FHA Single Family Housing Policy Handbook 4000.1, II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT > D. Appraiser and Property Requirements for Title II Forward and Reverse Mortgages > 11. Programs and Products — e. HUD Real Estate Owned Properties

iii. Required Analysis and Reporting

(A) Appraiser’s Inspection The Appraiser must inspect the interior and exterior of the Property. The Appraiser must describe any differences found between the information contained in the Property Condition Report (PCR) and the Appraiser’s observations. The Appraiser must support this description with photographs when warranted.

(B) Utilities - Mechanical Components If the utilities are off at the time of inspection, the Appraiser must ask to have them turned on and complete all requirements under Utilities – Mechanical Components. However, if it is not feasible to have the utilities turned on, then the appraisal must be completed without the utilities turned on or the mechanical systems functioning.

(C) Sales Comparison Approach, Use of Real Estate Owned Sales as Comparable Sales When considering sales to be utilized as comparables, the Appraiser must note the conditions of the sale and the motivation of the sellers and purchasers. In some markets, non-arm’s length sales constitute the majority of recent transactions of similar properties and thus are significant in the analysis of the subject. This assignment is to estimate Market Value, so REO sales, short sales and other non- arm’s length transactions must not automatically be chosen as comparables. If there is compelling evidence in the market to warrant their use, the Appraiser must provide additional explanation and support in the “Analysis” section of the sales comparison approach. Transfers to a Mortgagee or entity that owns the Mortgage by deed of trust, through foreclosure sale or sheriff’s sale, are not acceptable as comparable sales. Appraisers must exercise due diligence and care in the research and validation of REO sales to ensure similarity to the subject, especially in physical condition.

(D) Appraisal Conditions The Appraiser must provide an analysis and report of the value of the subject Property “as is.” The appraisal report must include the applicable property specific appraisal reporting form, all required exhibits, and a copy of the PCR. For Manufactured Housing, the Appraiser must not require a certification that the foundation complies with the PFGMH.

(E) Extraordinary Conditions The as-is value can be impacted by extraordinary conditions. If the Property has an illegal use or an extraordinary condition, the Appraiser must estimate the cost to bring the Property into compliance with zoning or typical marketability. The Appraiser must report whether any legal non-conforming use is allowed. The Appraiser may contact the Asset Management (AM) contractor for guidance and clarification when appraising a HUD home that is impacted by extraordinary circumstances.

(F) Statement of Insurability The Appraiser must include a Statement of Insurability in the “Comments” section of the appraisal report. (1) Insurable The Appraiser must state that the Property is insurable if, at the time of the appraisal, the Property meets MPR and MPS without needing repairs. (2) Insurable with Repair Escrow If the Property requires no more than $10,000 in repair, the Appraiser must state that the Property is insurable with a repair escrow. (3) Uninsurable If the cost of repairs is greater than $10,000, the Appraiser must state that the Property is uninsurable.

(G) Submitting the Appraisal The submission of the appraisal report and data is uploaded in HUD’s P260 web- based internet portal or subsequent system. The Appraiser must obtain a completed copy of the PCR from the contractor and submit the PCR with the appraisal report.

(H) Claims Without Conveyance of Title Properties (1) Assignment Type Under “Assignment Type” in the “Subject” section of the appraisal reporting form, the Appraiser must mark the box labeled “other” and indicate that the Property is a HUD Claims Without Conveyance of Title (CWCOT) Property. (2) Intended Use of Appraisal The intended use of the appraisal is to develop the as-is Market Value, which is a Mortgagee’s tool for calculating the Commissioner’s Adjusted Fair Market Value (CAFMV) (24 CFR § 203.368). (3) Intended User FHA is the intended user of a CWCOT appraisal. (4) Appraiser’s Inspection The Appraiser must inspect the interior and exterior of the Property. If the Appraiser cannot enter the Property, the Appraiser may perform the valuation based on an exterior-only inspection on the Fannie Mae Form 2055/Freddie Mac Form 2055, Exterior-Only Inspection Residential Appraisal Report, dated March 2005, or the Fannie Mae Form 1075/Freddie Mac Form 466, Exterior-Only Inspection Individual Condominium Unit Appraisal Report, for a condominium Property. The Appraiser must indicate that the Property could not be entered and identify the sources of the factual property data employed by the Appraiser in determining the value. (5) Appraisal Conditions CWCOT Properties are to be appraised “as is,” in the condition as it exists on the effective date of the appraisal. The value to be determined is Market Value. The Appraiser must provide an analysis and report of the value of the subject Property “as is.” Under “Reconciliation” in the “This appraisal is made” segment, the Appraiser must mark the box labeled “as is.”

(I) Pre-Foreclosure Sale Program (1) Assignment Type Under “Assignment Type” in the “Subject” section of the appraisal reporting form, the Appraiser must mark the box labeled “other” and indicate that the Property is a HUD Pre-Foreclosure Sale (PFS) Property. (2) Intended Use of Appraisal The intended use of the appraisal is to develop the as-is Market Value, which is a Mortgagee’s tool for determining the list price of a HUD PFS Property (24 CFR § 203.370). (3) Intended User FHA is the intended user of a PFS appraisal. (4) Sales Comparison Approach Sales selection requirements for PFS are the same as the Sales Comparison Approach in the REO section. (5) Appraisal Conditions PFS Properties are to be appraised “as is,” in the condition as it exists on the effective date of the appraisal. The value to be determined is Market Value. The Appraiser must provide an analysis and report of the value of the subject Property “as is.” Under “Reconciliation” in the “This appraisal is made” segment, the Appraiser must mark the box labeled “as is.”