems

An appraiser must examine the mechanical, plumbing and electrical
systems of the subject property to ensure that they are in proper
working order. This examination entails turning on the applicable
systems and observing their performance. Electrical, plumbing and/or
heating certifications may be called for by the appraiser when he/she
cannot determine if one or all of these systems are working properly. An
appraiser should not arbitrarily call for such certifications. However,
the appraiser is still responsible for checking the functionality of
these systems at the time of appraisal. Note the type of heating and
cooling for each unit, if different.

Heating and Cooling Systems

Field

Protocol

Heating

? Enter an \"X\" in the box indicating the type of heating system: FWA
(forced warm air), HWBB (hot water baseboard), Radiant or \"Other\". If
\"Other\" is marked, provide a brief description, e.g. EBB (for electric
baseboard).

\* Turn on the furnace/heating system to test functionality, weather
permitting, and that no unusual noises are heard, no odors or smoke are
emitted indicating a defective unit, etc. However, do not operate the
systems if doing so may damage equipment or when outside temperatures
will not allow system to operate.

\* Note significant holes/deterioration on the unit.

\* Turn on the hot water to ensure that the water heater is operating
appropriately.

Fuel

? Enter type of fuel used: coal, gas, oil, propane, electric, etc.

Cooling

\* Enter an \"X\" in the box indicating the type of cooling system:
Central Air Conditioning, Individual or Other. If \"Other\" is marked,
provide a brief description, e.g. permanently affixed fans, zoned
air-conditioning, etc.

Heating and Cooling Systems

Field

Protocol

Cooling

\* Turn on the air conditioning system to test functionality, weather
permitting, and that no unusual noises are heard, no odors or smoke are
emitted indicating a defective unit, etc. However, do not operate the
systems if doing so may damage equipment or when outside temperatures
will not allow system to operate.

\* Note significant holes/deterioration on the unit

Exterior Materials/Condition

Enter the types of Materials and rate the observed Condition of the
Materials (Good, Average, Fair, and Poor). Make every effort to describe
accurately and explain in detail \"Fair\" and \"Poor\" ratings and
whether or not the item(s) described require repair, replacement or
further inspection. The rating must relate to the habitability of the
house given local standards (Photo documentation of property condition
is always advisable).

Exterior Description

materials/condition

Field

Protocol

Foundation Walls

\* Enter the material type: poured concrete, block, brick, stone,
treated wood, etc. and rate the observed condition.

Exterior Walls

? Enter the material type: aluminum, vinyl or wood siding, brick veneer,
stucco, stone, etc. If a combination of materials, show the predominant
portion first and rate the observed condition.

Roof Surface

? Enter the material type: composition shingle, asphalt shingle, wood,
slate, clay tile, aluminum, built-up, etc. and rate the observed
condition.

\* View the roof from ground level to determine if the integrity of the
roof is sufficient.

\* If the roof is otherwise unobservable, look for telltale signs of
roof problems on the interior such as damage or water stains to ceiling
area of a room or closet.

\* Observe roof coverings, roof drainage systems, flashing, skylights,
chimneys for readily observable evidence of leakage or abnormal
condensation on building components.

\* Note any evidence of deterioration of roofing materials (missing
tiles, shingles,

flashing). Deteriorated roofing materials include those that are worn,
cupped, or curled.

\* The appraiser must note in the appraisal that he/she could not
adequately observe the entire roof area (state which area(s) were
unobservable). Based on the information reported by the appraiser, the
underwriter will determine whether or not a roofing inspection is
required.

Gutters and Downspouts

? Enter the material type: galvanized, aluminum, plastic, vinyl, PVC,
etc. and rate the condition observed.

Exterior Description

materials/condition

Field

Protocol

Window Type

? Enter window type: Double Hung, Single Hung, Casement, Sliders, etc.
and identify the window frame material: wood, aluminum, steel, vinyl,
etc. Rate the condition observed. Bedroom windows with security bars
require a quick release mechanism for emergency egress. If not so
equipped, condition the appraisal on a \"required repair\".

Storm Sash / Insulated

? Describe storm sash material or state if windows are double glazed,
etc. or a combination of the two. Rate the condition observed. If none,
so state.

Screens

\* Describe style (full, half, none) and rate the condition observed.

A brief description of an amenity may include its material type and/or
size and/or dimensions.

Amenities

Field

Protocol

Fireplace(s) \#

\* Enter \"X\" if this amenity exists and provide a specific number.

Woodstove \#

\* Enter \"X\" if this amenity exists and provide a specific number.

Patio/Deck

\* Enter \"X\" if this amenity exists. Describe material/type in
additional features.

Fence

\* Enter \"X\" if this amenity exists. Describe material/type in
additional features.

Pool

\* Enter \"X\" if this amenity exists. Describe in additional features.
Specify whether in-ground or above-ground. Above-ground pools are
considered personal property and are not to be included in the value.

Porch

\* Enter \"X\" if this amenity exists. Describe material/type in
additional features.

Other

\* Enter \"X\" if this line is used to report another amenity or salient
feature not listed above that has contributory value. Describe \"Other\"
in additional features. Be sure to compare the subject and comparable
sales in relation to that amenity or feature and make the appropriate
adjustments.

Interior Materials/Condition

Enter the types of Materials and rate the observed Condition of the
Materials (Good, Average, Fair, and Poor) and whether or not the item(s)
described require repair, replacement or further inspection. Make every
effort to describe accurately and explain in detail \"Fair\" and
\"Poor\" ratings. The rating must relate to the habitability of the
house given local standards (Photo documentation of property condition
is always advisable). If the condition of materials varies significantly
between the different units, address each unit

separately. Use the Additional Comment section on page 4 if necessary.

Interior

materials/condition

Field

Protocol

Floors

\* Enter material type - tile, hardwood, carpet, etc. - and rate
condition observed.

Walls

?????Enter material type - plaster, drywall, paneled etc. - and rate
condition observed.

Trim/Finish

? Enter material type - wood, metal, vinyl - and rate condition
observed.

Interior

materials/condition

Field

Protocol

Bath Floor

? Enter material type - ceramic tile, vinyl, carpet - and rate condition
observed

Bath Wainscot

? Enter material type that protects walls from moisture - ceramic tile,
fiberglass, etc. - and rate condition observed.

Car Storage

Field

Protocol

None

\* If the property does not have a garage, carport or driveway, mark
\"NONE\".

Driveway \# of Cars

\* If applicable, mark the box and enter the number of cars that can be
parked. A single lane driveway is considered to be a one-car driveway.
It would be considered a two car driveway if either car can be moved
without disturbing the other.

Driveway Surface

\* Enter surface type: concrete, gravel, macadam, etc., if none so
state.

Garage \# of Cars

\* Enter the number of cars the structure can accommodate.

Carport \# of Cars

\* Enter the number of cars the structure can accommodate.

Garage/Carport Type

\* If there is a garage, designate whether it is \"Attached\",
\"Detached\" or \"Built-in\" and Enter an \"X\" in the box(es)
indicating the style \"Att.\", \"Det., \"Built-in\"

Appliances

Field

Protocol

Refrigerator

Enter the number of refrigerators, enter 0 if none.

Range/Oven

Enter the number of range/ovens, enter 0 if none.

Dishwasher

Enter the number of dishwashers, enter 0 if none.

Disposal

Enter the number of disposals, enter 0 if none.

Microwave

Enter the number of microwaves, enter 0 if none.

Washer/Dryer

Enter the number of washer/dryers, enter 0 if none.

Other

Enter \"X\" for any other appliances not listed above and describe. Do
not include personalty. Enter \"none\" if applicable.

Gross Living Area

The gross living area is obtained by drawing an imaginary line on the
outside perimeter walls of each unit (similar to the method used to
measure a single family dwelling). Do not include attic or basement
areas that may be assigned to a unit.

Gross Building Area

The gross building area is the total finished area (including common
areas - hallways, interior stairways, etc.) of the improvements, above
and below grade, based upon exterior measurements. Use same method for
calculating GBA of comparable sales and rentals.

Room Count and Square Feet of Gross Living Area

Field

Protocol

To complete this section

\* Enter, for each unit, the total number of rooms, the total number of
bedrooms, and the total number of bathrooms.

\* Enter the total square footage of the gross living area for each
unit.

\* If a unit is located in the basement but has a walk-out at grade
entrance, included it in the gross building area.

Narrative Comments Section

The completion of this section is critical to the opinion of market
value. The appraiser must discuss all adverse conditions and observed
physical and functional deficiencies noted. If necessary, use the
Additional Comments section of the form report, or an addendum, for
additional discussion or description.

Field

Protocol

Additional Features

? Use this space to describe special energy efficient features such as
solar energy or geothermal systems and/or to further describe the
additional features,

? Please elaborate on any special or unusual aspects of items, e.g. gas
fireplace or wood burning fireplace, in-ground pool, etc. Condition of
the property (including needed repairs, deterioration, renovations,
remodeling, etc.)

? Describe any physical deterioration and/or functional or external
depreciation noted at the property.

? Provide a conclusion as to the overall condition of the improvements
that is supported by the previous descriptive sections.

\* Describe needed repairs.

Physical deficiencies or adverse conditions

\* Enter an \"X \" in the applicable box indicating whether or not there
are any physical deficiencies or adverse conditions that affect the
livability, soundness, or structural integrity of the property. If the
response is \"No\", no explanation is required or needed. However, if
the response is \"Yes\", a full and detailed explanation is required
and, if necessary, condition the appraisal on the \"repair or alteration
of the condition\" or a \"required inspection\" by appropriately
qualified individuals or entities, which may include professional
engineers, tradespersons, HUD Fee Inspectors.

Lead-Based Paint Hazard

\* If the home was built before 1978, this may indicate a lead paint
hazard. For all FHA insured properties, correction is required to all
defective paint in or on structures and/or property improvements built
before January 1, 1978 in accordance with 24 CFR Part 35.

\* Observe all interior and exterior surfaces, such as walls, stairs,
deck porch, railing, windows or doors for defective (chipping, flaking
or peeling) paint. (Exterior surfaces include surfaces on fences,
detached garages, storage sheds and other outbuildings and appurtenant
structures.). Note any areas affected (be specific) and condition the
appraisal on their repair subject to the satisfaction of the condition.

Property conformity

\* Enter an \"X \" in the applicable box indicating whether or not the
subject generally conforms to the neighborhood (functional utility,
style, condition, use, construction, etc.). If the response is \"Yes\",
no explanation is required or needed. However, if the response is
\"No\", a full and detailed explanation is required.

Subject to Rent Control

\* Enter an \"X\" in the applicable box indicating whether property is
subject to rent control

\* If yes, indicate ceilings on rent and any other pertinent controls.

Section 6 - Comparable Rental Data

The appraiser is required to report information on the subject and three
comparable rental properties. Ideally, the properties used for
comparable rentals will not be the same as those used in the Sales
Comparison Analysis.

Enter factual data in each field or line.

The following properties represent the most current, similar, and
proximate comparable rental properties to the subject property. The
analysis is intended to support the opinion of market rent for the
subject property.

Field

Protocol

Address

? Enter the address that can be used to locate each property. Enter
community, if needed, to identify property. For rural properties, list
location by road name, nearest intersection and side road.

Proximity to Subject

? Enter proximity in straight-line distance and direction. For example,
\"1.5 miles NE\" or \"3 blocks south\". If comparable distance from the
subject is more than a generally accepted distance, or located outside
the defined neighborhood boundaries, be sure to explain why the sale is
applicable in the \"Summary of Sales Comparison Approach\" section.

Current Monthly Rent

? Enter current monthly rent for the subject and each of the comparable
rentals.

.

Rent/Gross Bldg. Area

? Enter Rent/Gross Bldg Area for the subject and each of the comparable
rentals.

Rent Control

\* Enter an \"X\" in the applicable box indicating rent control or not

Data Source(s)

\* Enter data source(s) used for sales and property information

Date of Lease(s)

\* Enter the date of lease for each of the subject units as well as the
comparable rentals.

Location

\* Enter the neighborhood name that is commonly used to refer to the
property\'s location.

\* Location adjustments may be warranted for positive or negative
factors that influence market rent such as busy street versus a quiet
street.

\* Explain any adjustments made in this area.

Actual Age

\* Enter only the actual age of the subject and each comparable rental.

Field

Protocol

Condition

\* Enter the condition of the subject and comparable rental.

\* Ratings to be used are: \"New\", \"Good\", \"Average\", \"Fair\" and
\"Poor\" or a combination if more accurate.

\* Consider required repairs or alterations, to the subject, completed
when determining the need for adjustments to the comparables rentals.

Gross Building Area

\* Enter the total Gross Building Area for the subject and each
comparable.

Unit Breakdown

\* Enter total room count, number of bedrooms, number of baths and size
for each unit in the subject.

\* Enter total room count, number of bedrooms, number of baths, size in
square feet, and the monthly rent for each unit in each of the three
comparable rentals.

\* Enter room count, total square footage and monthly rent for each of
the comparable rentals.

Utilities included

\* Indicate which utilities, if any, (electric, water, heat, etc.) are
included in the rent for the subject and the comparable rentals.

Analysis of rental data and support for estimated market rents

\* Provide analysis of rental data collected.

\* Provide support for estimated market rents for the subject units.

\* Discuss the adequacy of the comparable rentals.

\* Address rental concessions if applicable.

Section 7 - Subject Rent Schedule

The appraiser is required to report information on the subject leases
and provide an opinion of market rent.

Rent Schedule: The appraiser must reconcile the applicable indicated
monthly market rents to provide an opinion of the market rent for each
unit in the subject property.

Leases

\* Provide the starting and termination dates of the leases for each
unit of the subject.

\* Provide comments on lease data, i.e. terms and conditions.

\*

Actual Rent

\* Enter the rent for each unit, unfurnished or furnished, and then the
total rent.

\* Enter the total actual monthly rent for all units

\* Enter any other monthly income. Itemize this information in the
comments section below.

\* Enter the total actual monthly income.

Total Actual Rent

Other Income

Total Actual Income

\*

Opinion of Market Rent

\* Enter opinion of market rent for each unit, unfurnished and
furnished, and then the total rent.

\* Enter the total estimated market rent for all units.

\* Enter any other monthly income. Itemize this information in the
comments section below, e.g. coin operated washers and dryers, garage
rented for storage, etc.

\* Enter the total estimated monthly income.

Gross Monthly Rent

Other Income

Total Est. Income

\*

Utilities included in estimated rents

\* Enter an \"X\" in the box indicating the applicable utility items
included in the rent.

\* If the \"other\" box is marked, describe.

Comments on actual or estimated rents

\* Provide comments on actual or estimated rents and other monthly
income (including personal property) such as itemizing other monthly
income; differences, or lack there of, between actual rent and market
rent.

Section 8 - Prior Sale History

Field

\* Protocol

Research sale or transfer history of subject & comps

\* Enter an \"X \" in the applicable box indicating whether you \"did\"
or \"did not\" research the sale or transfer history of the subject
property and comparable sales. If not, provide explanation.

Research prior sales or transfers of subject property

\* Enter an \"X \" in the applicable box indicating whether your
research \"did\" or \"did not\" reveal any prior sales or transfers of
the subject property for the three years prior to the effective date of
this appraisal.

Data Source(s)

\* Enter data source(s) used for sale and transfer information.

\* Appraisers are to be familiar with the data source(s), e.g. how the
data is gathered and how often it is updated

Research prior sales or transfers of comparable sales

\* Enter an \"X \" in the applicable box indicating whether your
research \"did\" or \"did not\" reveal any prior sales of transfers of
the comparable sales for the year prior to the date of sale of the
comparable sale.

Data Source(s)

\* Enter data source(s) used for sales and transfer information. Two
sources are recommended for researching prior sales and transfers, local
MLS and local public records at a minimum.

\* Appraisers should be familiar with the data source(s), e.g. how the
data is gathered and how often it is updated.

Report the results of the research and analysis of the prior sale or
transfer history of the subject property and comparable sales (report
additional prior sales in the \"Additional Comments\" section or an
addendum).

Field

\* Protocol

Date of Prior Sale/Transfer

\* Report the date(s) of prior sale(s) or transfer(s) of the subject
that occurred within three years of the effective date of the appraisal.

\* Report the date(s) of prior sale(s) or transfer(s) of each comparable
sale for the year prior to the date of the comparable sale.

Price or Prior Sale/Transfer

\* Report the price of the prior sale(s) or transfer(s) of the subject
that occurred within three years of the effective date of the appraisal.

\* Report the price of the prior sale(s) or transfer(s) of each
comparable for the year prior to the date of the comparable sale.

Data Source(s)

\* Identify the data source(s) used.

Effective Date of Data Source(s)

\* Enter the date the data was published or updated by the source for
the subject and comparable sales. For example, the local MLS may update
their database multiple times during the week or month whereas property
transfers recorded at the local land records office may take six or
eight weeks after settlement. The property transfer records may have an
effective date that is eight weeks earlier than the appraisal date and
the MLS data is within one week of the appraisal date.

Field

\* Protocol

Analysis of prior sale or transfer history of subject and comparable
sales

\* Provide analysis of prior sale or transfer history of the subject and
comparable sales.

\* Analysis may address changes in property conditions between sale
dates or verifying if prior sale was an arm\'s-length transaction.

Section 9 - Sales Comparison Approach

The appraiser is required to report the number of comparable properties
currently offered for sale, as of the effective date of the appraisal,
and the number of comparable sales in the subject neighborhood, within
12 months of the effective date of the appraisal, in this section.
Unlike the neighborhood price data, which includes all sales, this
section focuses only on those properties that are comparable to the
subject, not the universe of sales.

If there was difficulty in locating comparable properties, i.e. the
subject is a four unit single family property and one or more of the
comparable properties was a two or three unit single family property,
etc., then for purposes of this section, all such properties in the
subject\'s neighborhood are to be treated as comparable and counted.

Field

Protocol

Comparable properties offered for sale

\* Enter the number of comparable properties currently offered for sate,
including those under contract, within the subject neighborhood together
with price range

Comparable sales

\* Enter the number of comparable sales that occurred within the 12
month period preceding the effective date of the appraisal, and within
the subject neighborhood, together with the price range

Field

Protocol

Address

\* Enter the address that can be used to locate each property. Enter
community, if needed, to identify property. For rural properties, list
location by road name, nearest intersection and side road.

Proximity to Subject

\* Enter proximity in straight-line distance and direction. For example,
\"1.5 miles NE\" or \"3 blocks south\". If comparable distance from the
subject is more than a generally accept distance, or located outside the
defended neighborhood boundaries, be sure to explain why the sale is
applicable in the \"Summary of Sales Comparison Approach \" section.

Sale Price

\* Enter the purchase (total paid) for the subject and each of the
comparable sales. This means the closed or settled price of the
comparable sale.

\* If the appraisal involves a refinance of the subject, enter \"Refi\"
as the subject\'s sale price.

Sale Price/Gross Bldg. Area

\* Enter price per square foot of the gross building area for the
subject, if a purchase transaction, and each comparable sale.

Gross Monthly Rent

\* Enter the Gross Monthly Rent for the subject property and each
comparable sale.

Gross Rent Multiplier

\* Enter the Gross Rent Multiplier for the subject property and each
comparable sale. A manual check on the software calculations is
recommend to test for accuracy as the appraiser is responsible for data
contained in the report (Sale price divided by gross monthly rent).

Price Per Unit

\* Enter Price Per Unit for the subject property and each comparable.

Price Per Room

\* Enter Price Per Room for the subject property and each comparable.

Price Per Bedroom

\* Enter Price Per Bedroom for the subject property and each comparable.

Rent Control

\* Enter an \"X\" in the box indicating whether or not there is Rent
Control.

Data Source(s)

\* Enter data source(s) used for sales and property information for each
comparable.

Verification Source(s)

\* Enter verification source(s), the document or party from which the
additional proof was obtained. MLS by itself is not considered a
verification source.

\* Contacting someone with first-hand knowledge of the transaction
(agent,

broker, buyer, seller, etc) especially where it involves confirmation of
seller

concessions, is the preferred method of verification.

\* A single source may be used if the quality of data is such that sales
data are confirmed and verified by settled transactions. Information
provided should permit the reader of the report to locate the data from
the source cited.

Verification Source(s)

\* Do not use as market data sales that are not verified and adjusted to
reflect the terms and conditions of sale.

Value Adjustments

Adjustments are made to the price of the sale properties for
price-influencing dissimilarities between each sale and the subject
property. Not all dissimilarities require adjustment because not all
dissimilarities achieve price differentials in the market. All
adjustments must be extracted from and supported by the actions of the
market.

For each adjustment item, enter the description of the adjustment and
whether it is an upward or downward adjustment. Do not make an
adjustment unless it has a material effect on value. Make adjustments
only if the dissimilarity has a noticeable effect on the value. Small
differences do not usually require adjustments.

VALUE ADJUSTMENTS

Field

Protocol

Sales or Financing Concessions

\* Report the type of financing such as Conventional, FHA or VA, etc.

\* Report the type and amount of sales concession for each comparable
sale listed. If no concessions exist, the appraiser must note \"none.\"

\* The appraiser is required to make market-based adjustments to the
comparable sales for any sales or financing concessions that may have
affected the sales price.

\* The adjustment for such affected comparable sales must reflect the
difference between the sales price with the sales concessions and what
the property would have sold for without the concessions.

Date of Sale / Time

? State month and year of settlement. Showing the contract date and
settled date is also acceptable.

\* Time adjustments, if any, must be supported by the market and
consistent with the neighborhood market conditions noted. If this is the
case, show both the contract date and settled date as any time
adjustment should be calculated using the contract date (meeting of the
minds) rather than the settled date. Explanation is required for any
time adjustments.

Location

\* Enter the name of the subdivision or PUD. If none is applicable enter
the neighborhood name that is commonly used to refer to the property\'s
location.

\* Location adjustments may be warranted for positive or negative
factors that influence sales price such as busy street versus quiet
street.

\* Explain any adjustments made in this area.

Leasehold / Fee Simple

? State whether the property was sold as Fee Simple or as a Leasehold
Estate. An adjustment is required if the estate differs from the rights
appraised for the subject property.

Site

? Enter the site size. Make adjustments only for measurable differences.
Small differences in lot sizes do not usually call for an adjustment if
the size is typical.

? If necessary, consider the possibility of excess or surplus land.

View

? Describe the view from the site, i.e. similar homes, commercial area,
water view, scenic view, etc. Such terms as \"Average\" or \"Good\" are
only to be used as adjuncts, i.e. \"Residential/Average\", \"Water
view/Good\".

\* Make adjustments only if the view is superior or inferior to the
subject.

\* If the subject has a superior view and adjustments are made, a
photograph of the view amenity is recommended.

Design (Style)

? Enter the style according to a description used by local custom. Be
consistent with improvement description.

Quality of Construction

? Enter \"Good\", \"Average\", \"Fair\", etc. using the quality rating
from your cost service subscription or provider.

\* Adjustments may be warranted for construction quality and should be
explained.

Actual Age

? Enter only the actual age of the subject and each comparable sale.

Condition

? Enter the condition of the subject and comparable sales.

\* Ratings to be used are: \"New\", \"Good\", \"Average\", \"Fair\" and
\"Poor\" or a combination if more accurate.

? Consider required repairs or alterations to the subject completed when
determining the need for adjustments to the comparable sales.

Gross Building Area

? Enter the total Gross Building area for the subject and each
comparable.

Unit Breakdown

\* Enter room count per unit, consistent with the description of
improvements on the front of the form.

\* Enter room count for the units in each of the comparable sales and
make adjustments where warranted.

\* Explain adjustments in the Summary of Sales Comparison.

Basement Description

\* Enter description of basement, total square footage of basement area
and/or enter percentage of basement in relation to first floor area or
enter full, partial, none.

Basement Finished Rooms

? Enter the type of rooms below grade: bedroom, recreation room,
laundry, full bath, etc.

?????Make sure any adjustment made here have not been duplicated in the
GBA or elsewhere.

Functional Utility

? Enter \"Equal\", \"Superior\" or \"Inferior\" as a total of the items
rated in the Improvement Analysis compared to the subject. Use the
\"Summary of Sales Comparison Approach\" to explain differences.

? Adjust for functional obsolescence observed in the subject and not
found in the comparables.

Heating / Cooling

? Enter type of heating and cooling systems, e. g. Gas FWA C/Air.

\* Any adjustment for differences in heating and cooling systems should
be based on market expectations.

Energy Efficient Items

? Describe energy efficient items: storm windows and doors, solar
installations, replacement windows, etc. and enter an adjustment for
differences if warranted. If none, so state.

Parking on/off Site

?????Enter description of on/off site parting. Calculate adjustments in
accordance with market acceptance of on/off site parting.

Porch, Patio, Deck

? Enter these features for the subject and comparable sales if they
exist. Base any adjustments on local market expectations.

Blank Lines

? ?hree blank lines are provided for the appraiser\'s use to describe
additional amenities, features or individual characteristics not listed
or addressed elsewhere in the sales grid, e.g. woodstove, fireplace,
fencing, pool or other.

\* Enter appropriate adjustments. For example, a pool located in an area
that expects pools might bring a dollar premium in comparison to a
comparable without a pool.

Net Adjusted (Total)

? Mark either \[+\] or \[-\] box to indicate if the total net
adjustments will increase or decrease the value and note by how much. If
any adjustment is excessive, review the comparable sales to determine if
the best ones were selected. If the total adjustments appear excessive
in relation to the sale price; the appraiser should reexamine the
comparability of that sale.

? Explain any adjustment that appears to be excessive.

Adjusted Sale Price of Comparables

? Total all of the adjustments and add them to or subtract them from the
sales price of each comparable. Generally, adjustments should not exceed
10% for line items, 15% for net adjustments and 25% for gross
adjustments. If any adjustments exceed stated guidelines an explanation
must be provided including reasons for not using more similar comparable
sales.

Adjusted Price Per Unit

\* Enter adjusted price per unit for each comparable sale (adjusted sale
price divided by number of units).

Adjusted Price Per Room

\* Enter adjusted price per room for each comparable sale (adjusted sale
price divided by number of rooms).

Adjusted Price Per Bedroom

\* Enter adjusted price per bedroom for each comparable sale (adjusted
sale price divided by number of bedrooms).

Value Per Unit

\* Enter adjusted price per unit and multiply by number of units =
estimated value.

Value Per GBA

\* Enter price per gross square foot of building area and multiply by
gross square feet of building = estimated value

Value Per Room

\* Enter adjusted price per room and multiply by number of rooms =
estimated value.

Value Per Bedroom

\* Enter adjusted price per bedroom and multiply by number of bedrooms =
estimated value.

Summary of Sales Comparison Approach

\* Explain comparable selection and any necessary explanation of
adjustments.

\* Explain any adjustments exceeding guidelines.

\* The appraiser must reconcile the above value indicator(s) and comment
which were given most consideration and why.

Indicated Value by Sales Comparison Approach

\* Enter the indicated value by Sales Comparison Approach.

Section 10 - Income

Sale price divided by gross monthly rent = Gross Rent Multiplier

Gross Monthly Rent

\* Enter the gross monthly rent developed in the Opinion of Market Rent.

\* Multiply the gross monthly rent by the gross rent multiplier to
arrive at the indicated value by the Income Approach.

Comments on Income Approach

\* Provide comments on Income Approach including reconciliation of the
GRM.

o Reconcile the multipliers developed in the sales comparison analysis

o Judge comparability and applicability of each

o Do not average, account for differences

Section 11 - Reconciliation

The appraiser should consider all appropriate approaches to value and
all information relevant to the subject property and the market
conditions in the opinion of market value.

If there is insufficient space in the reconciliation section to list and
describe any \"repairs, alterations or required inspections\" noted,
then the appraiser is instructed to insert a reference in the
reconciliation section \"see Additional Comments section on the next
page\" and then list and describe the items under the heading \"Repairs,
Alterations, Required Inspections\". If necessary, due to space
limitations, use an addendum with the same heading.

Field

Protocol

Indicated Value by:

\* Enter the Indicated Value for each of the approaches to value
developed.

If the approach was not developed, enter \"ND or \"Not Dev\" for not
developed.

\* Reconcile the three approaches to value with a brief description of
the validity of each approach with respect to the appraisal assignment.

This appraisal is made

Field

Protocol

Mark this box

\"as is\"

when:

\* There is/are no repair(s), alteration(s) or inspection condition(s)
noted.

\* Establishing the \"as is\" value for a regular 203(k) when needed.

\* The property is ineligible for FHA financing and is being rejected.

This appraisal is made

Mark this box

\"per plans & specs\"

when the appraisal involves:

\* Proposed construction, or

\* Under construction, less than 90% complete, or a

\* 203(k) with a Plan Review and Specification of Repairs prepared by a
203(k) Consultant.

This appraisal is made

Mark this box

\"subject to repairs or alterations\"

when the appraisal involves existing housing, or new construction more
than 90% complete with only buyer preference items remaining (floor
coverings, appliances, landscaping packages (soil must be stabilized to
prevent erosion)), requiring repairs or alterations to:

\* Protect the health and safety of the occupants

\* Protect the security of the property

\* Correct physical deficiencies or conditions affecting structural
integrity

\* Complete buyer preference items for new homes, or to

\* Complete repairs/improvements noted in work order or contractor
estimates for the Streamline K

\* Meet FHA Minimum Property Requirements

The appraiser must indicate the extent of repairs and note this in the
appropriate section of the appraisal, or in the \"additional comments\"
section, or in an addendum, under the heading of \"Reconciliation --
Required Repairs\" listing the repairs noted together with an estimated
cost to cure.

This appraisal is made

Field

Protocol

Mark this box

\"subject to a required inspection\"

when the appraisal calls for a required inspection to:

\* Certify the condition and/or status of a mechanical or structural
element of the property

\* Protect the health and safety of the occupants

\* Protect the security of the property

\* Meet FHA Minimum Property Requirements or Minimum Property Standards

More than one box may be marked depending on the assignment and property
conditions.

The appraiser must indicate the reasoning for any required inspections
and note this in the appropriate section of the appraisal, or in the
\"additional comments\" section, or in an addendum, under the heading of
\"Reconciliation - Required Inspection \" listing the required
inspections.

Field

Protocol

The value \"subject to completion per plans and specifications\",
\"subject to the following repairs or alterations\", or \"subject to the
following required inspection\" must be consistent with the subject
property condition(s) described.

Opinion of Market Value

\* Enter the opinion of Market Value

Final Reconciliation

? This entry should contain the appraiser\'s reasoning for arriving at
the final value.

Date of Value

? Enter the date when the property was inspected.

Section 12- Additional Comments

These comment lines provide additional space for the appraiser to fully
describe any item, area or condition where the commentary exceeds the
space provided in other sections of the report. It is recommended that
any information carried forward to the additional comments section, or
an addendum if needed, follow the sequence of the form with a proper
heading identifying said section.

For example, the neighborhood \"market conditions\" comments exceed the
space provided on the form. In that case, on page one in neighborhood
market conditions enter \"See additional comments\", in the \"additional
comments\" section enter the heading \"Neighborhood Market Conditions\"
and provide the narrative in this section. Follow the same procedure for
any section of the report where commentary exceeds space provided. This
will provide the reader with the proper identification and linkage of
additional comments together with a logical flow of information in a
standardized reporting format.

Section 13 - Cost Approach

If the subject property is new construction (less than one year old), or
the Cost Approach is recognized in the market as a basis for pricing,
the appraiser may complete the Cost Approach; however, it is not
required for an FHA appraisal. If, however, the subject is a unique
property, has specialized improvements, is manufactured housing, or the
client requests the Cost Approach be completed, then the Cost Approach
is required and must be completed. The square foot method is to be used.

\* State the Remaining Economic Life as a single number or as a range.
This line must be completed for every FHA appraisal whether or not the
cost approach is completed. An explanation is required if the remaining
economic life is less than 30 years.

Cost Approach To Value

Provide adequate information for the lender/client to replicate the
below cost figures and calculations.

Field

Protocol

Support for opinion of site value

\* Provide a summary of the comparable land sales or other methods
(abstraction, allocation, land residual, extraction) of estimating site
value in support of the opinion of site value.

Reproduction or Replacement Cost

\* Mark the box indicating which cost estimating method was used

\* Reproduction Cost - exact duplicate with all deficiencies and
obsolescence

\* Replacement Cost - cost at current prices with equivalent utility.

Source of Cost Data

\* Provide the name of the cost service and reference page numbers of
cost tables or factors. Reviewer or reader must be able to replicate.

Provide adequate information for the lender/client to replicate the
below cost figures and calculations.

Field

Protocol

Quality Rating

\* Enter the quality rating of the cost tables or factors referenced.

Effective Date

\* Enter the edition and date of latest updates referenced.

Comments

\* Describe how physical depreciation was calculated

\* Describe functional or external obsolescence,

\* Gross living area calculations or refer to property sketch.

Economic Life

\* Enter remaining economic life of improvements (required for all FHA
appraisals).

Opinion of Site Value

\* Enter the Opinion Of Site Value

Dwelling Sq. Ft. @ \$

\* Enter the GLA, multiply it by the square foot factor - enter result.

Basement Sq. Ft. @ \$

\* Enter basement square feet, multiply it by square foot factor --
enter result.

Blank Line

\* Use this line for lump sum adjustments for plumbing fixtures,
dormers, fireplaces, built-in appliances, pools, etc. Add together -
enter the sum.

Gar/Crprt Sq. Ft @ \$

\* Enter the car storage square feet, multiply it by square foot factor
-- enter result.

Total Cost New

\* Add the results of the first five lines together - enter the sum.

Less Depreciation

\* Enter the amount of estimated depreciation as a specific dollar
amount, as a percentage or as a combination of both. Entries made in
either functional or external depreciation require explanation in the
comments section. Add together all forms of depreciation - enter the sum
and deduct this total from the total cost new.

Depreciated Cost

\* Enter the difference from the total cost new less depreciation.
\"As-is\" Value of Site Improvements

\* Enter the \"as-is\" value of site improvements

Blank Line

\* Enter marketing costs here; generally averages 6%. Also, if
applicable, identify and include impact fees.

Indicated Value

\* Add together depreciated cost of improvements, \"as-is\" value of
site improvements, marketing expense and/or impact fees - enter the
total.

Section 14 - PUD Information

A PUD is a project that includes common property and improvements owned
and maintained by an owners\' association for the use and benefit of the
individual units in the subdivision. If not applicable, leave blank.

Project Information for PUDs (if applicable)

Field

Protocol

Developer/Builder in

control of HOA

? Enter an \"X\" in the box indicating whether or not the
developer/builder is in control of the Home Owners\' Association (HOA).

Unit Type(s)

\* Enter an \"X\" in the box indicating unit type, Detached or Attached.

Provide the following information for PUDs only if the developer is in
control of the HOA and the subject property is an attached dwelling
unit.

The information requested is self-explanatory. Appraisers may choose to
answer the last question referencing common elements and recreational
facilities in support of a location adjustment regardless of dwelling
style.

Field

Protocol

Legal name of project

Total number of phases Total number of units

Total number of units sold

Total units rented

Total units for sale

Data source(s)

\* Provide source(s) of information, e.g. HOA board, management company,
etc.

Was the project created by the conversion of an existing building(s)
into a PUD? If Yes, date of conversion.

Does the project contain any multi-dwelling units? Yes NoData source(s)

Are the units, common elements, and recreation facilities complete? Yes
No

If no, describe the status of completion.

Describe common elements and recreational facilities.