FHA Appraisal Changes
Coming January 2nd, 2012
Following Fannie and Freddie's lead taken this last Fall, (September 2011)
, as of January 2, 2012, FHA (Federal Housing Administration) will be asking Appraisers to rate Condition of Property and Comparables from a pre-determined range of existing conditions.
These existing conditions will be rated from 1 to 6, (1 being new construction - to 6, being in need of total rehab and unacceptable condition).
The same will be true for ratings of Quality of Construction, and other identified factors. Utilization of these ratings will bring uniformity and objectivity to the Appraisal process when viewing FHA properties.
Collectively, all the above-mentioned changes now being demanded within Appraisals made by Freddie, Fannie, and FHA, will allow for a national data bank to be formulated, which will offer consistency of reporting practices by all Appraisers, something that (IMO) has long been needed, and overdue ... both from the Appraisal recipient's and professional Appraiser's view.
Below you will find the rating system to be utilized within all these Appraisals ... and the definition that corresponds with each rating:
C1: The improvements have been very recently constructed and have not previously been occupied. The entire structure and all components are new and the dwelling features no physical depreciation.*
*Note: Newly constructed improvements that feature recycled materials and/or components can be considered new dwellings provided that the dwelling is placed on a 100% new foundation and the recycled materials and the recycled components have been rehabilitated/re-manufactured into like-new condition. Recently constructed improvements that have not been previously occupied are not considered “new” if they have any significant physical depreciation (i.e., newly constructed dwellings that have been vacant for an extended period of time without adequate maintenance or upkeep).
C2: The improvements feature no deferred maintenance, little or no physical depreciation, and require no repairs. Virtually all building components are new or have been recently repaired, refinished, or rehabilitated. All outdated components and finishes have been updated and/or replaced with components that meet current standards. Dwellings in this category either are almost new or have been recently completely renovated and are similar in condition to new construction.
C3: The improvements are well maintained and feature limited physical depreciation due to normal wear and tear. Some components, but not every major building component, may be updated or recently rehabilitated. The structure has been well maintained.
C4: The improvements feature some minor deferred maintenance and physical deterioration due to normal wear and tear. The dwelling has been adequately maintained and requires only minimal repairs to building components/mechanical systems and cosmetic repairs. All major building components have been adequately maintained and are functionally adequate.
C5: The improvements feature obvious deferred maintenance and are in need of some significant repairs. Some building components need repairs, rehabilitation, or updating. The functional utility and overall livability is somewhat diminished due to condition, but the dwelling remains useable and functional as a residence.
C6: The improvements have substantial damage or deferred maintenance with deficiencies or defects that are severe enough to affect the safety, soundness, or structural integrity of the improvements. The improvements are in need of substantial repairs and rehabilitation, including many or most major components.
* Work with a mortgage lender with a complete and thorough understanding and knowledge of the appraisal process. Contact me, Gene Mundt at Chicago Bancorp, today. With over 20 years of experience and expertise as an IL licensed real estate appraiser, I can assist you, or your clients, in navigating today's challenging appraising and mortgage issues and processing.
I look forward to working with you throughout Chicagoland via any of the following methods:
(Joliet and Chicago offices also)
Direct #: 815.277.4036 Cell/Text: 708.921.6331
Fax: 312.624.6738 Skype: 630.219.1316
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Regional Manager - Mortgage Lender
Personal NMLS #216987
NMLS # 175656