Property Condition Grading Has Changed on all Appraisals. Know your C’s!!!!!

Mortgage and Lending with - Legend Lending NMLS #293883

Recently the condition assessment on appraisals has changed.  Before the condition options were Excellent, good, poor, etc.  That has now changed, they are now rated with letter “C” and a number 1 thru 6.  It is important to know these ratings or grades and how it can affect your client.  Here is the short explanation of each grade:


·         C-1  This is a brand new constructed home that has not been lived in

·         C-2   This home has no physical depreciation, deferred maintenance or needed repairs.  And all work has been done recently and is similar to that of a new constructed home

·         C-3   The home is well maintained and no major repairs are needed

·         C-4    This would be an average home.  it features some deferred maintenance and normal wear and tear. 

·         C-5    The home is in major need of repair(s).  The condition is okay and still livable

·         C-6    This home is in need of major repairs, maybe a tear down


Okay, now that you know the property condition rating system let’s talk about how it affects you.  Lenders will not lend on a C-6, some might not even lend on a C-5.  Of course by the time you know the grade for your property it will be in underwriting.   When an appraiser gives a lower score he should also state what caused it.  Some examples would be foundation problems, flooring, etc.  One way to solve your low grade is to do an repair escrow holdback for the repairs needed to increase the grade.  For more information check out:  Repair Escrow.   Another option is to have the seller fix the items needed before closing. 

Please call or email me with any questions. 

Posted by





David Krichmar 

Mortgage Banker NMLS#293883 

Legend Home Lending

LLC NMLS #229421

Has Written For Realtor Magazine, Houston Agent Magazine, Scotsman Mortgage Guide

Appeared On Fox Business


Named 5 Star Mortgage Professional 2013, 2014, 2015, 2016, 2017

Named Top Mortgage Professional 2010,2011


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If you are looking for a FHA, VA, USDA, Homepath, Conventional, Jumbo, Construction, FHA 203k mortgage in Fort Bend County, Sugar Land, Houston, Katy, Harris County, Brazoria County, Pearland, Richmond, Bellaire, West University, The Woodlands, Kingwood, Friendswood, Clear Lake, Galveston, Fulshear, Tomball, Spring, Conroe, Montgomery County or anywhere in Texas I am your GUY!  


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Andrea Lueth
The Real Estate Experts - Sugar Land, TX
REALTOR - Sugar Land Texas Homes for Sale

Thanks for the brief lesson on the new appraisal ratings! Now I gotta read about the repair escrow...

Dec 21, 2011 10:33 AM #1
Rosalie Evans
Meritus Group Real Estate - Sioux Falls, SD
The Evans Group, Sioux Falls, SD Homes For Sale

This is kind of scary for the owners of older homes I would think! I can't imagine that a 1880's to 1940's home could do much better then a C-4?? Could it?? Are older homes going to be increasing difficult to finance??

Dec 21, 2011 10:45 AM #2
go to & get 20 Listing Appointments per month
Real Estate Faster - Los Angeles, CA

Good information to know. Putting up to 5k in escrow in needed repairs is definitely worth it.

Dec 21, 2011 11:02 AM #3
Kim Sellers
Lake Arrowhead, CA Coldwell Banker - Lake Arrowhead, CA
Lake Arrowhead Realtor - BRE#01412099 - Lake Arrow

Thank you for sharing this, good information to pass one.

Dec 21, 2011 11:16 AM #4
Jennifer Robinson
Starkey Mortgage - Where PEOPLE come first! - Montgomery, AL
NMLSR# 190994/AL#50092, Conventional, FHA, VA, Step Up and USDA

Good post, Dave!  Something Lenders can quickly glance at and know before sending through underwriting if a potential problem exists.  Thanks for passing along!

Dec 21, 2011 01:51 PM #5
Hank Miller
Harry Norman Realtors - Alpharetta, GA
Associate Broker & Certified Appraiser
The more things change...this was done to standardize ratings so data can be mined. Average homes will mostly be c3-c4; the 5 and 6 ones will be obvious and would be homes that you'd normally look at as needing major repair. Curious to see how underwriters handle things.
Dec 21, 2011 02:04 PM #6
David Krichmar - Legend Lending - Sugar Land, TX

Thank You Everyone for the comments.

Thanks Hank for giving your professional opinion.  You are the right, underwriters will be the biggest deciding factor. Since it falls under their decision to approve or not approve a property. 

Dec 21, 2011 02:09 PM #7
Brian Madigan
RE/MAX West Realty Inc., Brokerage (Toronto) - Toronto, ON
LL.B., Broker

Thanks for the information. In Canada, I haven't seen that system used, but it's just a matter of time.

Dec 21, 2011 02:13 PM #8
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

An appraiser visited our meeting a few months ago and gave us a heads up on this new grading system!  I fear it will lead to more subjectivity on the part of the appraiser ... Do you know the rationale behind this.  Seems like we are not moving forward at all.

Dec 21, 2011 02:13 PM #9
David Krichmar - Legend Lending - Sugar Land, TX

Joan, great question.  Hank(#6) actually pointed out it is to streamline and standarize the information.  I dont really think it will hurt us.  Since there was a property condition rating before, but this addresses it with a number instead.  But, of course only time will tell.  And if underwriting will work with everyone on this. 

Dec 21, 2011 02:20 PM #10
Keller Williams Select Realtors-Buy a home in Washington DC. Sell a home in Washington DC - Bowie, MD
I don't make promises.I deliver results.SOLD HOMES

Thanks for the update Dave. Now I got to read the Escrow Report lately. Definitely bookmarking this one. Happy Holidays to you and your family. Great post.

Dec 21, 2011 03:25 PM #11
George Bennett
Inactive - Port Orford, OR
Inactive Principal Broker, GRI

Good information. Thanks for the training and happy holidays.

Dec 21, 2011 05:36 PM #12
Maggie McFarland
RE/MAX Pearland - Maggie McFarland - Pearland, TX
Pearland Realtor, Homes for Sale in Pearland Texas

As always Dave, you write a very informative post. Merry Christmas!

Dec 21, 2011 10:50 PM #13
Cheryl Ritchie
RE/MAX Leading Edge - Huntingtown, MD
Southern Maryland 301-980-7566

Thanks for highlighting some good ABC's as in C to learn about appraisal changes! Reblogged!

Dec 21, 2011 11:02 PM #14
Michael Setunsky
Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

Dave, thanks for explaining the new grading system. It looks like home inspections are becoming more important than ever.

Dec 22, 2011 01:23 AM #15
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Excellent post with much needed information!  The more that all participants within the transaction know regarding these changes and "gradings", the better.  I'm keeping my fingers crossed that these changes simplify and clarify expectations for appraisers, too.  Time will tell ...

Happy holidays!


Dec 22, 2011 01:27 AM #16
David Krichmar - Legend Lending - Sugar Land, TX

Thank you Maggie!!


Thank you Gene, for great mortgage info subscribe to Gene's blog.  And also subscribe to mine!!!!

Dec 22, 2011 02:38 AM #17
Dave Sullivan
Real Estate One - Birmingham, MI
Michigan Realtor with an investor viewpoint

Excellent information I will forward it if that is ok? thank you!!!

Nov 21, 2012 04:56 AM #18
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