![[logo: Fair Housing and Equal Opportunity]](images/hgv-icn-fheo.gif){kind=small}
US Dept of HUD
4150.2, CHG-1
TABLE OF CONTENTS
Paragraph Page
1 SELECTION OF APPRAISER 1-1
1-0 INTRODUCTION 1-1
1-1 FHA REGISTER 1-1
A. Appraiser Credentials 1-1
B. Register Application Process 1-1
C. Applicant Review) 1-2
D. Designation to the FHA Register 1-2
1-2 LENDER SELECTION OF THE APPRAISER 1-3
A. Non-Discrimination Policy 1-3
B. Contractual Responsibility of Appraisers 1-3
C. Communication with Appraisers 1-4
D. Appraisal Fees 1-4
2 SITE ANALYSIS 2-1
2-0 INTRODUCTION 2-1
2-1 SITE REQUIREMENTS 2-1
A. Neighborhood Definition 2-1
B. Competitive Sites 2-1
C. Definitions - Construction Status 2-1
D. Economic Trends 2-2
E. Land Use Restrictions 2-2
1. Zoning 2-2
2. Protective Easement/Covenants 2-2
3. Inharmonious Land Uses 2-2
4. Natural Physical Features 2-3
5. Attractiveness of Neighborhood Buildings 2-3
6. Neighborhood Character 2-3
7. Character of Neighborhood Structures 2-3
F. Community Services 2-3
G. Transportation 2-3
H. Utilities and Services 2-4
I. Neighborhood Change Considerations 2-4
J. Marketability 2-4
K. Small Community Market Preferences 2-4
L. Outlying Sites and Isolated Sites 2-4
M. Study of Future Utility 2-4
N. Consideration of General Taxes and Special
Assessments 2-4
1. Assessment 2-5
2. Special Assessment 2-5
2-2 SPECIAL NEIGHBORHOOD HAZARDS AND NUISANCES 2-5
A. Unacceptable Sites 2-6
B. Topography 2-6
C. Subsidence 2-6
D. Operating and Abandoned Oil or Gas Wells 2-7
1. Existing Construction 2-7
2. New or Proposed Construction 2-7
3. Abandoned Well 2-7
4. Special Case - Proposed, Existing or
Abandoned Wells 2-8
E. Slush Pits 2-8
F. Heavy Traffic 2-8
G. Airport Noise and Hazards 2-9
H. Special Airport Hazards 2-9
1. New and Proposed Construction 2-9
2. Existing Construction 2-9
I. Proximity to High Pressure Gas 2-10
i 6/99
4150.2, CHG-1
J. Overhead High-voltage Transmission Lines 2-10
K. Smoke, Fumes, Offensive Noises and Odors 2-10
L. Flood Hazard Areas 2-11
1. New and Proposed Construction 2-11
2. Existing Construction 2-12
3. Condominium 2-12
M. Stationary Storage Tanks 2-12
3 PROPERTY ANALYSIS 3-1
3-0 INTRODUCTION 3-1
3-1 APPRAISAL REQUIREMENTS 3-1
3-2 ANALYSIS OF SITE 3-1
A. Topography 3-2
B. Suitability of Soil 3-2
C. Off-Site Improvements 3-2
D. Easements, Restrictions or Encroachments 3-2
E. Encroachments 3-2
3-3 ANALYSIS OF PHYSICAL IMPROVEMENTS 3-3
A. Gross Living Area 3-3
B. Basement Bedrooms, Basement Apartments 3-3
C. Design 3-3
D. Conformity of Property to Neighborhood 3-4
3-4 REMAINING ECONOMIC LIFE OF BUILDING IMPROVEMENTS 3-5
A. Economic Life vs. Physical Life 3-5
B. Estimation of Remaining Economic Life 3-5
C. End of Useful Life of Building Improvements 3-6
3-5 CODE ENFORCEMENT FOR EXISTING PROPERTIES 3-6
3-6 GENERAL ACCEPTABILITY CRITERIA FOR FHA-INSURED MORTGAGES 3-6
A. General Acceptability Criteria 3-7
1. Subject Property 3-7
2. Hazards 3-7
3. Soil Contamination 3-8
a. Septic and Sewage 3-8
b. Other Soil Contaminants 3-9
c. Underground Storage Tanks 3-9
4. Drainage 3-9
5. Water Supply And Sewage Systems 3-9
a. Individual Water Supply and Sewage
Disposal Systems 3-10
b. Unacceptable Conditions 3-10
6. Wood Structural Components: Termites 3-11
7. Streets 3-12
8. Defective Conditions 3-12
9. Ventilation 3-13
10. Foundations 3-13
11. Crawl Space 3-13
12. Roof 3-14
13. Mechanical Systems 3-14
14. Heating 3-14
15. Electricity 3-15
16. Other Health And Safety Deficiencies 3-15
17. Lead-Based Paint And Other Hazards 3-15
B. Other Criteria 3-16
1. Party Or Lot Line Wall 3-16
2. Service And Facilities 3-16
6/99 ii
4150.2
5. Water Supply And Sewage Systems 3-9
a. Individual Water Supply and Sewage Disposal
Systems 3-10
b. Unacceptable Conditions 3-10
6. Wood Structural Components: Termites 3-11
7. Streets
3-12
8. Defective Conditions 3-12
9. Ventilation 3-13
10. Foundations 3-13
11. Crawl Space 3-13
12. Roof
3-14
13. Mechanical Systems 3-14
14. Heating.. 3-14
15. Electricity 3-15
16. Other Health And Safety Deficiencies 3-15
17. Lead-Based Paint And Other Hazards 3-15
B. Other Criteria 3-16
1. Party Or Lot Line Wall 3-16
2. Service And Facilities 3-16
3. Non-Residential Use Design Limitations 3-17
4. Access Onto Property 3-17
5. Space Requirements 3-17
6. Bedroom Egress 3-17
7. Energy Efficiency 3-17
C. Conditions Not Requiring Repairs 3-17
D. REPAIR CONDITIONS FOR NEW/PROPOSED CONSTRUCTION 3-18
4 THE VALUATION PROCESS 4-1
4-0 INTRODUCTION 4-1
4-1 MARKET VALUE ESTIMATES 4-1
A. Definition of Market Value 4-1
B. Property Rights Appraised 4-2
C. Purpose
4-2
D. Intended Use of Appraisal/Function 4-3
E. Use of the Appraisal 4-3
F. Effective Date of Value 4-3
G. Scope
4-3
H. Special Limiting Conditions and Assumptions 4-3
4-2 HUD/FHA REQUIREMENTS 4-3
4-3 NEW AND PROPOSED CONSTRUCTION REQUIREMENTS 4-4
A. New Construction 4-4
B. Proposed Construction 4-4
4-4 UNIQUE PROPERTY APPRAISALS 4-5
4-5 COST APPROACH 4-5
A. Cost Approach Methodology 4-6
1. Land Value Estimate 4-6
2. Excess Land 4-6
iii
4150.2
3. Sales Comparison Approach For Land Value 4-6
4. Alsite
4-6
5. Extraction
4-7
B. Improvement Cost Estimate 4-7
C. Typical Replacement Cost 4-7
D. Unusual and Non-Typical Costs 4-7
E. Recommended Methodologies 4-7
F. Remaining Economic Life 4-8
4-6 SALES COMPARISON APPROACH 4-8
A. Data Requirements 4-8
1. Sales Data vs. Comparable Sale 4-8
2. Selection of Comparable Sales for Analysis 4-8
3. Excluded Sales Transactions 4-9
4. Current Offerings and Listings Analysis 4-9
5. Sales in Escrow 4-9
6. Distressed Sales 4-9
7. Resite Sales 4-9
8. Confirmation of Sales and Transaction Information
4-10
B. Adjustment Process 4-10
1. Support for Adjustments 4-12
2. Explanation of Adjustments 4-12
3. Reconciliation of Adjusted Sale Prices 4-12
4-7 INCOME APPROACH 4-12
A. Data Requirements 4-13
1. Confirmation Of Leases And Transaction Information
4-13
2. Adjustment Process 4-13
3. The Income Projection 4-13
B. Development of Rates 4-14
4-8 FINAL RECONCILIATION 4-14
4-9 RECONSIDERATION OF APPRAISED VALUE 4-14
5 REPORTING THE APPRAISAL 5-1
5-0 INTRODUCTION 5-1
5-1 REPORTING THE APPRAISAL 5-1
A. Part 1: Uniform Residential Appraisal Report (URAR) 5-1
1. Departure from HUD Requirements 5-1
2. Certification 5-1
3. Statement of Limiting Conditions 5-2
B. Part 2: Valuation Conditions Form 5-2
C. Part 1: Homebuyer Summary 5-4
5-2 ACCESS TO FORMS 5-4
5-3 RECORD KEEPING 5-4
A. Minimum Term for Record Keeping 5-4
B. Documentation File Requirements 5-4
C. Sample Documentation File 5-5
iv
4150.2, CHG-1
8-0 DEFINITION 8-1
8-1 PROPERTY STANDARDS FOR TITLE II MORTGAGE INSURANCE 8-1
8-2 PROPERTY DESCRIPTION 8-2
8-3
APPRAISER QUALIFICATIONS FOR MANUFACTURED HOMES
CLASSIFIED AS PERSONAL PROPERTY 8-2
8-4 MANUFACTURED HOME LOT APPRAISALS 8-3
A. Manufactured Home Lot Sites 8-3
B. How to Perform a Manufactured Home Lot Appraisal8-3
9 PLANNED UNIT DEVELOPMENTS AND CONDOMINIUMS 9-1
9-0 PLANNED UNIT DEVELOPMENT (PUD) 9-1
A. Approach To Value 9-1
B. Estimate of Market Price 9-1
9-1 CONDOMINIUMS 9-2
A. Definitions 9-2
B. Approach to Value 9-3
1. Sales Comparison Approach 9-3
APPENDIX A: VALUATION OF OTHER PROPERTIES A-1
A-1 REAL ESTATE OWNED (REO) A-1
A-2 APPRAISAL OF SINGLE FAMILY HOMES ON NATIVE AMERICAN LANDS
A-4
APPENDIX B: SPECIAL PROGRAMS B-1
B-1 203(K) REHABILITATION HOME MORTGAGE INSURANCE B-1
B-2 SECTION 255: HOME EQUITY CONVERSION MORTGAGES
(REVERSE MORTGAGES) B-3
B-3 SECTION 223(E) B-3
B4 TITLE I PROPERTY IMPROVEMENT AND MANUFACTURED
HOME LOAN PROGRAM B-4
B-5 SOLAR ENERGY B-4
APPENDIX C: VALUATION REFERENCES C-1
C-1 RULES OF ROUNDING C-1
C-2 THE VALUATION PROCESS C-3
APPENDIX D: VALUATION PROTOCOL D-1
D-1 RESIDENTIAL APPRAISAL REQUIREMENTS D-1
D-2 VALUATION CONDITION REQUIREMENTS D-22
D-3 HOMEBUYER SUMMARY D-34
6/99 v
4150.2 CHG-1
FORMS AND REPORTS REFERENCED IN HANDBOOK 4150.2
HUD-92005: Description of Materials
HUD-92541: Builder's Certification
HUD-92544: Builder's Warranty
HUD-92563: Roster Appraiser Designation
Application (to be updated)
HUD-92802: Application and Request for
Manufactured Home Lot and/or
Site Preparation
Homebuyer Summary and Valuation Conditions Form
Marshall and Swift Form 1007
Freddie Mac 704 Form: Second Property Value Analysis and
Report
R.S. Means & Company Repair and Modeling Cost Data Book or the
Home-Tech Remodeling and Renovation Cost Estimator
Use of Materials Bulletin No. 100, Subject: HUD Building
Product Standards & Certification Program for Solar Water
Heating Systems-August 15, 1993
Marshall & Swift Cost Handbook - New & Proposed Construction
Marshall & Swift Guide to Construction Costs
Form FW 68: Land Appraisal Report
Uniform Standards of Professional Appraisal
Permanent Foundation Guide for Manufactured Housing
CABO Model Energy Code, 1992 Ed., Residential Buildings
vi 6/99
FORMS AND REPORTS REFERENCED IN HANDBOOK 4150.2
HUD-92005:
Description of Materials
HUD-92541:
Builder's Certification
HUD-92544:
Builder's Warranty
HUD-92563:
Roster Appraiser Designation Application (to be updated)
HUD-92802:
Application and Request for Manufactured Home Lot and/or Site
Preparation
Homebuyer Summary and Valuation Conditions Form
Marshall and Swift Form 1007
Freddie Mac 704 Form: Second Property Value Analysis and
Report
R.S. Means & Company Repair and Modeling Cost Data Book or the
Home-Tech Remodeling
and Renovation Cost Estimator
Use of Materials Bulletin No. 100, Subject: HUD Building
Product Standards & Certification
Program for Solar Water Heating Systems-August 15,1993
Marshall & Swift Cost Handbook - New & Proposed Construction
Marshall & Swift Guide to Construction Costs
Form FW 68: Land Appraisal Report
Uniform Standards of Professional Appraisal
Permanent Foundation Guide for Manufactured Housing
CABO Model Energy Code, 1992 Ed., Residential Buildings
vii
4150.2
FOREWORD
PURPOSES OF These are the purposes of this Handbook:
HANDBOOK
o Provide guidance for appraisers on how to
appraise existing, proposed and new
construction of one- to four-family homes for
which mortgages are to be insured by FHA.
o Introduce appraisers to the environment of
greater accountability associated with recent
HUD reforms.
HOME BUYER On June 1, 1998, HUD launched the HomeBuyer Protection Plan. The
PROTECNON Plan reforms the appraisal process to ensure that home buyers
PLAN seeking FHA-insured mortgages receive accurate
and complete appraisals of the homes they seek to
purchase. If homebuyers do not receive adequate
appraisals, they may have to make extensive
repairs to make their homes habitable. As a
result of the additional financial burden, they
may default on their FHA-insured mortgages.
THE NEW HUD As part of the HomeBuyer Protection Plan, HUD has revised the
VALUATION Valuation Conditions (VC) Form. This new form:
CONDITIONS
FORM o Requires submission of valuation
condition information for all appraisals
o Transforms the former VC form into a series of
"yes-or-no questions" based on readily
observable physical conditions of the subject
property
o Summarizes the information on the physical
condition of the property for the Homebuyer
THE Another significant change reflected in this
Handbook is the
PERFORMANCE introduction of performance measures for
appraisers. The
MEASUREMENT performance measurement framework is designed to
achieve
FRAMEWORK improvements in the performance and
professionalism of appraisers on the FHA
Register.
HUD will measure appraiser performance in the
following five performance categories:
o Appraisal process
o Appraisal reporting
o Valuation conditions
o Maintaining state licensure
o Responsiveness to field review
viii
4150.2
As part of this new framework, HUD will develop
statistical indicators to identify poor
appraisals and appraisers, and will inform
appraisers of its enforcement efforts.
ENFORCEMENT In addition to providing clear sanctions, HUD has enhanced
AND SANCTIONS enforcement efforts by creating an Enforcement
Center. The Enforcement Center will provide
administrative support for the management of the
sanction process.
RESOURCES Questions and comments can be sent electronically
to REAC's Internet website at reacone@hud.gov
The Help Desk will be available be g on May
5,1999 Monday through Friday from 7:30 a.m. to
8:00 p.m. EST for questions. The telephone
number is (888) 245-4860.
ix