As-Is Condition of the Subject Property
Fannie Mae permits appraisals to be based on the as-is condition of the property provided existing conditions are minor and do not affect the livability, soundness, or structural integrity of the property, and the appraiser’s opinion of value reflects the existence of these conditions. Minor conditions and deferred maintenance are typically due to normal wear and tear from the aging process and the occupancy of the property.
Note: While such conditions generally do not rise to the level of a required repair, they must be reported.
Examples of minor conditions and deferred maintenance include worn floor finishes or carpet, minor plumbing leaks, holes in window screens, or cracked window glass.
Requirements for Existing Construction
The tables below provide requirements related to existing properties that have physical deficiencies, minor conditions, or deferred maintenance items that may or may not affect the livability of the property.
Requirements for Existing Construction When There are Minor Conditions or Deferred Maintenance Items that Do Not Affect the Livability, Soundness, or Structural Integrity of the Property
Lenders must review the appraisal to ensure that the property does not have minor conditions or deferred maintenance items that affect livability, soundness, or structural integrity of the subject property. If the appraiser reports the existence of minor conditions or deferred maintenance items that do not affect the livability, soundness, or structural integrity of the property, the appraiser may complete the appraisal “as is” and these items must be reflected in the appraiser’s opinion of value.
Minor conditions and deferred maintenance items include, but are not limited to, worn floor finishes or carpet, minor plumbing leaks, holes in window screens, or cracked window glass and are typically due to normal wear and tear. The lender is not required to ensure that the borrower has had this work completed prior to delivery of the loan to Fannie Mae.
If there are minor conditions or deferred maintenance items to be remedied or completed after closing, the lender may escrow for these items at their own discretion and still deliver the loan to Fannie Mae prior to the release of the escrow as long as the lender can ensure that these items do not affect the livability, soundness, or structural integrity of the property.
Requirements for Existing Construction When There are Incomplete Items or Conditions that Do Affect the Livability, Soundness, or Structural Integrity of the Property
When there are incomplete items or conditions that do affect the livability, soundness, or structural integrity of the property, the property must be appraised subject to completion of the specific alterations or repairs. These items can include a partially completed addition or renovation, or physical deficiencies that could affect the soundness or structural integrity of the improvements, including but not limited to, cracks or settlement in the foundation, water seepage, active roof leaks, curled or cupped roof shingles, or inadequate electrical service or plumbing fixtures. In such cases, the lender must obtain a certificate of completion from the appraiser before the mortgage is delivered to Fannie Mae. Although the original appraiser should complete any required certification of completion, the lender may use a substitute appraiser.
*
IMO, if a permanent heating source is a muni requirement (i.e. Somewhere in New Mexico???)
it would fall into the same category as elect/plumbing above
Physical Deficiencies That Affect Soundness, Structural Integrity, and Livability of the Subject Property
The appraisal report must identify and describe physical deficiencies that could affect a property’s soundness, structural integrity, or livability, or improvements that are incomplete.
The property must be appraised subject to completion of the specific alterations or repairs.
If the appraiser is not qualified to evaluate the alterations or repairs needed, the appraisal must identify and describe the deficiencies and the property must be appraised subject to a satisfactory inspection by a qualified professional.
The appraisal may have to be revised based upon the results of the inspection. If so, the report must indicate the impact, if any, on the final opinion of value. The lender must review the revised appraisal report to ensure that no physical deficiencies or conditions that would affect the livability, soundness, or structural integrity of the property are
indicated. The lender must ensure that material conditions are repaired before loan delivery. If a property has incomplete improvements, the alterations or repairs must be performed. The lender must obtain a completion report from an appraiser before loan delivery.
Property Condition Disclosure to Borrower
The lender must disclose all known property condition issues to the borrower so that the borrower may take necessary actions to address such issues.
Highest and Best Use
If the current improvements clearly do not represent the highest and best use of the site as an improved site, the appraiser must so indicate on the appraisal report. Fannie Mae will not purchase or securitize a mortgage that does not represent the highest and best use of the site.
