Subpart B4, Underwriting Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 495
B4-1, Appraisal Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 496
Chapter B4-1, Appraisal Guidelines
Introduction
This chapter describes Fannie Mae appraisal policies, guidelines, and requirements.
In This Chapter
This chapter contains the following sections:
B4-1.1, General Appraisal Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 497
B4-1.2, Appraisal Document Standards, Report, and Property Inspections . . . . . . . . . . . . . . 510
B4-1.3, Special Appraisal Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 529
B4-1.4, Appraisal Report Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 543
B4-1.1-01, General Information on Appraisal Requirements
(07/26/2011)
Examples of Unacceptable Appraisal Practices
The following are examples of unacceptable appraisal practices:
• development of and/or reporting an opinion of market value that is not supportable by market
data or is misleading;
• development of a valuation conclusion based either partially or completely on the sex, race,
color, religion, handicap, national origin, familial status, or other protected classes of either the
prospective owners or occupants of the subject property or the present owners or occupants of
the properties in the vicinity of the subject property;
• development of a valuation conclusion based on factors that local, state, or federal law
designate as discriminatory, and thus, prohibited;
• misrepresentation of the physical characteristics of the subject property, improvements, or
comparable sales;
• failure to comment on negative factors with respect to the subject neighborhood, the subject
property, or proximity of the subject property to adverse influences;
• failure to adequately analyze and report any current contract of sale, option, offering, or listing
of the subject property and the prior sales of the subject property and the comparable sales;
• selection and use of inappropriate comparable sales;
• failure to use comparable sales that are the most locationally and physically similar to the
subject property;
• creation of comparable sales by combining vacant land sales with the contract purchase price
of a home that has been built or will be built on the land;
• use of comparable sales in the valuation process when the appraiser has not personally
inspected the exterior of the comparable property;
• use of adjustments to comparable sales that do not reflect market reaction to the differences
between the subject property and the comparable sales;
• not supporting adjustments in the sales comparison approach;
• failure to make adjustments when they are clearly indicated;
• use of data—particularly comparable sales data—provided by parties who have a financial
interest in the sale or in the financing of the subject property without the appraiser’s
verification of the information from a disinterested source;
• development of an appraisal or reporting an appraisal in a manner or direction that favors
the cause of either the client or any related party, the amount of the opinion of value, the
attainment of a specific result, or the occurrence of a subsequent event in order to receive
compensation and/or employment for performing the appraisal and/or in anticipation of
receiving future assignments;
• development of and/or reporting an appraisal in a manner that is inconsistent with the
requirements of the Uniform Standards of Professional Appraisal Practice in place as of the
effective date of the appraisal;
• failure to address and note adverse factors or conditions that affect value or marketability with
respect to the neighborhood, site, or improvements;
• use of unsupported descriptive comments or drawing unsupported conclusions from subjective
observations. These actions may have a discriminatory effect.
• use of unsupported assumptions, interjections of personal opinion, or perceptions about factors
in the valuation process. These actions may have a discriminatory effect, and may or may not
affect the use and value of a property.
• use of unacceptable terminology including but not limited to:
– “pride of ownership,” “no pride of ownership,” and “lack of pride of ownership”;
– “poor neighborhood”;
– “good neighborhood”;
– “crime-ridden area”;
– “desirable neighborhood or location”;
– “undesirable neighborhood or location.”
Other subjective terminology that can result in erroneous conclusions is equally unacceptable.
Just to note, the underwriter is charged with responsibility to accept or reject the appraisal as to meeting the requirements for the lender and Fannie Mae. The above requirements are not in conflict with USPAP.
