Valuation Frequently Asked Questions

Information by State  Print version

Table of Contents

1) CONDOMINIUMS
2) MANUFACTURED HOUSING
3) APPRAISER/APPRAISAL ISSUES
4) PROPERTY ISSUES
5) TERMITE
6) WELLS/SEPTIC SYSTEMS
7) MISCELLANEOUS

Condominiums

1) Q. How do I find out if a condo is on FHA's approved list?
A. Refer to this URL Hotspot for Approved Condos:

2) Q. How can I get a Condominium approved?
A. The guidelines for submission of Condos are set forth in HUD Handbook 4150.1 Rev-1, Chapter 11. Generally, the necessary documentation is submitted to HUD by a mortgage lender. Since most mortgage lenders are familiar with the information necessary for HUD to process the request, we strongly recommend that individuals, such as buyers and builders, use the services of a lender to make the submission. Copies of the handbook can be obtained from our Internet page at http://www.hudclips.org or may be ordered by calling (800) 767-7468.

3) Q. Can I do a spot loan on a Condo? Can I get a waiver for any of the items on the Spot Loan Certification?
A. Spot Condo procedures are in Mortgagee Letter 96-41. Spot Condo procedures are in Mortgagee Letter 96-41. All requirements in the Mortgagee Letter must be met. If the lender needs a waiver on any of the items, the loan cannot be accepted using the Spot Loan process. The project should be submitted for full review by HUD staff.

4) Q. Can I get a waiver if the owner-occupancy of a Condo is under 51%?
A. No. The lender must certify in writing on company letterhead that at least 51% of the units are owner-occupied. The lender can rely on information provided on the Individual Condominium Unit Appraisal Report (Fannie Mae Form 1073).

5) Q. Can the condo association waive the right of first refusal restriction and get a condo approved? What about spot loans?
A. No for both. See handbook 4265.1, Appendix 24 8(e)

6) Q. As a DE Underwriter, how am I supposed to certify the answer to question #14, a & b of the spot loan approval?
A. See Mortgagee Letter 96-41 for suggested approaches to ascertain compliance with the spot loan requirements. For instance: the appraiser could be utilized to research sold data to verify the number of FHA loans in the condominium project. (See attached URL link  Mortgagee Letter 96-41)

7) Q. How can I check the status of a Condo?
A. FHA Connection or Homeownership Center having jurisdiction; Processing time for Condos: 1 - 2 weeks.

See this URL Hotspot for Approved Condos

Manufactured Housing

1) Q. Does the 10-year warranty replace the engineer's certification on newly constructed manufactured homes?
A. NO.

2) Q. If we use the local government for the 3 inspections, they do not require an engineer's certification, is there any problem with this?
A. YES. Local inspections are not acceptable on manufactured homes.
 
3) Q. What new construction exhibits should the DE Underwriter require for proposed construction of a manufactured home?
A. Form HUD 92541 (Builders Certification)
Floor Plan
Form HUD 92005 (Description of Materials) Individual water supply and sewage disposal system documents Applicable design worksheet as per Permanent Foundations Guide for Manufactured Housing by a state certified engineer or registered architect
Foundation and perimeter enclosure plans
Heat loss calculations
Plot plan
Site elevation determinations related to potential flooding, based upon information shown on National Flood Insurance Rate Maps
Additional exhibits, where necessary, to ensure site acceptability. See URL link 4145.1 Rev 2 paragraph 2-2.F

See URL link 4145.1 Rev 2 paragraph 3-4B

4) Q. Does an existing manufactured home (Title II) located in a floodplain qualify for FHA insurance, if the finished grade elevation beneath the home is below the flood elevation level?  What about with flood insurance?
A.  All manufactured homes (new and existing) shall not be located within a FEMA designated Special Flood Hazard Area. The finished grade level beneath the manufactured home shall be at or above the 100-year return frequency flood elevation or be covered by a Letter of Map Amendment (LOMA) or Letter of Map Revision (LOMR) or an Elevation Certification (FEMA form 81-31). An Elevation Certificate must be prepared by a state licensed land surveyor, licensed professional engineer, or registered architect and completed on finished construction (not proposed or under construction), and reflect a finished grade at or above the 100-year return frequency flood elevation. When using an Elevation Certificate, the property is still located in a flood plain, and therefore, flood insurance is required.
 
Appraiser/Appraisals

1) Q. How does an appraiser apply to perform FHA appraisals?
A. See web site for Appraisal License Eligibility.

2) Q. The appraiser's license has expired. How is it updated?
A. The appraiser or lender should fax a copy of the current license to the Office of Single Family Housing @ (202) 401-0416. See web site for: Appraisal License Renewal.

3) Q. Can a case number be canceled and another one requested with a different appraiser?
A. Once an appraisal has been completed, it has a life of six months for existing and twelve months for proposed properties, and should not be canceled. Reconsideration of value as well as transferring to a different lender should be handled in accordance with the HUD HB 4150.2 The case number should not be canceled because the buyer changes, the case number is attached to the property.

4) Q. Can a HUD roster appraiser sign the appraisal as the "Supervisory Appraiser"?
A. The appraiser selected by the lender must be on the lender select roster, perform the inspection of the subject property and all comparables. This same appraiser's signature is required as "appraiser" on the left side of page two of the URAR. A review of the supervisory signature is not made. Reference can be made in the "Comments" section of the URAR regarding a trainee's assistance with the appraisal. See URL link: 4150.2 5-1 A.2.

5) Q. Can a lender charge a fee before transferring an appraisal?
A. As per the 4000.4 the original mortgagee may request a pro-rata portion of the origination fee. No more than one half percent if the underwriter has reviewed and signed the appraisal, and no more than one percent if the underwriter has reviewed both the appraisal and mortgage credit worksheet.
See URL link:  HUD handbook 4000.4 page 1-11.

6) Q. Can an appraisal be extended?
A. Appraisals on proposed construction may be extended up to 12 months provided that construction started before the original appraisal expired. Appraisals on existing properties may not be extended.
See URL link:  HUD handbook 4000.4 page 3-5.

7) Q. Should the lender refer the mortgagor to HUD if they have a complaint about the condition of the property?
A. Complaints made to a mortgagee involving cases processed under Direct Endorsement are to be initially investigated by the mortgagee. See URL link: HUD handbook 4000.4 page 1-11.

8) Q. What is the allowable inspection fee for new construction inspections by FHA compliance inspectors?
A. Fees vary by location. See URL link:  Inspection Fees.
 

Property Issues

1)    Q. Is an AC (architectural condition) sheet required? 
A. No. AC sheets are no longer utilized because of conditions required by the underwriter on the reverse side of the 92800.5B. In addition, the Builder's Certification, HUD-92541, Block (3) assures compliance with Appendix 8, HUD's Site Grading & Drainage Guidelines. Appraisers, builders and lenders are reminded that compliance with Appendix 8 of HUD Handbook 4145.1, REV-2, is required.

2) Q. Regarding the private road maintenance agreement: Suppose one of the owners along the road will not sign the agreement?
A. The subject property should be rejected. Everyone living along the road must sign the agreement.

3) Q. Are black and white pictures acceptable if clear?
A. Appraiser must take pictures from oblique angles to clearly reflect grading and drainage on new construction. Pictures should also be taken from oblique angles to clearly show side & front, rear & side whenever possible. In all cases Black & White pictures are acceptable as long as the depiction of the subject is clear. See URL Link: 4145.1, Rev.-2, 6-3.A.#3.

4) Q. Must chipping paint on a home built after 1978 be cured?
A. Per Mortgage Letter 2005-48, defective paint surfaces on a post-1978 home do not require repair unless the surface is otherwise unprotected. See Mortgagee Letter 2005-48

5) Q. Must central A/C and inside appliances be working?
A. Items contributing to value must be operational. See URL Link: 4150.2, paragraph 3-6 and 3-6A.14 .

6) Q. Must the appraiser view the attic and crawl space?
A. Yes. See attached URL Link: 4150.2, paragraph 3-6(10 & 11)

7) Q. Must earth-wood contact be corrected?
A. Yes. There should be a minimum of 6 inches between the wood siding and the earth. (CABO/International Residential Code)

8) Q. What is the minimum distance between the subject and the dwelling on abutting property?
A. Distances that are common for the market and meet local code (set-backs, zoning, etc.) requirements.

9) Q. There is significant confusion regarding construction exhibits required by the lender as a result of ML 95-11.  We have been advised by a builder that we are the only lender requiring the new construction exhibits listed in the 4145.1. Please clarify.
A. Mortgagee Letter-2005-09, issued February 17, 2005 advises mortgagees that FHA no longer requires them to retain new construction exhibits in the origination binder when processing a new construction loan with a building permit & certificate of occupancy (See Mortgagee Letter 2001-27).  The lender is still required to provide the appraiser with the exhibits necessary to complete the appraisal when the home is less than 90% complete. If the appraiser feels the cost approach is relevant to value it may be necessary to secure certain new construction exhibits, which the mortgagee must provide. 

Termites

1) Q. Are termite inspections required on a "Streamline Refinance"?
A. No. Inspections for Wood destroying insects/organisms are only required if there is evidence of active infestation, mandated by state or local jurisdiction and when termite activity is customary/prevalent in the subjects market or at lenders discretion. See ML-2005-48.

2) Q. Is there an alternate to chemical treatment for termites on new construction?
A. The Department also accepts the use of EPA registered baits and wood treatments as termite protection. For all treatment types, the application must be by a licensed pest control operator. See HUD Handbook 4910.1, 606-1, Mortgagee Letter 99-03, and/or Mortgagee letter 2001-04, for further clarification. See URL link: Pest Control

3) Q. When the appraiser or pest control operator indicates termite damage and the mortgagee must provide a clear inspection by a qualified inspector to determine that the structure is sound, can a compliance inspector make that determination or must it be a structural engineer?
A. An inspection can be completed by a “qualified” professional (FHA inspector, home building inspector, building contractor/tradesperson, engineer, etc.) that has experience in structural related matters. See URL Link: Clearing Conditions

4) Q. What do we do if the termite report does not address whether or not there is damage but does shows previous or active infestation?
A. In all instances, active infestation must be treated. An inspection is only required if damage is indicated. See URL Link: Pest Control

5) Q. What states are termite/wood destroying insect inspections required?
A. A. See URL: Pest Control Zones.

Wells/Septic Systems

1) Q. Is a water test required for all properties with a well?
A. Well (individual water system) test or inspection is required if mandated by state or local jurisdiction; if there is knowledge that well water may be contaminated; when the water supply relies upon a water purification system due to presence of contaminants; or when there is evidence of:Corrosion of pipes (plumbing);Areas of intensive agriculture within 1/4 mile; Coal mining or gas drilling operations within 1/4 mile; Dump, junkyard, landfill, factory, gas station, or dry cleaning operation within1/4 mile; Unusually objectionable taste, smell or appearance of well water.

2) Q. What exhibits are necessary when requesting a waiver of the distance from a well to any of the potential sources of pollution or the property line as listed in HUD Handbook 4910.1, Appendix "K"?
A. Specific exhibits are required for waiver of distances; you should contact your local Homeownership Center for processing requirements. See URL link: Well Waiver

3) Q. Are there ANY exceptions to the requirement for connection to public utilities when available? And if so, who may grant the waiver?
A. The only exception is if connection costs exceed 3% of the estimated value of the property. In this case the existing on-site system is acceptable provided it is functioning properly and meets the requirements of the local health authority. See HUD Handbook 4150.2; paragraph 3-6 and Appendix D, VC-4. Additional info see URL: Water Systems.

Miscellaneous

1)    Q. How do I become an approved Home Inspector?
A. Although we strongly urge homeowners to get a home inspection before buying a home, HUD does not approve or maintain a roster of home inspectors. You may contact the American Society of Home Inspectors for more information. You may also contact your state agency responsible for home inspectors.

2)    Q. How do I become an approved FHA builder?
A. Effective with HUD Mortgagee Letter 95-57, HUD no longer approves builders or maintains a list of approved builders. See attached URL links: Mortgagee Letters 95-57,   95-18 and 93-27.