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Appraisers will be required
to report on the sales history of the comparable properties for at least the past three years. This new requirement is stated in the Appraisal Report and Data Delivery
Guide and not the 4000.1 Handbook.
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Previously, Appraisers were
only required to report on the past 12 month sales history on the comparable sales.
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It is stated in the
Appraisal Report and Data Delivery Guide that a property's location in a "non-disclosure" state does not remove the appraiser from the requirement to research, report,
and analyze the prior sale history of the subject and comparable properties.
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Previously, HUD appraisal
protocols did not specifically address this topic.
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For properties that have
individual water and/or sewer systems (wells & septic), the Mortgagee must require that they be connected to a public or community system whenever feasible and
available at a reasonable cost. However, no guidelines are provided in the 4000.1 Handbook as to what would be considered as a reasonable cost.
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Previously, reasonable cost
for hook-up to a public or community system was defined as 3% or less of the value of the property.
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On new construction cases,
the Appraiser must obtain from the Mortgagee a fully executed Form HUD-92541 (Builder's Certification) dated no more than 30 days prior to the date of the appraisal
along with documents related to New Construction (e.g. Plans, Specs, etc.).
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Previously, it was indicated
that a completed HUD-92541 be provided to the Appraiser, but there was no reference to a fully-executed Form.
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The non-residential portion
of the Total Floor Area of a property may not exceed 49%. Properties must be legally permitted and conform to current zoning requirements. The term "Total Floor Area"
is not defined by HUD in the 4000.1 Handbook.
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Previously, HUD would only
allow up to 25% of the Gross Livable Area (GLA) on mixed-use properties to be non-residential in use on Sec. 203(b) loan transactions.
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Appraisers will now be
required to indicate whether or not the subject property can be legally rebuilt if destroyed, if the property has a legal non-conforming zoning designation.
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Previously, Appraisers were
not required to report this information.
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Appraisers will be required
to notify the Mortgagee if the subject dwelling or related property improvements are located within an Easement of an Overhead Electric Power Transmission Line or if
they appear to be located within an unsafe distance of the power line or tower.
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Previously, the Appraiser only
had to report on whether or not the dwelling or related property improvements were located within an Easement serving the power line or tower.
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A definition of what HUD
considers to be Excess Land and Surplus Land is provided in the 4000.1 HB and it is stated that Surplus Land is land that is not currently needed to support the
existing improvement but cannot be separated from the property and sold off. It may or may not contribute to the value of the improved parcels. HUD should provide a
better definition of what would be considered as Surplus Land along with examples. For example, how would an appraiser arrive at a value for a property containing 20
acres with comparable sales containing only 5 acres?
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Previously, HUD instructed
appraisers to describe any Excess Land (from the readily marketable real estate entity) but not appraise the Excess Land (since it was excluded from the maximum
mortgage amount). HUD had no previous definition of what constitutes Surplus Land.
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Appraisers must report when
the subject property has security bars on the bedroom windows or doors. There is no further guidance provided as to what conditions (if any) an underwriter must take
when this information is provided by the appraiser.
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Previously, security bars were
acceptable if they complied with local fire codes and if the occupants would be able to quickly get outside if there were a fire (e.g. quick-release mechanisms are
installed on the security bars).
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Appraisers must operate all
conveyed appliances (such as a dishwasher) and observe their performance. The Appraiser must notify the Mortgagee of any deficiency if an appliance is found to be
inoperable.
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Previously, HUD did not
specifically state that appraisers were expected to operate appliances as part of their on-site review of a property.
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Appraisers must observe the
roof of a property to determine whether there are deficiencies that present a health and safety hazard or do not allow for reasonable future utility. The Appraiser must
report if the roof has less than 2 years of remaining life, and make the appraisal subject to inspection by a professional roofer.
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Previously, Appraisers were
required to observe the roof area and note any readily observable conditions. However, they were not responsible for making an assessment if the roof had a remaining
physical life of at least two years.
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Appraisers will be required
to notify the Mortgagee if the property has a sump pump that is not properly functioning at the time of the appraisal. A sump pump may be hardwired by an acceptable
wiring method or may have a factory electrical cord that is to be connected to a receptacle suitable for such use.
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Previously, Appraisers only
had to report the existence of a sump pump at a property.
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Appraisers will be required
to take a lot more photographs of the property during their on-site visit. Some examples of additional minimum photo requirements include: kitchen, main living area,
bathrooms, bedrooms, any other rooms representing overall condition, basement, attic, crawl space, any updates or renovation and any repair conditions or property
deficiencies. In addition, photos of common areas and shared amenities will be required on condominiums.
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Previously, only photos of
front and rear sides of the dwelling, a street scene and any improvements with a contributory value were required.
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Appraisers must consider
and attempt all approaches to value and must develop and reconcile each approach that is relevant.
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Previously, the cost approach
was not required on existing properties more than one year old and the income approach did not have to be performed on one unit properties.
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No reference is made to HUD
Form 54114 in the 4000.1 Handbook. This Form was created for use by DE underwriters to record the results of their review of the Appraisal Report. Although the
completion of this Form was not deemed mandatory by HUD, many DE underwriters utilize this Form as a means to provide consistent feedback on their review findings (if
any).
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At the current time, Form
54114 is available off of HUD's HUCLIPS website. The new Handbook should make reference to this Form and indicate if it is still optional for use by DE underwriters.
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