From Fannie Mae:
16. What is the appraiser’s responsibility for reporting property condition?
The appraiser is responsible for considering all factors that have an impact on value in the development of his/her opinion of market value for the subject property. Fannie Mae requires the appraiser to express an opinion about the condition of the property on our appraisal report forms. The appraiser must report the condition of the property in factual, specific terms. We believe that an accurate description of the physical condition of the subject property is a critical element in arriving at a supportable opinion of market value, as well as in the prudent underwriting of a mortgage loan.
With the introduction of the Market Conditions Addendum, the appraiser must provide information about market conditions in the neighborhood of the subject property to provide additional support for his/her conclusions about the property’s value.
17. What is expected with regard to the appraiser’s inspection of a property?
Fannie Mae’s requirement of the appraiser’s property inspection for an appraisal based on an interior and exterior inspection is a complete visual inspection of the accessible areas of the property. The appraiser is responsible for noting in his/her report any adverse conditions (such as,
but not limited to, needed repairs; deterioration; the presence of hazardous wastes, toxic substances, or adverse environmental conditions
that were apparent during the inspection of the property or that he/she became aware of during the research involved in performing the appraisal.
The appraiser is expected to consider and describe the overall quality and condition of the property and identify items that require immediate repair as well as items where maintenance may have been deferred, which may or may not require immediate repair. On the other hand, an appraiser is not responsible for hidden or unapparent conditions. In addition, Fannie Mae does not consider the appraiser to be an expert in all fields, such as environmental hazards.
In situations where an adverse property condition may be observed by the appraiser but the appraiser is not qualified to decide whether that condition requires immediate repair (such as the presence of mold, an active
roof leak, settlement in the foundation, etc.), the property must be appraised subject to an inspection by a qualified professional. In such cases, the lender may need to ask the appraiser to update his or her appraisal based on the results of the inspection, in which case the appraiser would incorporate the results of the inspection and measure the impact, if any, on his or her final
opinion of market value.
18. In what situations should a property be appraised “as-is” versus “as-repaired”?
Fannie Mae permits an appraisal to be based on the “as-is” condition of the property as long as any minor conditions, such as deferred maintenance, 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 items include worn floor finishes or carpet, minor plumbing leaks, holes in window screens, or cracked window glass. Minor conditions and deferred maintenance typically are due to normal wear and tear from the aging process and the occupancy of the property. Such conditions generally do not rise to the level of a “required repair.”
Nevertheless, they must be reported. The appraiser must identify physical deficiencies that could affect the soundness, structural integrity, or livability of the property as part of his or her description of the physical condition of the property. These may include cracks or settlement in the foundation, water seepage, active roof leaks, curled or cupped roof shingles, inadequate electrical service or plumbing fixtures, etc. In situations where an adverse property condition may be observed by the appraiser but the appraiser
is not qualified to decide whether that condition requires immediate repair, the property must be appraised subject to an inspection by a qualified professional. In such cases, the lender must have the property inspected and any material conditions repaired before it delivers the mortgage loan to
Fannie Mae. The appraiser may be asked to update his or her appraisal based on the results of the inspection, in which case the appraiser would ncorporate the results of the inspection and measure the impact, if any, on his or her final opinion of market value.
