The FHA guidelines for property analysis include specific

requirements to which appraisers must adhere for the appraisal to

reflect an accurate valuation that win:

o denote any deficiencies in the subject property

o protect HUD's interest in that property

The property analysis includes General Acceptability Criteria for

conducting the appraisal to address FHA minimum property



o The appraiser must make a complete visual inspection of the

subject property - interior and exterior - and complete the

VC form.

o The appraiser must take photographs that show the sides,

front and rear of the subject property and all improvements

on the subject property with any contributory value. A

photograph of the street frontage is also required.

o The appraiser is required to submit a single photograph of

each comparable sale transaction in the addenda to the

appraisal report.

o The map of proposed construction must clearly show proposed


o The appraiser must provide a copy of a local street map that

shows the location of the property and each comparable sale.

o If the subject property is proposed construction and the

improvement has not started, the appraiser should take a

photograph that shows the grade of the vacant lot.


For both proposed and existing construction, the appraiser must

determine the present highest and best use for the site,

disregarding improvements that may exist or are proposed for the

site. This conclusion serves as the basis of comparison for

estimating the market price of the land and discloses the extent

to which the existing or proposed building improvements are

appropriate or inappropriate for the site. This also forms the

basis for selecting comparable land sales.

The appraiser must analyze the site to:

o establish the basis for comparing the market estimates of

sites in the estimate of replacement cost of the property

o determine suitability for the existing or proposed use



Carefully consider the topography, suitability of soil, off-site

improvements, easements, restrictions or encroachments.



Proper topography and site grading can be important elements

in preventing wet basements, damp crawl spaces, erosion of

soils, and overflowing sewage disposal systems. To ensure

proper protection, the appraiser must analyze the

relationship of street grades, floor elevations, and lot

grades. If the foundation or its bearing soils may be

affected by seepage or frost, the dwelling is unacceptable

unless the surface and subsurface water is diverted from the

structures to ensure positive drainage away from the



Consider the readily observable soil and subsoil conditions

of the site including the type and permeability of the soil,

the location of the water table, surface drainage

conditions, compaction, rock formations and other physical

features that affect the value of the site or its

suitability for development. Also observe the effects of

the adverse features of the adjoining land.


Consider the off-site improvements adjoining the subject

property, including street surface, curbs, sidewalks, curb

cuts, driveways, aprons, etc., that are not contained within

the legal boundaries of the site but enhance the market

acceptance and the use and livability of the property. Also

consider these situations:

o Compare the subject property with the immediate

neighborhood to determine the dominant off-site

improvements required by the market. Note any

necessary off-site improvements that are not in

existence or are proposed for the subject property and

adjust for them in the market value.

o Any proposals for installing off-site improvements and

levying assessments by the local governing body in the

near future may affect value. These proposals will

necessitate a commitment condition that requires the

installation of improvements and the payment of the

assessment before or immediately after insurance



Consider all easements, restrictions or encroachments and

their impact on the market value of the subject property and

list them on the appraisal. These factors are often

discovered during the survey and title report once the

appraisal has begun. Perform limited due diligence to

verify the existence of these types of significant limiting

factors. Also record these items in the URAR which were

considered in the value estimate.


As a general rule, an encroachment will cause a property to

be ineligible for FHA mortgage insurance. However, there

are exceptions to this rule and further information can be

found by calling the lender. The appraiser should identify

any of these conditions:




o encroachment of a dwelling, garage, another physical

structure or other improvement onto an adjacent

property, right-of-way or utility easement

o encroachment of a dwelling, garage, another physical

structure or improvements on the subject property

o encroachment of a dwelling, garage or another physical

structure into the setback requirement

An encroachment may be acceptable if the adjoining landowner

or the local governing authority provides a perpetual

encroachment easement that is filed in the County Clerk and

Recorder's Office. The Direct Endorsement under-writer will

handle this issue under the General Waiver guidelines.


Analysis of the physical improvements results in conclusions as

to the desirability, utility and appropriateness of the physical

improvements as factors in determining mortgage risk and the

ultimate estimate of value.


Gross Living Area is the total area of finished, above-grade

residential space. It is calculated by measuring the

outside perimeter of the structure and includes only

finished, habitable, above-grade living space. Finished

basements and unfinished attic areas are not included in

total gross living area. The appraiser must match the

measurement techniques used for the subject to the

comparable sales. It is important to apply this measurement

technique and report the building dimensions consistently

because failure to do so can impair the quality of the

appraisal report.


As a rule basement space does not count as habitable space.

If the bedroom does not have proper light and ventilation,

the room can not be included in the gross living area. The

following requirements apply to the valuation of below-grade


o The windowsill may not be higher than 44 inches from

the floor.

o The windowsill must have a net clear opening (width x

height) of at least 24 inches by 36 inches.

o The window should be at ground level; however,

compensating factors may allow less.

In all cases, use reasonable care and judgment. If these

standards are not substantially met, the basement area

cannot be counted as habitable space.


Design is the cohesive element that blends the structural,

functional and decorative elements of a property into a

whole. With good design, the property's parts will be in

harmony (each part with all the other parts). The whole property,





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

Because good design is recognized and desired, the economic

life of properties and neighborhoods will be extended and

prices will typically exceed those for properties offering

the same number of rooms and area but lacking good design.

This competitive advantage usually continues through the

entire economic life of the property.

The appraiser must recognize this demonstrable price

differential and reflect it in the comparative adjustments

of market data and the final finding of value.


A residential property with good physical characteristics

may not necessarily be good security for a mortgage loan,

even if it is situated in a good location. The property may

be entirely appropriate at another location, but not in its

actual location. The property may be displeasing when

viewed in relation to its surroundings, and it may not

conform in other respects to the most marketable use in the

particular neighborhood. When determining the effect of

property-neighborhood relationships to marketability,

consider elements other than similarity of physical


Analysis of the Elements of Conformity. Analysis of

Conformity requires consideration of Suitability of Use-

Type, Appropriateness of Functional Characteristics, Harmony

of Design and Relation of Expense of Ownership to Family

Income Levels.

o Suitability of Use-Type. The term Use-Type refers to

the use for which a dwelling is designed - single-

family, two-family, etc. In most neighborhoods only

one use-type is suitable. In some neighborhoods,

however, because of their heterogeneous development,

several use-types may be found suitable.

o Appropriateness of Functional Characteristics.

Functional Characteristics refer to the living

facilities provided in a residential property. They

relate to site use and to arrangement, number and size

of rooms. Usually well-defined neighborhood market

preferences are observable.

Nonconformity may exist because of the placement of the

house on the site. Carefully consider any deviation from

the accustomed or accepted placement to determine whether it

adversely affects desirability.

If a site is substantially smaller than the size typical in

the neighborhood, marketability may be limited. The shape

or topography of a particular lot may make it less desirable

than those typical of the area.

The number, arrangement and size of rooms frequently conform

to definite preferences in given neighborhoods. In some

localities where one-story dwellings dominate, a two-story

dwelling may meet considerable market resistance.



o Harmony of Design. Conformity of the exterior design

of a structure with other structures in the immediate

neighborhood is not important unless it contrasts

inharmoniously with them. There may be considerable

variety in the exterior design of dwellings in a

neighborhood and yet each may present a pleasing

appearance when viewed in relation to its surroundings.

On the other hand, a dwelling may be without any

architectural faults and yet clash so violently with

the design of neighboring properties that marketability

may be seriously limited.

o Relation of Ownership Expense to Family Incomes.

Families usually select homes in neighborhoods where

typical occupants have financial means similar to their

own. A home that is too costly for these families to

purchase or maintain will have limited marketability.


Because a building is subject to physical deterioration and

obsolescence, its period of usefulness is limited. As a building

deteriorates or becomes obsolete, its ability to serve useful

purposes decreases and eventually ends. This may occur gradually

or rapidly.


o The total physical life of a building is the period

from the time of completion until it is no longer fit

or safe for use or when maintaining the building in a

safe, usable manner is no longer practicable.

o The total economic life of a building is the period of

time from its completion until it can no longer produce

services or net returns over and above a return on the

land value.

Economic life can never be longer than the physical life,

but may be and frequently is shorter. A structure that is

sound and in good physical condition with many years of

physical life remaining may have reached the end of its

economic life - if its remaining years of physical

usefulness will not be profitable.


In predicting the remaining economic life of a building,

consider these factors:

o the economic background of the community or region and

the need for accommodations of the type represented

o the relationship between the property and the immediate

environment the architectural design, style and utility

from a functional point of view and the likelihood of

obsolescence attributable to new inventions, new

materials and changes in tastes

o the trends and rate of change of characteristics of the

neighborhood and their effect on land values




o workmanship, durability of construction and the rate

with which natural forces cause physical deterioration

o the physical condition and probable cost of maintenance

and repair, the maintenance policy of owners and

occupants and the use or abuse to which structures are



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

o when the building can no longer produce annual income

or services sufficient to offset maintenance expense,

insurance and taxes to produce returns on the value of

the land


o when rehabilitation is not feasible

The improvements on the lot at the time have no more value

than the amount obtainable from a purchaser who will buy

them and remove them from the site.


Local municipalities design local housing code standards;

therefore, enforcement of such housing standards rests with the

local authority. HUD does not have the authority or the

responsibility for enforcing local housing codes except for

mortgages on properties to be insured under Section 221(d)(2)-a

program with mortgage limits at $36,000. Loans insured under

Section 221(d)(2) of the National Housing Act require code

enforcement. The appraiser should contact the lender for further

instructions if the mortgage is to be insured under Section



These criteria define standards for existing properties to be

eligible for FHA mortgage insurance. Underwriters bear primary

responsibility for determining eligibility; however, the

appraiser is the on-site representative for the lender and

provides preliminary verification that these standards have been

met. Many of the requirements are technical and beyond the

expertise of the appraiser. They are presented here for

reference, and the appraiser's responsibility is noted by


These criteria form the basis for identifying the deficiencies of

the property that the appraiser must note in the VC form and that

must be addressed by the lender before closing. When examination

of existing construction reveals noncompliance with the General

Acceptability Criteria, an appropriate specific condition to

correct the deficiency is required if correction is feasible. If

correction is not feasible and compliance can be effected only by

major repairs or alterations, the lender will reject the

property. The appraiser is only required to note conditions that

are readily observable.

As-Repaired Appraisal. The appraiser prepares the valuation "as-

repaired" subject to the conditions noted on the VC form. Those

items not listed on the VC will form the basis of comparison to

comparable properties for physical conditions.





Required repairs are limited to those repairs necessary to

preserve the continued marketability of the property and to

protect the health and safety of the occupants.

Deferred Maintenance. Any operable or useful element that will

have reached the end of its useful life within two years should

be replaced. With respect to such deferred maintenance items,

exercise good judgment in requiring repair.

Replacement Because of Age. If an element is functioning well,

do not recommend replacement simply because of its age.

> If the septic system shows evidence of failure because of

age, recommend a specific inspection.

Valuation Conditions. The Valuation Conditions Form and its

protocol help the appraiser evaluate the standards required by

the General Acceptability Criteria. The criteria are described

below. The appraiser must ascertain if the condition called for

exists and mark yes if it does.

> If the observed deficiencies exist, mark "YES" in the

appropriate location on the Valuation Conditions Form,

condition the appraisal on the requirement for repair or

further inspection and prepare the appraisal "as-repaired"

subject to the satisfaction of the condition.

The following guidelines are HUD's General Acceptability Criteria

for existing properties. They provide general guidance for

determining the property's eligibility for FHA mortgage

insurance. For instructions on filling out the VC form, see the

protocol in Appendix D.


These minimum requirements for existing housing apply to

existing buildings and to the sites on which they are

located. The buildings may be:

o detached

o semidetached

o multiplex

o row houses

o individual condominium units

These requirements also cover the immediate site environment

for the dwelling, including streets, other services and

facilities associated with the site.

1. Subject Property

The subject property must be adequately identified as a

single, marketable real estate entity. However, a

primary plot with a secondary plot for an appurtenant

garage or for another use contributing to the

marketability of the property will be acceptable if the

two plots are contiguous and comprise a readily

marketable real estate entity.




(3-6) 2. Hazards

The property must be free of all known hazards and

adverse conditions that:

o may affect the health and safety of the occupants

o may affect the structural soundness of the


o may impair the customary use and enjoyment of the


These hazards include toxic chemicals, radioactive

materials, other pollution, hazardous activities,

potential damage from soil or other differential ground

movements, ground water, inadequate surface drainage,

flood, erosion, excessive noise and other hazards on or

off site.

> If the property meets the acceptability guidelines

in the VC protocol (Appendix D), quantify the

deficiency's impact in the property valuation.

> If the property does not meet the acceptability

guidelines, note the appropriate hazard in VC-1 and


In the appraisal of new and proposed construction,

special conditions may exist or arise during

construction that were unforeseen and necessitate

precautionary or hazard mitigation measures. HUD will

require corrective work to mitigate potential adverse

effects from the special conditions as necessary.

Special conditions include:

o rock formations

o unstable soils or slopes

o high ground water levels

o springs

o other conditions that may have a negative effect

on the property value

The builder must ensure proper design, construction and

satisfactory performance when any of these issues are


For specific instructions about noting this information

in the VC form, see VC-1 in the protocol (Appendix D).

3. Soil Contamination

a. Septic and Sewage

If a septic system is part of the subject

property, the appraiser must determine whether the

area is free of conditions that adversely affect

the operation of the system. Consider the




(3-6) o the type of system

o topography

o depth to ground water

o soil permeability

o the type of soil to a depth several feet

below the surface

If in doubt about the operation of sewage disposal

systems in the neighborhood, mark "YES" in VC-2,

condition the appraisal on further inspection and

prepare the appraisal "as-repaired" subject to

satisfaction of the condition.

The lender will contact the local health authority

or a professional to determine the viability of

the system.

b. Other Soil Contaminants

The following conditions may indicate unacceptable

levels of soil contamination: pools of liquid,

pits, ponds, lagoons, stressed vegetation, stained

soils or pavement, drums or odors.

> If there is evidence of hazardous substances

in the soil, require further inspection. Mark

"YES" in VC-2, condition the appraisal on

further inspection and prepare the appraisal

"as-repaired" subject to the satisfaction of


c. Underground Storage Tanks

During the site inspection, the appraiser must

walk the property and search for readily

observable evidence of underground storage tanks.

Evidence would include fill pipes, pumps,

ventilation caps, etc.

> If there is evidence of underground storage

tanks, require further analysis. Mark "YES"

in VC-2, condition the appraisal on that

requirement and prepare the appraisal "as-

repaired" subject to the satisfaction of the


4. Drainage

The site must be graded to provide positive drainage

away from the perimeter walls of the dwelling and to

prevent standing water on the site. Signs of

inadequate draining include standing water proximate to

the structure and no mitigation measures such as

gutters or downspouts.

For specific instructions about noting this information

in the VC form, see VC-3 in the protocol (Appendix D).

> If drainage is inadequate and needs improvement,

mark "YES" in VC-3, make a repair requirement,

condition the appraisal on that requirement and

prepare the appraisal "as-repaired" subject to the

satisfaction of the condition.




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

Each living unit must contain the following:

o domestic hot water

o a continuing and sufficient supply of potable

water under adequate pressure and of appropriate

quality for all household uses

o sanitary facilities and a safe method of sewage


Connection must be made to a public water/sewer system

or a community water/sewer system, if connection costs

to the public or community system are reasonable (3% or

less of the estimated value of the property). If

connection costs exceed 3%, the existing on-site

systems will be acceptable provided they are

functioning properly and meet the requirements of the

local health department.

> If the correction is feasible, require connection.

Mark "YES" in VC-4, condition the appraisal on the

requirement and prepare the appraisal "as repaired"

subject to the satisfaction of the condition.

a. Individual Water Supply and Sewage Disposal


If water and sewer systems are not connected to

public systems, the water well and/or septic system

must meet the requirements of the local health

authority with jurisdiction. If the local

authority does not have specific requirements, the

maximum contaminant levels established by the

Environmental Protection Agency (EPA) will apply.

If the authority is unable to perform the water

quality analysis in a timely manner, a private

commercial testing laboratory or a licensed

sanitary engineer acceptable to the authority may

take and test water samples.

o Each living unit must be provided with a sewage

disposal system that is adequate to dispose of

all domestic wastes and does not create a

nuisance or in any way endanger the public


o Individual pit privies are permitted where such

facilities are customary and are the only

feasible means of waste disposal and, if they

are installed in accordance with the

recommendations of the local Department of


> If there is a well or septic system on the

property, mark "YES" in VC4, condition the

appraisal on further inspection by the lender

and prepare the appraisal "as-repaired" subject

to satisfaction of the condition.

A domestic well must be a minimum of 50 feet from a

septic tank, 100 feet from the septic tank's drain

field and a minimum of 10 feet from any property




> Clearly show the location of private wells and

septic systems on the site sketch and note the

distance between the two.

b. Unacceptable Conditions

The following water well conditions are

unacceptable and must be noted in VC-4:

o mechanical chlorinators

o water flow that decreases noticeably when

simultaneously running water in several

plumbing fixtures (the well may not be able to

provide a continuous, adequate supply of


o properties served by dug wells unless a

complete survey conducted by an engineer was

delivered to the lender and subsequently given

to the appraiser

o properties served by springs, lakes, rivers or

cisterns (3-6)

To be considered acceptable, the engineer's survey

must include these items:

o a health report with no qualifications

o indication that an inoperative well was cased,

sealed and capped with concrete to a depth of

at least 20 feet

o a pump test indicating a flow of at least 3-5

gallons per minute supply for an existing

well, and 5 gallons per minute for a new well

o an acceptable septic report

o no indication of exposure to environmental

contamination, mechanical chlorination or

anything else that adversely affects health

and safety

> If these requirements for individual wells or

septic tanks are not met, note them in VC-4 and

prepare the appraisal "as-repaired" subject to

further inspection.

The lender will require the engineer's follow-up

report and will arrange for any

required corrective measures.

6. Wood Structural Components: Termites

Termites can cause serious problems in the wood

structural components of a house and may go undetected

for a long period of time. FHA requires maximum

assurances that a home is free of any infestation. A

pest inspection is always required for:




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

o any structure where the wood touches ground

Structures in a geographic area with no active termite

infestation may not require a pest inspection.

However, the appraiser must always note:

o any infestation

o any damage resulting from previous infestation

o whether damage from infestation has been repaired

or is in need of repair

Observe all areas of the property that have potential

for termite infestation, including the bottoms of

exterior doors and frames, and wood siding in contact

with the ground and crawl spaces. Examine mud tunnels

running from the ground up the side of the house for

possible evidence of termite infestation.

> If there is any evidence of termite infestation,

require an inspection by a reputable licensed

termite company. Mark "YES" in VC-5, condition the

appraisal on the requirement and prepare the

appraisal "as-repaired" subject to the satisfaction

of the condition.

For specific instructions on noting this information in

the VC Form, see VC-5 in the protocol (Appendix D).

7. Streets

Each property must be provided with safe and adequate

pedestrian and vehicular access from a public or

private street. Private streets must be protected by

permanent recorded easements and have joint maintenance

agreements or be owned and maintained by a HOA.

All streets must provide all-weather access to all

buildings for essential and emergency use, including

access for deliveries, service, maintenance and fire

equipment. FHA defines all-weather surface as a road

surface over which emergency vehicles can pass in all

types of weather. Streets must either be:

o dedicated to public use and maintenance


o retained as private streets protected by permanent

recorded easements (when approved by HUD)

> If these requirements are not met, mark "YES" in

VC-6 and prepare the appraisal "as-repaired"

subject to the correction of this deficiency.




(3-6) 8. Defective Conditions

A property with defective conditions is unacceptable

until the defects or conditions have been remedied and

the probability of further damage eliminated.

Defective conditions include:

o defective construction

o poor workmanship

o evidence of continuing settlement

o excessive dampness

o leakage

o decay

o termites

o other readily observable conditions that impair

the safety, sanitation or structural soundness of

the dwelling

The items outlined in VC-7: Structural Conditions, are

meant to alert the appraiser and the lender to the

possibility of defective conditions. These items are

readily identifiable characteristics that could

indicate one of the defective conditions.

9. Ventilation

Natural ventilation of structural space - such as

attics and crawl spaces - must be provided to reduce

the effect of excess heat and moisture that are

conducive to decay and deterioration of the structure.

All attics must have ventilation to allow moisture and

excessive heat to escape. The appraiser must check the

attic areas to determine whether the ventilation is


> If ventilation is not provided, make a condition

for repair, mark "YES" in VC7 and prepare the

appraisal 'as-repaired" subject to the satisfaction

of the condition.

10. Foundations

All foundations must be adequate to withstand all

normal loads imposed. Stone and brick foundations are

acceptable if they are in good condition. The

appraiser must review the conditions in VC-8 for

evidence of conditions that could indicate safety or

structural deficiencies that may require repair.

> If the foundation is deficient, mark "YES" in VC-8

and prepare the appraisal "as-repaired" subject to

the repair of the deficiencies.

11. Crawl Space

To ensure against conditions that could cause the

property to deteriorate and seriously affect the

marketability of the property, it is required that:




(3-6) o There must be adequate access to the crawl space;

the appraiser must be able to access the crawl

space for inspection. Access is defined as ability

to visually examine all areas the crawl space.

Specifically, the minimum distance is 18 inches.

o The floor joists must be sufficiently above ground

level to provide access for maintaining and

repairing ductwork and plumbing.

o The crawl space must be clear of all debris and

trash and must be properly vented.

o The crawl space must not be excessively damp and

must not have any water ponding.

> If these requirements are not met, mark 'YES" in

VC-8 and prepare the appraisal "as-repaired"

subject to repair of the deficiency.

12. Roof

The covering must prevent moisture from entering and

must provide reasonable future utility, durability and

economy of maintenance. When re-roofing is needed for

a defective roof that has three layers of shingles, all

old shingles must be removed before re-roofing. The

details of the process are provided in the protocol.

The appraiser must observe the roof to determine

whether the deficiencies present a health and safety

hazard or do not allow for reasonable future utility.

The appraiser is only required to note readily

observable conditions.

> If the roof is deficient, mark "YES" in VC-9 and

prepare the appraisal "as repaired" subject to the

repair of the deficiency.

Flat roofs typically have shorter life spans and

therefore require inspection.

> If there is a flat roof mark "YES" in VC-9 and

prepare the appraisal "as repaired" subject to

further inspection.

13. Mechanical Systems

These are the requirements for mechanical systems:

o must be safe to operate

o must be protected from destructive elements

o must have reasonable future utility, durability

and economy

o must have adequate capacity and quality




(3-6) The appraiser must observe the systems in VC-10 and

determine if any of the conditions do not meet the

above stated criteria.

> If the systems require repair, mark "YES' in VC-10,

condition the appraisal on the repair or further

inspection and prepare the appraisal "as-repaired"

subject to the satisfaction of the condition.

> If systems could not be operated due to weather

conditions, explain that in VC-10, condition the

appraisal on assumed functionality, and make a note

of this condition on the Homebuyer Summary - Part 3

of the Comprehensive Valuation Package.

14. Heating

Heating must be adequate for healthful and comfortable

living conditions:

o Dwellings that use wood-burning stoves or solar

systems as a primary heat source must have

permanently installed conventional heating systems

that can maintain a temperature of at least 50

degrees F. in areas containing plumbing systems.

These systems must be installed in accordance with

the manufacturer's recommendations.

o Properties with electric heating sources must have

an acceptable electric service that meets the

general requirements of the local municipal


o All water heaters must have a non-adjustable

temperature and pressure-relief valve. If the

water heater is in the garage, it must comply with

local building codes.

o All non-conventional heating systems - space

heaters and others - must comply with local

jurisdictional guidelines.

Solar energy systems are discussed in Appendix B.

15. Electricity

Electricity must be available for lighting and for

equipment used in the living unit. Refer to the

specific instructions in the protocol (Appendix D) for

determining adequate electricity.

16. Other Health And Safety Deficiencies

The appraiser must note and make a repair requirement

for any health or safety deficiencies as they relate to

the subject property, including:

o broken windows, doors or steps

o inadequate or blocked doors

o steps without a handrail

o others




The appraiser must operate a representative number of

windows, interior doors and all exterior and garage

doors, as well as verify that the electric garage door

operator will reverse or stop when met with resistance

during closing.

If conditions exist that require repair, mark "YES" in

VC-11 and prepare the appraisal "as-repaired" subject

to the satisfaction of the condition.

17. Lead-Based Paint And Other Hazards

If the home was built before 1978, the appraiser should

note the condition and location of all defective paint

in the home. Inspect all interior and exterior

surfaces - wars, stairs, deck porch, railing, windows

and doors - for defective paint (chipping, flaking or

peeling). Exterior surfaces include those surfaces on

fences, detached garages, storage sheds and other

outbuildings and appurtenant structures.

> If there is evidence of defective paint surfaces,

condition the appraisal on their repair, mark "YES"

in VC-12 and prepare the appraisal "as-repaired"

subject to the satisfaction of the condition.

For condominium units, the appraiser needs to inspect

only the exterior surfaces and appurtenant structures

of the unit being appraised and address the overall

condition, maintenance and appearance of the

condominium project.

> If the condominium project was built before 1978

and shows signs of excessive deferred maintenance

or defective paint, mark "YES" in VC-13 and prepare

the appraisal "as-repaired" subject to the

satisfaction of the condition.


There are other eligibility criteria that are not part of

the VC form. The lender bears primary responsibility for

these; however, they are provided here so that the appraiser

may reference them if questions arise during the property


1. Party Or Lot Line Wall

There must be adequate space based upon market

acceptability between buildings to permit maintenance

of the exterior walls for detached homes.

2. Service And Facilities

Trespass. Each living unit must have the capacity to

be maintained individually without trespassing on

adjoining properties.

Utilities. Utilities must be independent for each

living unit except that common services - water, sewer,

gas and electricity - may be provided for living units

under a single mortgage or ownership.

o Each unit must have separate utility service shut-





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

o For living units under separate ownership, common

utility services may be provided from the main

service to the building line when protected by an

easement or covenant and maintenance agreement

acceptable to HUD.

o Individual utilities serving a unit must not pass

over, under or through another unit, unless:

- Provisions have been made for repairing and

maintaining those utilities without trespassing

on adjoining properties.


- An easement of covenant is made for permanent

right of access for maintenance and repair of


o If a single drain line in the building serves more

than one unit, the building drain clean-outs must

be accessible from the exterior.

o Other facilities must be independent for each

living unit, except common services, such as

laundry and storage space or heating, may be

provided for two-to-four-living-unit buildings

under a single mortgage.

Dedication. Utilities must be located on easements

that have been permanently dedicated to the local

government or appropriate public utility body. This

information must be recorded on the deed record so that

the utility services match the easement.

3. Non-Residential Use Design Limitations

A qualified property must be predominantly residential

in use and appearance. Any nonresidential use of the

property must be subordinate to its residential use,

character and appearance. A property, any portion of

which is designed or used for nonresidential purposes,

is eligible only if the type or extent of the

nonresidential use does not impair and/or remove the

property's residential character and appearance.

4. Access Onto Property

Access to the living unit must be provided without

passing through any other living unit. Access to the

rear yard must be provided without passing through any

other living unit. For a row-type dwelling, the access

may be by an alley, easement or passage through the





(3-6)5. Space Requirements

Each living unit must have the space necessary to

ensure suitable living, sleeping, cooking and dining

accommodations and sanitation facilities.

6. Bedroom Egress

All bedrooms must have adequate egress to the exterior

of the home. If an enclosed patio (solid walls) covers

the bedroom window, it is possible that the bedroom

won't qualify as a habitable bedroom. Security bars

are acceptable if they comply with local fire codes.

Occupants of a bedroom must be able to get outside the

home if there is a fire.

7. Energy Efficiency

For new and proposed construction and properties less

than one year old, all detached one- and two-family

dwellings and one-family townhouses not more than three

stories in height must comply with the CABO Model

Energy Code, 1992 Edition, Residential Buildings,

except for sections 101.3.1, 101.3.2, 104 and 105.

These sections remain:

o Section, Historic Buildings

o The Appendix

o HUD Intermediate MPS Supplement 4930.2 Solar

Heating and Domestic Hot Water Systems, 1989


Valuation procedures for solar energy systems can be

found in Appendix B.3.


Conditions that do not ordinarily require repair include any

surface treatment, beautification or adornment not required

for the preservation of the property.

These are some examples:

o A wood floor's finish that has worn off to expose the

bare wood must be sanded and refinished. However, a

wood floor that has darkened with age but has an

acceptable finish does not need polishing or


o Peeling interior paint and broken or seriously cracked

plaster or sheetrock require repair and repainting, but

paint that is adequate though not fresh does not need

to be redone.

o Missing shrubbery or dead grass on an existing

property does not need to be replaced.

o Cleaning or removing carpets is required only when

they are so badly soiled that they affect the

livability and/or marketability of the property.



o Installing paved driveways or aprons should not be

required if there is an otherwise acceptable surface.

o Installing curbs, gutters or partial street paving is

not required unless assessment for the same is


o Complete replacement of tile floors is not necessary

if some tiles do not match, etc.

Avoid unnecessary requirements because they increase housing

cost without adding any basic amenities to the property.


The appraiser must develop the cost approach for new or

proposed construction and the normal site development costs

must be included in the lot value. Where unusual cuts,

fills, retaining walls, etc. are necessary to prepare the

site for the proposed building improvements, estimate the

amount by which the cost of the work exceeds the cost of

preparing typical sites for similar structures from the

Marshall and Swift Cost Handbook. This estimate supplements

the estimate of the replacement cost of building


o When estimating the market price of a site with unusual

site characteristics that must be corrected, assume

that the site is in the condition that will exist after

the corrective work is completed. Disregard the cost

of the treatment, but use the value of the improved

site in the estimate of the replacement cost of the


o Use the supplemental cost estimate to:

- determine the extent to which the replacement cost

of the property will exceed the cost of a

substitute property produced by constructing

identical improvements on a typical site

- indicate the extent to which value may be less

than the replacement cost for that part in excess

of the cost of preparing the typical site

o Do not include the cost of treating unusual site

characteristics in the estimate of replacement cost of

building improvements. It is necessary to avoid

including both the effect of site treatment and the

cost of the work in the estimate of replacement cost of

the property.