## Chapter 11. Appraisal Requirements

#### Overview

+-----------+----------------------------------------------------------+
| ##### Int | > This chapter contains information about appraisal      |
| roduction | > requirements.                                          |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| ###       | > This chapter contains the following topics.            |
| ## In thi |                                                          |
| s Chapter |                                                          |
+-----------+----------------------------------------------------------+

  ------- ----------------------------------------------------- ---------
  Topic   Topic description                                     See Page

  1       Using This Information                                11-2

  2       VA Reasonable Value                                   11-3

  3       VA Appraisal Requirements                             11-4

  4       Appraisal Report Contents                             11-6

  5       Submission of Appraisal Reports                       11-9

  6       Approaches to Value                                   11-11

  7       Selection and Analysis of Comparable Sales            11-12

  8       Other Market Analysis Considerations                  11-14

  9       Minimum Property Requirements and Repairs             11-17

  10      Remaining Economic Life of Improvements               11-18

  11      Proposed Construction                                 11-20

  12      Other Property Types and Situations                   11-22

  13      Liquidation Appraisals                                11-27
  ------- ----------------------------------------------------- ---------

#### 1. Using This Information

+------------+---------------------------------------------------------+
| ##### C    | > October 1, 2008, Change 8                             |
| hange Date | >                                                       |
|            | > This section has been changed to add subsection c on  |
|            | > servicers.                                            |
+------------+---------------------------------------------------------+

+-----------+----------------------------------------------------------+
| #         | > This chapter describes the requirements that must be   |
| #### a. A | > followed in appraising property for VA loan guaranty   |
| ppraisers | > purposes.                                              |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| ##### b   | > The Lender's Staff Appraisal Reviewer (SAR) of a       |
| . Lenders | > lender with Lender Appraisal Processing Program (LAPP) |
|           | > authority must use the information in this chapter     |
|           | > when reviewing the work of VA fee appraisers. This     |
|           | > information will also help lenders without LAPP        |
|           | > authority to understand appraisal reports and          |
|           | > VA-issued Notices of Value (NOV).                      |
+-----------+----------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### c.   | > The Servicer's SAR with Servicer Appraisal Processing |
|  Servicers | > Program (SAPP) authority must use the information in  |
|            | > this chapter when reviewing the work of VA fee        |
|            | > appraisers.                                           |
+------------+---------------------------------------------------------+

#### 2. VA Reasonable Value

+------------+---------------------------------------------------------+
| ##### C    | > July 20, 2007, Change 5                               |
| hange Date |                                                         |
|            | This section has been changed to create subsection      |
|            | lettering.                                              |
+------------+---------------------------------------------------------+

+-----------+----------------------------------------------------------+
| #         | > For VA loan guaranty purposes, the "reasonable value"  |
| #### a. D | > of a property is that figure which represents the      |
| efinition | > amount a reputable and qualified appraiser, unaffected |
|           | > by personal interest, bias, or prejudice, would        |
|           | > recommend to a prospective purchaser as a proper price |
|           | > or cost in the light of prevailing conditions.         |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| ####      | > VA considers reasonable value and market value to be   |
| # b. "Rea | > synonymous. VA's definition of market value is         |
| sonable"  | > consistent with that used by Fannie Mae, Freddie Mac   |
| vs. "Mark | > and major appraisal organizations.                     |
| et" Value |                                                          |
+-----------+----------------------------------------------------------+

#### 3. VA Appraisal Requirements

+-----------+----------------------------------------------------------+
| ##### Ch  | > October 1, 2008 Change 8                               |
| ange Date |                                                          |
|           | This section has been changed to update subsection a to  |
|           | provide instructions for completing the borrower field   |
|           | in the appraisal report form and to make minor           |
|           | grammatical edits.                                       |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| ##        | > Every VA appraisal must:                               |
| ### a. Ge |                                                          |
| neral Req | -   name VA as the client on the appraisal report form,  |
| uirements |                                                          |
|           | -   insert "Any Qualified Veteran," rather than the      |
|           |     veterans name in the borrower field of the appraisal |
|           |     report form,                                         |
|           |                                                          |
|           | -   be performed within VA timeliness requirements,      |
|           |                                                          |
|           | -   conform to Uniform Standards of Professional         |
|           |     Appraisal Practice (USPAP),                          |
|           |                                                          |
|           | -   meet the additional requirements (as outlined in     |
|           |     this chapter) that VA considers to be supplemental   |
|           |     to USPAP, and                                        |
|           |                                                          |
|           | -   be uploaded into E-Appraisal by the appraiser as a   |
|           |     Portable Document Format (PDF) document.             |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| ####      | > Fee appraisers must complete VA assignments as quickly |
| # b. Time | > as appraisals for conventional loans are generally     |
| liness  { | > completed in the area where the property is located.   |
| #b.-timel | > An exception may be allowed in a particular case if:   |
| iness .un |                                                          |
| numbered} | -   Valid extenuating circumstances are documented, and  |
|           |     the                                                  |
|           |                                                          |
|           | -   VA Regional Loan Center (RLC) with jurisdiction is   |
|           |     notified on IND cases, or the                        |
|           |                                                          |
|           | -   Lender Appraisal Processing Program (LAPP) lender,   |
|           |     indicated on [VA Form                                |
|           |                                                          |
|           |  26-1805](http://www.vba.va.gov/pubs/forms/26-1805.pdf), |
|           |     Request For Determination of Reasonable Value (Real  |
|           |     Estate), item 5a, is notified on LAPP cases.         |
|           |                                                          |
|           | > ***Note***: Liquidation appraisals must be completed   |
|           | > within five business days. The time required to gain   |
|           | > interior access (see section 13 of this chapter) will  |
|           | > not be counted against this standard. VA will consider |
|           | > reasonable explanations for delays beyond the control  |
|           | > of the appraiser.                                      |
|           | >                                                        |
|           | > RLCs will consider adding appraisers to the fee panel  |
|           | > in areas where it consistently takes lenders longer to |
|           | > obtain a VA appraisal than a comparable conventional   |
|           | > appraisal.                                             |
+-----------+----------------------------------------------------------+

Continued on next page

3\. VA Appraisal Requirements, Continued

+-----------+----------------------------------------------------------+
| ####      | > Fee appraisers must not complete an assignment for a   |
| # c. Prop | > property that does not appear to be eligible to become |
| erties No | > the security for a VA-guaranteed loan without first    |
| t Eligibl | > contacting the lender involved or the RLC with         |
| e for App | > jurisdiction.                                          |
| raisal  { | >                                                        |
| #c.-prope | > *See* [chapter                                         |
| rties-not | > 10](http://                                            |
| -eligible | www.warms.vba.va.gov/admin26/pamphlet/pam26_7/ch10.doc), |
| -for-appr | > section 6.                                             |
| aisal .un |                                                          |
| numbered} |                                                          |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| ##        | > Every VA appraisal must meet the USPAP requirements.   |
| ### d. US | > Lenders and their Staff Appraisal Reviewers are        |
| PAP {#d.- | > expected to be familiar with applicable USPAP          |
| uspap .un | > provisions.                                            |
| numbered} |                                                          |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| #####     | > Any appraisal that is not based on recognized          |
|  e. Sales | > appraisal practices in order to "accommodate" the sale |
|  Price Ac | > price is unacceptable and will result in VA            |
| commo- {# | > disciplinary action.                                   |
| e.-sales- |                                                          |
| price-acc |                                                          |
| ommo- .un |                                                          |
| numbered} |                                                          |
|           |                                                          |
| ##        |                                                          |
| ### datio |                                                          |
| n Prohibi |                                                          |
| ted {#dat |                                                          |
| ion-prohi |                                                          |
| bited .un |                                                          |
| numbered} |                                                          |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| ##### f.  | > The VA assigned fee appraiser must personally:         |
|  Appraisa |                                                          |
| l Tasks N | -   view the interior and exterior of the subject        |
| ot to be  |     property (except on proposed construction cases) and |
| Delegated |     the exterior of each comparable,                     |
|  {#f.-app |                                                          |
| raisal-ta | -   select and analyze the comparables,                  |
| sks-not-t |                                                          |
| o-be-dele | -   make the final value estimate, and                   |
| gated .un |                                                          |
| numbered} | -   sign the appraisal report as the appraiser.          |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| #####     | > If the VA assigned appraiser relied on significant     |
| g. Apprai | > professional assistance in performing the appraisal or |
| sal Assis | > in preparing the appraisal report (except as           |
| tance  {# | > prohibited in subsection f of this chapter) the name   |
| g.-apprai | > of that individual and the specific tasks performed    |
| sal-assis | > must be shown in the "Reconciliation" section of the   |
| tance .un | > appraisal report.                                      |
| numbered} |                                                          |
+-----------+----------------------------------------------------------+

#### 4. Appraisal Report Contents {#appraisal-report-contents .unnumbered}

+-----------+----------------------------------------------------------+
| ##### Ch  | > October 1, 2008, Change 8                              |
| ange Date |                                                          |
|           | This section has been changed to update subsection a to  |
|           | authorize the use of appraisal forms for exterior-only   |
|           | inspections for liquidation appraisals when the property |
|           | is occupied and the appraiser is unable to gain interior |
|           | access to the property and to make minor grammatical     |
|           | edits.                                                   |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| ##        | > Every VA appraisal report must include the following   |
| ### a. Re | > items.                                                 |
| quired It |                                                          |
| ems {#a.- | -   A properly completed (according to the requirements  |
| required- |     in this chapter) appraisal report using one of the   |
| items .un |     following forms:                                     |
| numbered} |                                                          |
|           | ```{=html}                                               |
|           | <!-- -->                                                 |
|           | ```                                                      |
|           | -   Uniform Residential Appraisal Report (URAR), Freddie |
|           |     Mac Form 70/Fannie Mae Form 1004, if the property is |
|           |     a single-family residence, not a manufactured home   |
|           |     or a unit in a condominium.                          |
|           |                                                          |
|           | -   Manufactured Home Appraisal Report, Freddie Mac      |
|           |     Form70B/Fannie Mae Form 1004C, if the property is a  |
|           |     single-family manufactured home.                     |
|           |                                                          |
|           | -   Individual Condominium Unit Appraisal Report,        |
|           |     Freddie Mac Form 465/Fannie Mae Form 1073, if the    |
|           |     property is a condominium unit.                      |
|           |                                                          |
|           | -   Small Residential Income Property Appraisal Report,  |
|           |     Freddie Mac Form 72/Fannie Mae Form 1025, if the     |
|           |     property has two to four living units.               |
|           |                                                          |
|           | -   Exterior-Only Inspection Residential Appraisal       |
|           |     Report, Freddie Mac Form 2055/Fannie Mae Form 2055,  |
|           |     for liquidation appraisals (only), when interior     |
|           |     access cannot be obtained (see section 13 of this    |
|           |     chapter).                                            |
|           |                                                          |
|           | -   Exterior-Only Inspection Individual Condominium      |
|           |     Appraisal Report Freddie Mac 466/Fannie Mae 1075,    |
|           |     for liquidation appraisals (only), when interior     |
|           |     access cannot be obtained (see section 13 of this    |
|           |     chapter).                                            |
|           |                                                          |
|           | -   Exterior-Only Individual Cooperative Interest        |
|           |     Appraisal Report, Fannie Mae 2095 for liquidation    |
|           |     appraisals (only), when interior access cannot be    |
|           |     obtained (see section 13 of this chapter).           |
|           |                                                          |
|           | ```{=html}                                               |
|           | <!-- -->                                                 |
|           | ```                                                      |
|           | -   A location map, showing the location of the subject  |
|           |     and each comparable.                                 |
|           |                                                          |
|           | -   Building perimeter sketches showing the "footprint"  |
|           |     of all improvements, including floor plan layout of  |
|           |     residential spaces. The calculation for the square   |
|           |     foot size of the improvements must also be shown     |
|           |     either here or in the "Comments on Cost Approach"    |
|           |     section of the URAR.                                 |
|           |                                                          |
|           | -   Photographs (see subsection b of this section).      |
|           |                                                          |
|           | -   An itemized list of any observed repairs required to |
|           |     be completed, customer preference items to be        |
|           |     installed, inspections to be performed, or           |
|           |     conditions to be corrected, for the property to meet |
|           |     VA minimum property requirements.                    |
|           |                                                          |
|           | -   A copy of the appraisal invoice should be included   |
|           |     preceding the report.                                |
+-----------+----------------------------------------------------------+

Continued on next page

4\. Appraisal Report Contents, Continued

+------------+---------------------------------------------------------+
| a\.        | -   Any additional appraisal or repair-related          |
| Required   |     information that may be needed to support the fee   |
| Items      |     appraiser's conclusions. The appropriate areas of   |
| (          |     the computer-generated URAR can be expanded to      |
| continued) |     include such information, provided the standard     |
|            |     sequence of the URAR instructions, information      |
|            |     entries, etc., does not change and the "Sales       |
|            |     Comparison Analysis" does not appear on two         |
|            |     separate pages.                                     |
+------------+---------------------------------------------------------+

+-----------+----------------------------------------------------------+
| ##        | Each appraisal report requires:                          |
| ### b. Ph |                                                          |
| otograph  | -   photographs of the subject property showing a front  |
| Requireme |     and rear view (preferably including a different side |
| nts {#b.- |     view in each photograph) and the street scene, and   |
| photograp |                                                          |
| h-require | -   a photograph of each comparable (only a front view   |
| ments .un |     of the comparable sales is required).                |
| numbered} |                                                          |
|           |     Exception:                                           |
+-----------+----------------------------------------------------------+

+---------------------------+------------------------------------------+
| If...                     | ...then...                               |
+---------------------------+------------------------------------------+
| it is a proposed          | only a photograph of the subject site    |
| construction case and no  | and street scene are required in         |
| improvements are under    | addition to a front view photograph of   |
| construction,             | each comparable.                         |
+---------------------------+------------------------------------------+
| > the property is in a    | no photographs of the comparable sales   |
| > condominium more than   | are required, provided they are located  |
| > three units high,       | in the same project as the subject       |
|                           | property and are substantially identical |
|                           | to the subject property.                 |
+---------------------------+------------------------------------------+
| > the appraiser documents | copies of listing service or advertising |
| > an inability to take    | pictures are acceptable for the          |
| > photos of the           | comparable sales if they clearly depict  |
| > comparable sales due to | the properties. Copies of listing        |
| > lack of access, poor    | service or advertising pictures in lieu  |
| > visibility, etc.,       | of photographs are never acceptable for  |
|                           | the subject property.                    |
+---------------------------+------------------------------------------+

Continued on next page

4\. Appraisal Report Contents, Continued

+-----------+----------------------------------------------------------+
| ##### c.  | > Additional certifications required by State law or     |
| Additiona | > related to continuing education or membership in       |
| l Conditi | > appraisal organizations, etc., can be made on a        |
| ons and C | > separate form or page, provided they do not conflict   |
| ertificat | > with the language on the Statement of Assumptions and  |
| ions {#c. | > Limiting Conditions or with any VA policy.             |
| -addition |                                                          |
| al-condit | > ***Note*:** Appraisal reviewers must determine that    |
| ions-and- | > additions or changes to the Statement of Assumptions   |
| certifica | > and Limiting Conditions do not conflict with VA        |
| tions .un | > requirements.                                          |
| numbered} |                                                          |
+-----------+----------------------------------------------------------+

#### 5. Submission of Appraisal Reports {#submission-of-appraisal-reports .unnumbered}

+-----------+----------------------------------------------------------+
| ##### Ch  | > October 1, 2008, Change 8                              |
| ange Date |                                                          |
|           | This section has been updated for minor grammatical      |
|           | edits.                                                   |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| ##        | > Fee appraisers are required to upload their appraisals |
| ### a. El | > into E-Appraisal at the VA [Veterans Information       |
| ectronic  | > Portal](https://vip.vba.va.gov/) (VIP) web site        |
| Transmiss | > ([https://vip.vba.va.gov](https://vip.vba.va.gov/)).   |
| ion {#a.- |                                                          |
| electroni | > System failures of VIP or E-Appraisal should be        |
| c-transmi | > reported to: <VIP@vba.va.gov>.                         |
| ssion .un |                                                          |
| numbered} | > In the event of system unavailability(ies), VA         |
|           | > appraisers may e-mail their report to the Lender       |
|           | > Appraisal Processing Program (LAPP) Lender or to VA    |
|           | > (IND Cases), but must upload into E-Appraisal at a     |
|           | > later time when the system(s) is available.            |
|           |                                                          |
|           | > As with all other aspects of the VA appraisal process, |
|           | > fee appraisers must meet all Uniform Standards of      |
|           | > Professional Appraisal Practice (USPAP) requirements   |
|           | > applicable to electronically transmitted appraisal     |
|           | > reports.                                               |
|           |                                                          |
|           | > The appraiser must upload a fully completed appraisal  |
|           | > report with all related exhibits, including            |
|           | > photographs, into E-Appraisal using the Portable       |
|           | > Document Format (PDF) from Adobe Acrobat®.             |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| #         | > VA staff, lenders, agents, servicers, and other        |
| #### b. A | > requesters with VA issued ID numbers that are          |
| ccess to  | > associated with the loan number will be able to        |
| Appraisal | > retrieve the appraisal from E-Appraisal for review,    |
|  Reports  | > issuance of the Notice of Value (NOV), or other        |
| {#b.-acce | > functions. Only the latest copy of the appraisal       |
| ss-to-app | > uploaded into E-Appraisal will be available for        |
| raisal-re | > retrieval. []{.mark}                                   |
| ports .un |                                                          |
| numbered} |                                                          |
+-----------+----------------------------------------------------------+

Continued on next page

5\. Submission of Appraisal Reports, Continued

+-----------+----------------------------------------------------------+
| ##        | > An exemption to the E-Appraisal upload requirements    |
| ### c. Ap | > may be granted when warranted. Appraisers must request |
| praiser   | > and obtain written authorization from the Regional     |
| {#c.-appr | > Loan Center (RLC) of jurisdiction to be exempt from    |
| aiser .un | > the E-appraisal requirement.                           |
| numbered} |                                                          |
|           | > If an exemption to E-Appraisal is granted, the         |
| #         | > appraiser must send the appraisal report by overnight  |
| #### E-Ap | > mail delivery to the:                                  |
| praisal E |                                                          |
| xemption  | -   VA RLC of jurisdiction, and                          |
| {#e-appra |                                                          |
| isal-exem | -   LAPP lender, indicated on VA Form 26-1805, Request   |
| ption .un |     for Determination of                                 |
| numbered} |                                                          |
|           |     Reasonable Value (Real Estate), item 5a, for LAPP    |
|           |     cases or                                             |
|           |                                                          |
|           | -   Servicer, indicated on VA Form 26-1805, Request for  |
|           |     Determination of                                     |
|           |                                                          |
|           |     Reasonable Value (Real Estate), item 5, for SAPP     |
|           |     cases.                                               |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| ##### d.  | > Appraisal reports must have the appraiser's signature, |
|  Appraise | > either electronically or handwritten.                  |
| r Signatu |                                                          |
| re and El | > The electronic signature may be a digitized image      |
| ectronic  | > controlled through a personal identification number,   |
| Signature | > or other verified signature electronic media where the |
|  {#d.-app | > appraiser has the sole control of affixing the         |
| raiser-si | > signature.                                             |
| gnature-a |                                                          |
| nd-electr | > ***Note:*** USPAP provides specifics on what can be    |
| onic-sign | > considered an electronically verified signature.       |
| ature .un | > Please refer to these standards for more information.  |
| numbered} |                                                          |
+-----------+----------------------------------------------------------+

#### 6. Approaches to Value {#approaches-to-value .unnumbered}

+-----------+----------------------------------------------------------+
| ##### Ch  | > July 20, 2007, Change 5                                |
| ange Date |                                                          |
|           | -   This section has been changed to create subsection   |
|           |     lettering.                                           |
|           |                                                          |
|           | -   Subsection b has been changed to add an example.     |
|           |                                                          |
|           | -   Subsection c has been changed to clarify the income  |
|           |     approach for income-producing properties.            |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| #####     | > VA relies exclusively on the sales comparison approach |
| a. Sales  | > to value, except in very unusual circumstances         |
| Compariso | > involving inadequate or nonexistent comparable sales   |
| n Approac | > or an extremely unique property. The VA value estimate |
| h {#a.-sa | > should never exceed what has been indicated through    |
| les-compa | > the sales comparison approach.                         |
| rison-app |                                                          |
| roach .un | > This approach recognizes that a well-informed          |
| numbered} | > purchaser will generally pay no more for a property    |
|           | > than the price of acquiring a similar property of      |
|           | > equal desirability and utility without an undue delay. |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| ##### b.  | > Since the residential real estate market does not base |
| Cost Appr | > transaction decisions on a property's reproduction or  |
| oach {#b. | > replacement cost, the cost approach to value may only  |
| -cost-app | > be used to support the sales comparison approach in    |
| roach .un | > the final reconciliation. VA does not require the      |
| numbered} | > completion of the cost approach unless it is           |
|           | > applicable to the appraisal.                           |
|           |                                                          |
|           | > ***Example**:* The cost approach may be useful in      |
|           | > supporting the sales comparison approach in an         |
|           | > appraisal of a new manufactured home in a rural area   |
|           | > that has only recent sales of stick-built homes and    |
|           | > much older manufactured homes.                         |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| ####      | > Development of an income approach for a single family  |
| # c. Inco | > property is not required. If the appraisal involves an |
| me Approa | > income-producing property (more than one living unit), |
| ch {#c.-i | > the appraiser will use the Small Residential Income    |
| ncome-app | > Property Appraisal Report, Freddie Mac Form 72 or      |
| roach .un | > Fannie Mae Form 1025, which requires value estimates   |
| numbered} | > developed through both the income approach and the     |
|           | > sales comparison approach in the final reconciliation. |
+-----------+----------------------------------------------------------+

#### 7. Selection and Analysis of Comparable Sales {#selection-and-analysis-of-comparable-sales .unnumbered}

+-----------+----------------------------------------------------------+
| ##### Ch  | > October 1, 2008, Change 8                              |
| ange Date |                                                          |
|           | This section has been updated for minor grammatical      |
|           | edits.                                                   |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| ###       | > The appraiser must select the three best closed        |
| ## a. Gen | > comparable sales available and properly adjust the     |
| eral Requ | > sales price of each comparable sale for market         |
| irement { | > recognized differences between it and the subject      |
| #a.-gener | > property. The goal is to obtain a VA value estimate    |
| al-requir | > that does not exceed the price at which similar        |
| ement .un | > properties can be purchased in the current market.     |
| numbered} | >                                                        |
|           | > The appraiser must adequately explain any reliance on  |
|           | > sales that are not truly comparable to the subject.    |
|           | >                                                        |
|           | > Sales listings, contract offers, and unsettled sales   |
|           | > must not be used as comparables.                       |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| ##### b.  | > Comparable sales should preferably exhibit a narrow    |
|  Sales Pr | > price range. The appraiser must adequately explain a   |
| ice Range | > wide range in the sale prices of comparables before or |
|  {#b.-sal | > after adjustment.                                      |
| es-price- |                                                          |
| range .un |                                                          |
| numbered} |                                                          |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| ##### c.  | > A single data source is adequate if it provides        |
|  Data and | > quality sales data verified by closed transactions.    |
|  Verifica | > Sales data provided by a party to the sale or          |
| tion  {#c | > financing of the subject property must be verified by  |
| .-data-an | > a secondary data source or a party without an interest |
| d-verific | > in the transaction.                                    |
| ation .un |                                                          |
| numbered} |                                                          |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| #####     | > Comparable sales should be recent sales, typically     |
|  d. Sales | > within 6 months and generally not more than 12 months  |
|  Dates {# | > old. In some markets, sales over 6 months old may be   |
| d.-sales- | > considered outdated.                                   |
| dates .un | >                                                        |
| numbered} | > ***Note**:* The appraiser must adequately explain the  |
|           | > use of sales over 12 months old.                       |
+-----------+----------------------------------------------------------+

Continued on next page

7\. Selection and Analysis of Comparable Sales, Continued

+-----------+----------------------------------------------------------+
| ##### e.  | > Comparable sales should be located as close to the     |
|  Location | > subject as practical. Their proximity to the subject   |
|  {#e.-loc | > (such as three blocks north) must be described.        |
| ation .un | > Generally, blocks should be used in cities and miles   |
| numbered} | > in rural areas to locate properties.                   |
|           | >                                                        |
|           | > The appraiser must adequately explain any reliance on  |
|           | > sales located either:                                  |
|           |                                                          |
|           | -   further from the subject than similar recent         |
|           |     comparable sales readily available in the subject    |
|           |     neighborhood, or                                     |
|           |                                                          |
|           | -   outside of the subject's market area.                |
|           |                                                          |
|           | > ***Note***: In some rural areas, comparable sales may  |
|           | > be 5, 10, or 20 miles away from the subject property   |
|           | > and still be within the subject's immediate market     |
|           | > area.                                                  |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| ##### f.  | > To be in a condition acceptable to VA, properties must |
| Value Adj | > meet VA's Minimum Property Requirements (MPR) (see     |
| ustments  | > [chapter                                               |
|  {#f.-val | > 12](http://w                                           |
| ue-adjust | ww.warms.vba.va.gov/admin26/pamphlet/pam26_7/ch12.doc)). |
| ments .un | > Since MPR repairs identified in the appraisal report   |
| numbered} | > must be completed as a condition of the report, value  |
|           | > adjustments to the comparables are to be made as if    |
|           | > the repairs to the subject have been accomplished.     |
|           | >                                                        |
|           | > Generally, good comparables require minimal adjustment |
|           | > for individual feature differences and a minimal total |
|           | > net adjustment. The appraiser must adequately explain  |
|           | > large adjustments.                                     |
|           | >                                                        |
|           | > Adjustments based on some factor other than market     |
|           | > reaction, such as builder costs for materials, project |
|           | > development, etc., are not generally acceptable.       |
+-----------+----------------------------------------------------------+

#### 8. Other Market Analysis Considerations {#other-market-analysis-considerations .unnumbered}

+-----------+----------------------------------------------------------+
| ##### Ch  | > October 1, 2008, Change 8                              |
| ange Date |                                                          |
|           | This section has been updated for minor grammatical      |
|           | edits.                                                   |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| ###       | > The following market analysis considerations are       |
| ## a. Int | > provided as a reminder of VA appraisal expectations    |
| roduction | > and as an aid in development of the appraisal report.  |
|           | > Reporting each consideration, separate from the        |
|           | > requirements of the appraisal report form is optional, |
|           | > unless time adjustments are used in the report.        |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| ##### b   | > The appraiser should report:                           |
| . Sales o |                                                          |
| r Financi | -   in the "Neighborhood" section of the Uniform         |
| ng Conces |     Residential Appraisal Report (URAR) or on an         |
| sions {#b |     addendum, the prevalence of sales or financing       |
| .-sales-o |     concessions (for example, interest rate buy-downs,   |
| r-financi |     inclusion of non-realty items in the transaction,    |
| ng-conces |     seller payment of any buyer closing costs, etc.);    |
| sions .un |     and                                                  |
| numbered} |                                                          |
|           | -   if any comparable sale involved concessions, the     |
|           |     effect of the concessions on the sales price of the  |
|           |     comparable should be noted. In doing so, the         |
|           |     appraiser should consider:                           |
|           |                                                          |
|           | ```{=html}                                               |
|           | <!-- -->                                                 |
|           | ```                                                      |
|           | -   that the effect of financing/sales concessions can   |
|           |     vary in different locales,                           |
|           |                                                          |
|           | -   that the amount of any adjustment should generally   |
|           |     be based upon the real estate market reaction to the |
|           |     concession, and not on the dollar-for-dollar cost of |
|           |     the concession(s) to the seller, and                 |
|           |                                                          |
|           | -   in proposed construction cases, closed sales by the  |
|           |     same builder, sales in competitive subdivisions, and |
|           |     re-sales of similar existing properties.             |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| #####     | In every case, the appraiser should:                     |
| c. Housin |                                                          |
| g Supply  | -   consider the supply and demand for available housing |
| and Deman |     in the subject market area, and                      |
| d {#c.-ho |                                                          |
| using-sup | -   report, either in the "Neighborhood" section of the  |
| ply-and-d |     URAR or on an addendum, the average listing price to |
| emand .un |     sale price ratio for the subject market area.        |
| numbered} |     Professional judgment must be used to estimate that  |
|           |     ratio if it cannot be determined from available data |
|           |     sources.                                             |
+-----------+----------------------------------------------------------+

Continued on next page

8\. Other Market Analysis Considerations, Continued

+-----------+----------------------------------------------------------+
| ####      | > In every case, the appraiser should:                   |
| # d. Mark |                                                          |
| eting Tim | -   consider the marketing time trend (increasing or     |
| e and Tre |     decreasing) in the subject market area, and          |
| nd {#d.-m |                                                          |
| arketing- | -   report, either in the "Neighborhood" section of the  |
| time-and- |     URAR or on an addendum, the extent of increase or    |
| trend .un |     decrease in the average marketing time (listing      |
| numbered} |     period) in that market area. For example, "In the    |
|           |     last 3 months, the listing period in the subject's   |
|           |     market area decreased from 180 to 90 days."          |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| #####     | > In every case, the appraiser should:                   |
| e. Sales  |                                                          |
| Listings  | -   Analyze sales listings, contract offers, and         |
| and Contr |     unsettled sales to determine if market conditions    |
| act Offer |     changed between the date each comparable sold and    |
| s {#e.-sa |     the date of the subject property appraisal. This is  |
| les-listi |     especially important in markets with rapidly         |
| ngs-and-c |     increasing or decreasing values. If the subject      |
| ontract-o |     property is in a new subdivision, the analysis       |
| ffers .un |     should include the builder's closed sales, sales in  |
| numbered} |     competitive subdivisions, and sales of similar       |
|           |     existing properties.                                 |
|           |                                                          |
|           | -   Certify, either in the "Neighborhood" section of the |
|           |     URAR or on an addendum: "I have considered relevant  |
|           |     competitive listings/contract offerings in           |
|           |     performing this appraisal, and any trend indicated   |
|           |     by that data is supported by the listing/offering    |
|           |     information included in this report."                |
|           |                                                          |
|           | -   Provide a listings/offers addendum if a significant  |
|           |     market transition is indicated in the "Neighborhood" |
|           |     section due to changes in employment opportunity,    |
|           |     housing supply/demand, average marketing time,       |
|           |     seller concessions, etc.                             |
+-----------+----------------------------------------------------------+

Continued on next page

8\. Other Market Analysis Considerations, Continued

+-----------+----------------------------------------------------------+
| e\. Sales | > ***If a sales listing and/or contract offers addendum  |
| Listings  | > is submitted:***                                       |
| and       |                                                          |
| Contract  | -   It should provide all of the following information   |
| Offers    |     regarding competitive listings or verifiable, bona   |
| (c        |     fide contract offerings considered the most similar  |
| ontinued) |     and proximate to the subject:                        |
|           |                                                          |
|           | ```{=html}                                               |
|           | <!-- -->                                                 |
|           | ```                                                      |
|           | -   The information usually found in a Multiple Listing  |
|           |     Service (MLS) entry or other listing.                |
|           |                                                          |
|           | -   How long each property has been on the market (total |
|           |     time listed).                                        |
|           |                                                          |
|           | -   Any change in the listing price of each property (if |
|           |     known).                                              |
|           |                                                          |
|           | -   A short statement comparing the property to the      |
|           |     subject.                                             |
|           |                                                          |
|           | ```{=html}                                               |
|           | <!-- -->                                                 |
|           | ```                                                      |
|           | -   Contract offerings are more desirable than listings. |
|           |                                                          |
|           | -   Any new construction contract must clearly identify  |
|           |     all optional items and variations from the basic     |
|           |     house type and any sales/financing concession        |
|           |     included in the sales price.                         |
|           |                                                          |
|           | -   Listings should be properly identified and may       |
|           |     include a legible copy of a MLS entry.               |
|           |                                                          |
|           | ```{=html}                                               |
|           | <!-- -->                                                 |
|           | ```                                                      |
|           | -   Although not required, it may be helpful to make     |
|           |     adjustments or otherwise use a sales comparison      |
|           |     analysis grid.                                       |
+-----------+----------------------------------------------------------+

#### 9. Minimum Property Requirements and Repairs {#minimum-property-requirements-and-repairs .unnumbered}

+-----------+----------------------------------------------------------+
| ##### Ch  | > October 1, 2008, Change 8                              |
| ange Date | >                                                        |
|           | > This section has been updated for minor grammatical    |
|           | > edits.                                                 |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| ##### a   | > Fee appraisers are experienced observers who must view |
| . Existin | > both the interior and exterior of the subject property |
| g Constru | > to:                                                    |
| ction {#a |                                                          |
| .-existin | -   determine its overall condition, and                 |
| g-constru |                                                          |
| ction .un | -   recommend any readily observable repairs necessary   |
| numbered} |     to make it meet VA Minimum Property Requirements     |
|           |     (MPRs) stated in [chapter                            |
|           |     12](http://                                          |
|           | www.warms.vba.va.gov/admin26/pamphlet/pam26_7/ch12.doc). |
|           |                                                          |
|           |     > On the Uniform Residential Appraisal Report        |
|           |     > (URAR), the fee appraiser must select the          |
|           |     > appropriate box in the "Reconciliation" section    |
|           |     > following, "This appraisal is made"                |
|           |                                                          |
|           | -   "As is", if the property meets MPRs with no repairs  |
|           |     required, or                                         |
|           |                                                          |
|           | -   "Subject to the following repairs...", if repairs    |
|           |     are required for the property to meet MPRs. The      |
|           |     appraiser must also provide an itemized list of      |
|           |     observed repairs, customer preference items to be    |
|           |     installed on new construction cases, or other action |
|           |     necessary to ensure the property meets MPRs.         |
|           |                                                          |
|           |     > When there is an indication of a potential         |
|           |     > environment problem (e.g., abandoned underground   |
|           |     > fuel storage tank), the appraisal report must      |
|           |     > contain a requirement for correction of the        |
|           |     > problem in accordance with any local, state or     |
|           |     > federal requirements.                              |
|           |                                                          |
|           |     > Appraisers must not recommend electrical,          |
|           |     > plumbing, heating, roofing or other inspections    |
|           |     > only as a measure of liability protection.         |
|           |     > Improvements or site conditions that do not appear |
|           |     > to meet MPR's should, in most instances, be        |
|           |     > required to be corrected, repaired or replaced,    |
|           |     > rather than inspected. An inspection should be     |
|           |     > recommended only if there is an indication of a    |
|           |     > complex problem requiring a professional opinion,  |
|           |     > such as, pests, site drainage, structural defects, |
|           |     > safety concerns, code violations, etc.             |
|           |                                                          |
|           | > ***Note***: Fee appraisers are required to view, but   |
|           | > not enter, any accessible crawl space and/or attic     |
|           | > areas of the home and report any significant defective |
|           | > conditions observed.                                   |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| ##### b.  | > See [chapter                                           |
|  Proposed | > 12](http://                                            |
|  Construc | www.warms.vba.va.gov/admin26/pamphlet/pam26_7/ch12.doc). |
| tion  {#b |                                                          |
| .-propose |                                                          |
| d-constru |                                                          |
| ction .un |                                                          |
| numbered} |                                                          |
+-----------+----------------------------------------------------------+

#### 10. Remaining Economic Life of Improvements

+-----------+----------------------------------------------------------+
| ##### Ch  | > October 1, 2008, Change 8                              |
| ange Date |                                                          |
|           | This section has been updated for minor grammatical      |
|           | edits.                                                   |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| #####     | > Remaining economic life is the estimated period of     |
|  a. Defin | > time until the improvements lose their ability to      |
| ition {#a | > serve their intended purpose as a home.                |
| .-definit |                                                          |
| ion-1 .un |                                                          |
| numbered} |                                                          |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| #         | > For VA Loan Guaranty purposes, the remaining economic  |
| #### b. B | > life of the security must be at least as long as the   |
| asic Requ | > loan repayment term, typically 30 years.               |
| irements  |                                                          |
| {#b.-basi | > A remaining economic life estimate of less than 30     |
| c-require | > years must be adequately explained and not arbitrarily |
| ments .un | > established. This is to avoid depriving veterans of    |
| numbered} | > the home of their choice in an area where they can     |
|           | > afford to live.                                        |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| ###       | > In estimating remaining economic life, the appraiser   |
| ## c. Wha | > must consider:                                         |
| t the App |                                                          |
| raiser Mu | -   the relationship between the property and the        |
| st Consid |     economic stability of the block, neighborhood, and   |
| er  {#c.- |     community;                                           |
| what-the- |                                                          |
| appraiser | -   comparisons with homes in the same or similar areas; |
| -must-con |                                                          |
| sider .un | -   the need for a home of the particular type being     |
| numbered} |     appraised;                                           |
|           |                                                          |
|           | -   the architectural design, style and utility from a   |
|           |     functional point of view;                            |
|           |                                                          |
|           | -   the workmanship and durability of the construction,  |
|           |     its physical condition, and probable cost of         |
|           |     maintenance and/or repair;                           |
|           |                                                          |
|           | -   the extent to which other homes in the area are kept |
|           |     in repair; and                                       |
|           |                                                          |
|           | -   in areas where rehabilitation and code enforcement   |
|           |     are operating or under consideration, their expected |
|           |     results in improving the neighborhood for            |
|           |     residential use.                                     |
+-----------+----------------------------------------------------------+

Continued on next page

10\. Remaining Economic Life of Improvements, Continued

+-----------+----------------------------------------------------------+
| ##### d   | > If the estimate of remaining economic life is less     |
| . What th | > than 30 years, the appraiser must provide a supporting |
| e Apprais | > explanation, based on either known economic factors or |
| er Must R | > observed physical condition.                           |
| eport {#d |                                                          |
| .-what-th | > If the estimate of remaining economic life is 30 years |
| e-apprais | > or more, the appraiser must state the estimate at its  |
| er-must-r | > maximum (for example, 40 years).                       |
| eport .un |                                                          |
| numbered} | > For condominium units, the estimate of remaining       |
|           | > economic life must be reported in the "Reconciliation" |
|           | > section of Fannie Mae Form 1073, Individual            |
|           | > Condominium Unit Appraisal Report.                     |
+-----------+----------------------------------------------------------+

#### 11. Proposed Construction {#proposed-construction .unnumbered}

+-----------+----------------------------------------------------------+
| ##### Ch  | > October 1, 2008, Change 8                              |
| ange Date |                                                          |
|           | This section has been updated for minor grammatical      |
|           | edits.                                                   |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| ##        | > Proposed construction appraisals based on construction |
| ### a. Ap | > exhibits must include the following certification:     |
| praiser C |                                                          |
| ertificat | > "I hereby certify that the information contained in    |
| ion Requi | > \[*specific identification of all construction         |
| red {#a.- | > exhibits (e.g., Smith Construction Plan Type A, 9      |
| appraiser | > sheets, [VA Form                                       |
| -certific | > 2                                                      |
| ation-req | 6-1852](http://www.vba.va.gov/pubs/forms/HUD-92005.pdf), |
| uired .un | > Description of Materials, plot plan by Jones, Inc.)*\] |
| numbered} | > was used to arrive at the estimate of reasonable value |
|           | > noted in this report.                                  |
|           |                                                          |
|           | > \[*appraiser's signature*\]                            |
|           |                                                          |
|           | > \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_"                    |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| #####     | > Each "master" appraisal must include:                  |
| b. "Maste |                                                          |
| r" Apprai | -   a separate Uniform Residential Appraisal Report      |
| sal Repor |     (URAR) completed for each basic house type in the    |
| ts {#b.-m |     appraisal;                                           |
| aster-app |                                                          |
| raisal-re | -   narrative analysis of the project to include:        |
| ports .un |                                                          |
| numbered} | ```{=html}                                               |
|           | <!-- -->                                                 |
|           | ```                                                      |
|           | -   current status of project (development stage, number |
|           |     of sales, etc.),                                     |
|           |                                                          |
|           | -   status of off-site improvements (streets, common     |
|           |     area improvements, etc.), and                        |
|           |                                                          |
|           | -   any condominium/planned unit development related or  |
|           |     other information not sufficiently covered in the    |
|           |     URAR;                                                |
|           |                                                          |
|           | ```{=html}                                               |
|           | <!-- -->                                                 |
|           | ```                                                      |
|           | -   list of all options with the value estimate for each |
|           |     one (see subsection c below);                        |
|           |                                                          |
|           | -   list of all offsite improvements included in the     |
|           |     value estimate; and                                  |
|           |                                                          |
|           | -   list of all lots/units, to include:                  |
|           |                                                          |
|           | ```{=html}                                               |
|           | <!-- -->                                                 |
|           | ```                                                      |
|           | -   each lot number or legal description,                |
|           |                                                          |
|           | -   value estimate for each lot (according to its        |
|           |     relative size and desirability), and                 |
|           |                                                          |
|           | -   total value estimate for each lot and the basic      |
|           |     improvements to be built on it (or a schedule which  |
|           |     provides for the substitution of models on           |
|           |     individual lots).                                    |
+-----------+----------------------------------------------------------+

Continued on next page

11\. Proposed Construction, Continued

+-----------+----------------------------------------------------------+
| #####     | > "Options" are items of equipment and variations from   |
| c. Valuin | > the basic house type (such as kitchen appliances,      |
| g "Option | > fireplace, building elevation variations, etc.) not    |
| s" {#c.-v | > included in the base price of the house.               |
| aluing-op |                                                          |
| tions .un | > Personal-type items (such as, blenders, fireplace      |
| numbered} | > equipment, furniture, drapes, rugs, etc.) cannot be    |
|           | > included in the VA valuation.                          |
|           |                                                          |
|           | > VA value estimates for options must be:                |
|           |                                                          |
|           | -   based on real estate market data (the contribution   |
|           |     to the home's basic value, based on sales of         |
|           |     properties with such options).                       |
|           |                                                          |
|           | -   applied uniformly and should not vary considerably   |
|           |     from one subdivision to another in the same real     |
|           |     estate market.                                       |
|           |                                                          |
|           |     > VA will consider requests to increase the          |
|           |     > established value of options and make appropriate  |
|           |     > changes if warranted by sufficient and valid       |
|           |     > market data.                                       |
|           |                                                          |
|           | > ***Note***: Cost handbook data can only be used to     |
|           | > supplement insufficient market data.                   |
+-----------+----------------------------------------------------------+

#### 12. Other Property Types and Situations {#other-property-types-and-situations .unnumbered}

+-----------+----------------------------------------------------------+
| ##### Ch  | > October 1, 2008, Change 8                              |
| ange Date |                                                          |
|           | This section has been changed to update the hyperlinks   |
|           | and minor grammatical edits.                             |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| ##### a.  | > The appraiser must enter the manufactured home (MH)    |
|  Manufact | > unless it is both:                                     |
| ured Home |                                                          |
| s Classif | -   new, and                                             |
| ied as Re |                                                          |
| al Estate | -   has not been delivered to the dealer or to the site. |
|  {#a.-man |                                                          |
| ufactured | > In those cases where the appraiser is unable to access |
| -homes-cl | > and/or inspect the new MH, the appraiser must obtain   |
| assified- | > the following documents to be included in his/her      |
| as-real-e | > appraisal:                                             |
| state .un |                                                          |
| numbered} | -   MH plans: design or floor plans showing room layout  |
|           |     and exterior dimensions for MH unit, and elevation   |
|           |     plans;                                               |
|           |                                                          |
|           | -   Specifications: information on all standard items of |
|           |     inclusion such as flooring, heating, plumbing,       |
|           |     electrical equipment, and appliances;                |
|           |                                                          |
|           | -   Supplemental information on any selected options or  |
|           |     upgrades included in the subject sale; and           |
|           |                                                          |
|           | -   Foundation plan.                                     |
|           |                                                          |
|           |     > If other MH's classified as real estate on         |
|           |     > permanent foundations are not available for use as |
|           |     > comparables, the appraisal report must:            |
|           |                                                          |
|           | ```{=html}                                               |
|           | <!-- -->                                                 |
|           | ```                                                      |
|           | -   state that fact, and                                 |
|           |                                                          |
|           | -   show in the market analysis grid that the sales      |
|           |     prices of the best comparable conventional home      |
|           |     sales available were properly adjusted.              |
|           |                                                          |
|           | > See section 5 of [chapter                              |
|           | > 10](http://                                            |
|           | www.warms.vba.va.gov/admin26/pamphlet/pam26_7/ch10.doc), |
|           | > and section 10 of [chapter                             |
|           | > 12](http:/                                             |
|           | /www.warms.vba.va.gov/admin26/pamphlet/pam26_7/ch12.doc) |
|           | > for additional information.                            |
+-----------+----------------------------------------------------------+

Continued on next page

12\. Other Property Types and Situations, Continued

+-----------+----------------------------------------------------------+
| ##        | > When the purpose of the VA loan is to make             |
| ### b. Pr | > alterations, improvements, or repairs costing in       |
| operty to | > excess of \$3,500, the appraiser must estimate         |
|  be Alter | > reasonable value both on an "as is" and an "as         |
| ed/ Impro | > repaired" basis and disclose the full extent of the    |
| ved/ Repa | > work to be done.                                       |
| ired {#b. |                                                          |
| -property |                                                          |
| -to-be-al |                                                          |
| tered-imp |                                                          |
| roved-rep |                                                          |
| aired .un |                                                          |
| numbered} |                                                          |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| ##        | > If an appraisal is required per section 5 of [chapter  |
| ### c. Pa | > 10](http://                                            |
| rtial Rel | www.warms.vba.va.gov/admin26/pamphlet/pam26_7/ch10.doc), |
| ease of L | > the appraisal report will contain three values. The    |
| oan Secur | > estimated reasonable value of:                         |
| ity {#c.- |                                                          |
| partial-r | -   the entire property on an "as is" basis,             |
| elease-of |                                                          |
| -loan-sec | -   the described parcel to be released, and             |
| urity .un |                                                          |
| numbered} | -   that portion of the property which will remain as    |
|           |     security, after release of the described parcel.     |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| ####      | > The appraisal report must:                             |
| # d. Plan |                                                          |
| ned Unit  | -   Show the amount of the current monthly assessment.   |
| Developme |                                                          |
| nts (PUDs | -   For condominiums, indicate which utilities are/are   |
| ) and Con |     not included.                                        |
| dos {#d.- |                                                          |
| planned-u | -   Comment on the adequacy of the monthly assessment,   |
| nit-devel |     based upon the appraiser's opinion of the adequacy   |
| opments-p |     of the project's budget and a comparison to          |
| uds-and-c |     competitive projects. If the assessment is           |
| ondos .un |     considered inadequate, a "fair" or "market"          |
| numbered} |     assessment must be recommended.                      |
|           |                                                          |
|           | -   Report any known pending litigation involving the    |
|           |     subject project or its homeowners association.       |
|           |                                                          |
|           | > See [chapter                                           |
|           | > 16](http:/                                             |
|           | /www.warms.vba.va.gov/admin26/pamphlet/pam26_7/ch16.doc) |
|           | > for additional information.                            |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| #####     | > For VA purposes, the value of a solar energy system    |
|  e. Solar | > must be based on real estate market data.              |
|  Energy S |                                                          |
| ystems {# | > See section 3 of [chapter                              |
| e.-solar- | > 12](http:/                                             |
| energy-sy | /www.warms.vba.va.gov/admin26/pamphlet/pam26_7/ch12.doc) |
| stems .un | > for solar system requirements.                         |
| numbered} |                                                          |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| #         | > If the property is existing construction which is      |
| #### f. L | > located in an area where specific local                |
| ocal Hous | > housing/planning authority code requirements are       |
| ing/ {#f. | > enforced in conjunction with the sale of homes, the    |
| -local-ho | > appraiser's report must take this into consideration.  |
| using .un |                                                          |
| numbered} |                                                          |
|           |                                                          |
| ##        |                                                          |
| ### Plann |                                                          |
| ing Autho |                                                          |
| rity Code |                                                          |
|  Enforcem |                                                          |
| ent {#pla |                                                          |
| nning-aut |                                                          |
| hority-co |                                                          |
| de-enforc |                                                          |
| ement .un |                                                          |
| numbered} |                                                          |
+-----------+----------------------------------------------------------+

Continued on next page

12\. Other Property Types and Situations, Continued

+-----------+----------------------------------------------------------+
| ####      | > Although VA does not make farm or other business       |
| # g. Farm | > loans, the law allows veterans to use their Loan       |
|  Residenc | > Guaranty benefit to purchase a farm on which there is  |
| es {#g.-f | > a farm residence. VA does not set a limit on the       |
| arm-resid | > number of acres which the property may have.           |
| ences .un | >                                                        |
| numbered} | > The appraisal of properties with acreage should not    |
|           | > present difficulties if a sufficient number of similar |
|           | > properties in the area, *which may include             |
|           | > improvements not typically considered residential      |
|           | > (i.e. barns, sheds, corrals, stables, pastures),* were |
|           | > recently sold primarily for residential use. For VA    |
|           | > purposes, the valuation must not include livestock,    |
|           | > crops, or farm equipment and supplies.                 |
|           | >                                                        |
|           | > *In any case, individual improvements not typically    |
|           | > considered residential (i.e. barns, sheds, corrals,    |
|           | > stables, pastures)* will be valued *at their fair      |
|           | > market value* on the basis of the use of the property  |
|           | > for residential purposes only.                         |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| ##### h   | > Special Flood Hazard Areas (SFHAs) are those areas in  |
| . Propert | > 100-year floodplains delineated on Federal Emergency   |
| ies Subje | > Management Agency (FEMA) flood maps. SFHAs are usually |
| ct to Flo | > designated Zones A, AO, AH, AE, A99, VO, VE, or V.     |
| oding {#h | > Older maps use numbered A and V Zones (for example,    |
| .-propert | > A2, V30).                                              |
| ies-subje |                                                          |
| ct-to-flo | > The appraiser must:                                    |
| oding .un |                                                          |
| numbered} | -   Check FEMA flood map(s) for the area in which the    |
|           |     property is located.                                 |
|           |                                                          |
|           | -   Notify VA and the lender if it appears that the      |
|           |     property may **not** be eligible for VA appraisal    |
|           |     because                                              |
|           |                                                          |
|           | ```{=html}                                               |
|           | <!-- -->                                                 |
|           | ```                                                      |
|           | -   it is proposed or new construction and there is an   |
|           |     indication that the elevation of the lowest floor is |
|           |     below the base flood level (100-year flood level).   |
|           |     See [24 CFR 200.926d(c)(4)]{.underline}, or          |
|           |                                                          |
|           | -   there is an indication that it is subject to regular |
|           |     flooding, for whatever reason. Regular flooding      |
|           |     would cause the property to not meet VA Minimum      |
|           |     Property Requirements (MPRs) whether or not it is    |
|           |     located in a SFHA.                                   |
|           |                                                          |
|           | ```{=html}                                               |
|           | <!-- -->                                                 |
|           | ```                                                      |
|           | -   If the property is eligible for appraisal and        |
|           |     located on a flood map                               |
|           |                                                          |
|           | ```{=html}                                               |
|           | <!-- -->                                                 |
|           | ```                                                      |
|           | -   identify the map number and flood zone on the        |
|           |     appraisal report, whether or not the property is     |
|           |     located in a SFHA.                                   |
|           |                                                          |
|           | -   If any part of the dwelling is in a SFHA, provide    |
|           |     appropriate information in the "Site" section of the |
|           |     appraisal report.                                    |
|           |                                                          |
|           | -   If a "master" appraisal, provide a list of the lots  |
|           |     located in a SFHA.                                   |
+-----------+----------------------------------------------------------+

Continued on next page

12\. Other Property Types and Situations, Continued

+------------+---------------------------------------------------------+
| h\.        | > Flood insurance is not required in Zones B, C, X, and |
| Properties | > D.                                                    |
| Subject to | >                                                       |
| Flooding   | > Also see "Properties in Coastal Barrier Areas" listed |
| (          | > in subsection i of this chapter.                      |
| continued) |                                                         |
+------------+---------------------------------------------------------+

+-----------+----------------------------------------------------------+
| ##### i.  | > Properties located in a Coastal Barrier Resources      |
|  Properti | > System (CBRS) area, as delineated on a CBRS map, are   |
| es in Coa | > not eligible as security for a VA-guaranteed loan.     |
| stal Barr | > Affected areas include portions of the Great Lakes,    |
| ier Areas | > Gulf Coast, Puerto Rico, Virgin Islands, and the       |
|  {#i.-pro | > Atlantic coast.                                        |
| perties-i |                                                          |
| n-coastal | > Appraisers who work in CBRS areas must obtain the      |
| -barrier- | > appropriate maps from the U.S. Fish and Wildlife       |
| areas .un | > Service. Prohibited areas on the maps are those inside |
| numbered} | > the solid heavy black lines.                           |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| ####      | > The appraisal report must identify any airport noise   |
| # j. Prop | > zone or safety-related zone in which the property is   |
| erties Ne | > located.                                               |
| ar Airpor |                                                          |
| ts {#j.-p | Noise Zones are defined in decibels (db) in the table    |
| roperties | below.                                                   |
| -near-air |                                                          |
| ports .un |                                                          |
| numbered} |                                                          |
+-----------+----------------------------------------------------------+

  ------- -------------------- -------------------- -----------------------
  Noise   CNR (Composite Noise NEF (Noise Exposure  DNL (Day/Night Average
  Zone    Rating)              Forecast)            Sound Level)

  1       Under 100 db         Under 30 db          Under 65 db

  2       100-115 db           30-40 db             65-75 db

  3       Over 115 db          Over 40 db           Over 75 db
  ------- -------------------- -------------------- -----------------------

+-----------------------------------------------------------------------+
| -   Clear zones are areas of highest accident risk located            |
|     immediately beyond the ends of a runway.                          |
|                                                                       |
| -   Accident potential zones are beyond the clear zones but still     |
|     have significant potential for accidents. Only military airports  |
|     identify them.                                                    |
|                                                                       |
| -   No existing property will be rejected because of airport          |
|     influence if that property is already the security for an         |
|     outstanding VA loan.                                              |
+-----------------------------------------------------------------------+

Continued on next page

12\. Other Property Types and Situations, Continued

+------------+---------------------------------------------------------+
| j\.        | > Depending on the type of construction and the airport |
| Properties | > noise or safety-related zone involved, the following  |
| Near       | > requirements also apply with regard to the appraisal  |
| Airports   | > and/or VA Notice of Value (NOV):                      |
| (          |                                                         |
| continued) |                                                         |
+------------+---------------------------------------------------------+

  -------------- ----------- ----------- ----------- -------- --------------
  Type           Noise Zone  Noise Zone  Noise Zone  Clear    Accident
  Construction   One         Two         Three       Zone     Potential Zone

  Proposed       A           A, B, C, D  E           F        A, C, H, I

  New/Existing   A           A, D        A, D        A, C, G  A, C, I
  -------------- ----------- ----------- ----------- -------- --------------

  ------------- ------------------------------------------------------------------
  Requirement   

  A             The fee appraiser's market data analysis must include a
                consideration of the effect on value, if any, of the property
                being located near an airport.

  B             Sound attenuation features must be built into the dwelling to
                bring the interior DNL of the living unit to 45 decibels or less.

  C             Available comparable sales must indicate market acceptance of the
                subdivision in which the property is located.

  D             The veteran must sign a statement which indicates his/her
                awareness that the property being purchased is located in an area
                near an airport, and that aircraft noise may affect livability,
                value, and marketability of the property.

  E             Not acceptable as the security for a VA loan unless the project
                was accepted by VA before noise zone three contours were changed
                to include it. In that situation, the requirements for proposed
                construction in noise zone two must be met.

  F             Not acceptable as the security for a VA loan.

  G             The veteran must sign a statement which indicates his/her
                awareness that the property being purchased is located near the
                end of an airport runway, and that this may have an affect upon
                livability, safety, value, and marketability of the property.

  H             The project in which the properties are located must be consistent
                with the recommendations found in the airport's Air Installation
                Compatible Use Zone (AICUZ) report.

  I             The veteran must sign a statement which indicates his/her
                awareness that the property being purchased is located in an
                accident potential zone and that this may have an affect upon
                livability, safety, value, and marketability of the property.
  ------------- ------------------------------------------------------------------

#### 13. Liquidation Appraisals {#liquidation-appraisals .unnumbered}

+-----------+----------------------------------------------------------+
| ##### Ch  | > October 1, 2008, Change 8                              |
| ange Date |                                                          |
|           | This section has been changed to update subsection f on  |
|           | liquidation appraisal addendums, remove figure one, and  |
|           | make minor grammatical edits.                            |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| ####      | > The lender/servicer must assist the appraiser in       |
| # a. Inte | > gaining access to the vacant property. Failure to      |
| rior Acce | > provide such assistance may limit VA liability.        |
| ss {#a.-i | > However, the lender/servicer may ask the Regional Loan |
| nterior-a | > Center (RLC) of jurisdiction to waive this requirement |
| ccess .un | > for a particular case or in a particular area, based   |
| numbered} | > on a written opinion from their legal counsel          |
|           | > regarding a legal conflict or other serious concern.   |
|           |                                                          |
|           | > With the above assistance, the fee appraiser must gain |
|           | > access to the interior of the dwelling unless one or   |
|           | > more of the following apply.                           |
|           |                                                          |
|           | -   The RLC has approved a request to waive the          |
|           |     lender/servicer's responsibility for access of a     |
|           |     vacant property as described above.                  |
|           |                                                          |
|           | -   The property owner/occupant has permanently refused  |
|           |     the appraiser's entry.                               |
|           |                                                          |
|           | -   The appraiser considers access to present a          |
|           |     legitimate hazard.                                   |
|           |                                                          |
|           | -   Three or more attempts to call the telephone         |
|           |     number(s) provided with the liquidation appraisal    |
|           |     request, on different days and at times most likely  |
|           |     for the occupant to be at home, have resulted in no  |
|           |     access to an occupied residence.                     |
|           |                                                          |
|           | -   The appraiser has made three appointments to enter   |
|           |     the dwelling, all of which have been broken.         |
|           |                                                          |
|           | -   The property is vacant and jurisdictional law        |
|           |     prohibits the lender from gaining or assisting in    |
|           |     gaining access to the property, and the RLC has      |
|           |     waived such access.                                  |
|           |                                                          |
|           | -   On a case-by-case basis, the RLC may consider there  |
|           |     to be other valid extenuating circumstances (such    |
|           |     as, the owner's personal effects remain in a vacant  |
|           |     property causing legitimate concern about exposure   |
|           |     to litigation).                                      |
+-----------+----------------------------------------------------------+

Continued on next page

13\. Liquidation Appraisals, Continued

+------------+---------------------------------------------------------+
| **a.       | > If interior access cannot be gained to a vacant       |
| Interior   | > property, despite requesting assistance from the      |
| Access**   | > lender/servicer, the appraiser:                       |
| (          |                                                         |
| continued) | -   Must document the appraisal report, or its          |
|            |     addendum, with the dates, names, and telephone      |
| #####      |     numbers of all individuals contacted in attempting  |
|            |     to gain access to the property, and a brief         |
|            |     description of the responses received.              |
|            |                                                         |
|            | -   Must make reasonable efforts to verify the interior |
|            |     conditions by the best available means (such as     |
|            |     through a listing service data source, property     |
|            |     assessment records, interviews with neighbors or    |
|            |     others knowledgeable about the property).           |
|            |                                                         |
|            | -   In the absence of factual information, must make    |
|            |     reasonable assumptions about interior conditions as |
|            |     they relate to physical inadequacies or needed      |
|            |     repairs (both VA Minimum Property Requirement (MPR) |
|            |     related and cosmetic) that impact value.            |
|            |                                                         |
|            | -   Must obtain and document approval from the RLC of   |
|            |     jurisdiction prior to completing a drive-by         |
|            |     exterior inspection appraisal for any vacant        |
|            |     property.                                           |
|            |                                                         |
|            | Freddie Mac Form 2055/Fannie Mae Form 2055,             |
|            | Exterior-Only Inspection Residential Appraisal Report,  |
|            | will be used when interior access is not gained.        |
+------------+---------------------------------------------------------+

+-----------+----------------------------------------------------------+
| ##### b.  | > Except as noted in subsection c below, liquidation     |
| Originati | > appraisal requirements are the same as the origination |
| on and Li | > appraisal requirements outlined in this chapter.       |
| quidation |                                                          |
|  Similari |                                                          |
| ties {#b. |                                                          |
| -originat |                                                          |
| ion-and-l |                                                          |
| iquidatio |                                                          |
| n-similar |                                                          |
| ities .un |                                                          |
| numbered} |                                                          |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| #####     | > Liquidation appraisals must be market value appraisals |
|  c. Appro | > (that is, the price the property can command if        |
| ach to Li | > exposed for sale in the open market, allowing a        |
| quidation | > reasonable time to find a purchaser). A liquidation    |
|  Value {# | > appraisal is not an appraisal of value under forced    |
| c.-approa | > sale or foreclosure conditions.                        |
| ch-to-liq |                                                          |
| uidation- | > The fee appraiser's value estimate for all liquidation |
| value .un | > appraisals will be for the subject property in its "as |
| numbered} | > is" condition.                                         |
+-----------+----------------------------------------------------------+

Continued on next page

13\. Liquidation Appraisals, Continued

+-----------+----------------------------------------------------------+
| ####      | > Comparables must be the best available closed sales in |
| # d. Sele | > the subject's market area, considering typical         |
| ction of  | > transactions and actions of typical buyers and         |
| Comparabl | > sellers. Real Estate Owned (REO) Sales may be          |
| es {#d.-s | > considered if they are reflective of the market and    |
| election- | > are truly an indicator of the subject's value.         |
| of-compar |                                                          |
| ables .un | > Comparables must not be restricted solely to those in  |
| numbered} | > a similar "as is" condition. A property in the         |
|           | > immediate area, but in a better condition than the     |
|           | > subject, may be a better indicator of value than a     |
|           | > comparable in a similar condition located in a         |
|           | > different area (as long as there are proper            |
|           | > adjustments to the sales price).                       |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| #####     | > The appraiser must provide a list of all repairs which |
| e. Repair | > are needed to make the property meet VA MPR (i.e.,     |
| s {#e.-re | > needed to make the home safe, sound, sanitary, and     |
| pairs .un | > secure) and those that are cosmetic but affect the     |
| numbered} | > marketability of the property.                         |
|           |                                                          |
|           | > The repair list must show:                             |
|           |                                                          |
|           | -   the estimated cost of each repair, and               |
|           |                                                          |
|           | -   any contributory value of each repair. In estimating |
|           |     contributory value, the fee appraiser must recognize |
|           |     that cost does not always equal value. In some       |
|           |     cases, the real estate market only recognizes        |
|           |     several individual repair items considered in the    |
|           |     aggregate as contributing to value.                  |
|           |                                                          |
|           | > ***Note***: If there are listed repairs, the appraiser |
|           | > should correlate any condition adjustments made to the |
|           | > comparable sales with the total contributory value     |
|           | > amount of those repairs.                               |
+-----------+----------------------------------------------------------+

+-----------+----------------------------------------------------------+
| #####     | > Every liquidation appraisal must contain an addendum   |
|  f. Liqui | > that addresses:                                        |
| dation Ad |                                                          |
| dendum {# | -   Access -- Indicate if access to the property was     |
| f.-liquid |     gained. If unable to gain                            |
| ation-add |                                                          |
| endum .un |     access, make at least three separate attempts by     |
| numbered} |     telephone or visits to the                           |
|           |                                                          |
|           |     property and provide the date, time, phone number    |
|           |     used, and name of any                                |
|           |                                                          |
|           |     person contacted. If refused access, provide the     |
|           |     date, time, and name of                              |
|           |                                                          |
|           |     contact that denied access.                          |
|           |                                                          |
|           | -   Property Status -- Provide a statement indicating if |
|           |     the property is occupied or                          |
|           |                                                          |
|           |     vacant, and if it is secured.                        |
+-----------+----------------------------------------------------------+

Continued on next page

13\. Liquidation Appraisals, Continued

+------------+---------------------------------------------------------+
| f\.        | -   Repairs Needed -- Provide a list of repairs needed  |
| L          |     to return the property to a                         |
| iquidation |                                                         |
| Addendum   |     condition comparable to typical properties in the   |
| (          |     neighborhood, and an                                |
| continued) |                                                         |
|            | > estimate for individual repair costs and contributory |
|            | > value of the repairs.\                                |
|            | > Indicate emergency repairs with an asterisk.          |
|            |                                                         |
|            | -   Analysis of Listings and Offers -- Provide a list   |
|            |     of at least three comparable                        |
|            |                                                         |
|            |     property listings or properties with pending        |
|            |     offers, including the number of                     |
|            |                                                         |
|            |     days on the market and a brief comparison to the    |
|            |     subject. (See section 8 of                          |
|            |                                                         |
|            |     this chapter for more detailed information.)        |
|            |                                                         |
|            | -   Comments/Continuations -- Provide any pertinent     |
|            |     comments or                                         |
|            |                                                         |
|            |     continuations in the preparation of this addendum.  |
+------------+---------------------------------------------------------+