Fannie Condition ratings C1, C2, C3, C4, C5 and C6 on Page 1 URAR?

[residentialguy]

C1 = New
C2 = Excellent
C3 = Good
C4 = Avg
C5 = Fair
C6 = Poor

 

[KenAZ]

We need something in the middle, like a C3- or a C4+,

Maybe a C3.5 for average?

 

[VolcanoLvr]

This discussion points out why the overall UAD process is flawed, and has been ever since it began in 2011. However it is fixable by applying condition ratings overall and for components uniformly.

I wrote and taught a CE class to appraisers on the application of the 'new' UAD process at that time. It was very evident to me that using 'banned' WORDS on page 1 for individual component condition ratings made absolutely no sense at all, when those same components were evaluated to determine the overall Condition rating (NUMBER) on page 2.

So, since 2011 I have had the below verbiage in my reports. I only had one client push back when they didn't find 'words' in those fields on the form. So I had to use 'special ratings' for them, such as C3 (Avg) on the field entry. Everyone else just gets the C3, and they don't complain. But over the past year or so, even that original complaining client has quit doing so.

Here's the wording I use. You might want to copy this and paste it into a word processor, and then enlarge the typeface - to read it easier:

SUBJECT INDIVIDUAL COMPONENT CONDITION RATINGS (Improvements section, Form Page 1):
This report is written to the 'new' UAD reporting conventions mandated by FannieMae/FreddieMac. Those entities have required appraisers to adopt new proprietary numerical reporting 'rating numbers' for the Overall Condition of the property. The GSE's have abandoned the former reporting conventions of 'average, good' etc. because there are no defined definitions for those words, except in the copyrighted manual produced by a cost rating agency, which the UAD process does not use.

Definitions for the new numerical ratings are included with the report. Any reader or reviewer must consult those pages to determine what the numerical ratings mean for the overall rating. This inclusion is consistent with the appraiser's obligation under USPAP to produce a report that is not misleading.

The problem with this numerical rating system is the condition rating is primarily applicable to the overall condition rating shown in various places on the form pages, but the overall Subject rating is determined from the individual component ratings. It makes no sense to use the 'abandoned' words shown above for the individual components, and then try to translate those into an overall numerical condition rating.

In order for the appraiser to report the overall Condition of the Subject property, individual rating numbers have been applied to the individual components on Form page 1, Improvements section. Those are then analyzed and amalgamated into the overall Condition rating applied to Form page 1, and in the Comps grid. This is a process based on logic and the ratings defined and mandated by Fannie/Freddie.

The appraiser has adapted the UAD Appendix D condition ratings and has applied those definitions to individual components in this way:
C1 - Individual components new; no physical depreciation (New)
C2 - Individual components nearly new or recently repaired, refinished or rehabilitated to meet current standards (Good)
C3 - Individual components are well maintained and have limited physical depreciation; some but not all Individual components may be updated or recently rehabilitated (Average)
C4 - Individual components have minor deferred maintenance and physical depreciation, but have been adequately maintained and are functionally adequate (Average)
C5 - Individual components need repairs, rehabilitation or updating but are useable and functional (Fair)
C6 - Individual components need substantial repair and rehabilitation due to damage or deferred maintenance; immediate corrections needed to maintain livability of the dwelling (Poor or Low)

 

[The Bob]

Volcano,

Logical and well thought out post.

Let's hope Fannie adopts something similar in the near future.

 

[Peter LeQuire]

Volcano,

Logical and well thought out post. Agree.

Let's hope Fannie adopts something similar in the near future. Probably won't happen - it's too logical and well thought out.

 

[YankeeFan]

I like the logic in VolcanoLvr's system and trying to be consistent, I get it. But once again, its equating a Code system developed by Fannie for a "holistic" view of a property and trying to fit that specific Code identifiers defined system into individual components, which FAQ 34 evidently says Not to do, hey, Fannie said it, not me. I like using Fair, Average, Good, New as condition descriptors in my reports for the individual components, its easier for the reader's of the report to understand as its how these fields were initially intended to be commented on since the beginning of time..... but why fight the "new" UAD code system?...why not include the UAD Individual component explanation comment addendum as provided by VolcanoLvr and Still use the "banned" words as it were like: Average, Good, Excellent, New....the Individual Component comment addendum as provided would equate these to the new UAD code system for the reader...C1 is like "new"; C2 is like "Good", et cetera and the problems solved, isn't it?! #1: I didn't use the UAD codes C1, C2, C3 specifically for individual component descriptions, which Fannie says not to do; I still used Average, Good, et cetera in those cells but I've tied them to those UAD Code descriptions in the Individual Component Commentary addendum which explains what I'm doing for consistency reasons due to UAD's holistic view codes which helps explain how I got from point A to Point B...which is what fannie says to do I think in FAQ 34. Now I think that's a clear logical solution to this problem and it still complies with FAQ 34.

 

[Jo Ann Meyer Stratton]

Each appraiser is typing their own thing for the condition of the individual items. Some type Average or Avg or A or other variations of Average, so that is not consistent nationwide. Then the blanks on the form are so small that after the type of material is typed there is limited space for the condition, which is another reason when I heard about using the codes, it made sense to use C4 for average, it only takes up two spaces. Because of the small space on the forms very contorted abbreviations are used to describe the type of material which causes even more confusion. To me typing Carpet/Tile/C4 is easier to understand and read then CpTlAverage for example. In my area there is such a wide variety of properties with a mishmash of materials, workmanship quality and condition in one structure that individual describing and rating of each component provides more information about the property, how and why I arrived at the overall rating.

 

[J Grant]

Fannie advises against it and still people want to do it. Sad.

 

[YankeeFan]

≅ is approximately equal to or what I call...comparable to, a term used by appraisers every day I believe.
Here is what I've decided to start implementing, and Im pretty sure it satisfies FAQ 34 and wont get me in trouble with Fannie Mae or reviewers...its solves the problem and is the solution I believe. I acknowledge VolcanoLvr for showing the light at the end of the tunnel!

SUBJECT INDIVIDUAL COMPONENT CONDITION RATINGS (Improvements section, Form Page 1):
This report is written to the 'new' UAD reporting conventions mandated by FannieMae/FreddieMac. Those entities have required appraisers to adopt new proprietary numerical reporting 'rating numbers' for the Overall Condition of the property. The GSE's have abandoned the former reporting conventions of 'average, good' etc. as an "overall" or holistic view of a property because there are no defined definitions for those words, except in the copyrighted manual produced by a cost rating agency, which the UAD process does not use.

Definitions for the new numerical ratings are included with the report. Any reader or reviewer must consult those pages to determine what the numerical ratings mean for the overall rating. This inclusion is consistent with the appraiser's obligation under USPAP to produce a report that is not misleading.

The problem with this numerical rating system is the UAD condition rating is primarily applicable to the overall condition rating shown in various places on the form pages and FannieMae in FAQ #34 indicates not to use these proprietary codes in the individual property component sections of the URAR, but the overall Subject rating is determined from the individual component ratings. It makes perfect sense to use the 'abandoned' words shown above for the individual components by translateing or relating them into the overall UAD condition rating.

In order for the appraiser to report the overall Condition of the Subject property, individual rating letters have been applied to the individual components on Form page 1, Improvements section. Those are then analyzed and amalgamated into the overall Condition rating applied to Form page 1, and in the Comps grid. This is a process based on logic and the ratings defined and mandated by Fannie/Freddie.

The appraiser has adapted the UAD Appendix D condition ratings and has applied those definitions to individual components in this way:
C1 - Individual components new; no physical depreciation ≅ (New or N)
C2 - Individual components nearly new or recently repaired, refinished or rehabilitated to meet current standards ≅ (Excellent or E)
C3 - Individual components are well maintained and have limited physical depreciation; some but not all Individual components may be updated or recently rehabilitated ≅ (Good or G)
C4 - Individual components have minor deferred maintenance and physical depreciation, but have been adequately maintained and are functionally adequate ≅ (Average or A)
C5 - Individual components need repairs, rehabilitation or updating but are useable and functional ≅ (Fair or F)
C6 - Individual components need substantial repair and rehabilitation due to damage or deferred maintenance; immediate corrections needed to maintain livability of the dwelling≅ (Poor or P)

Example: Flooring: Crpt,Vinyl,G....not only does this solution solve the problem for appraisers it also adds another character of space for utilization in the report...ie G is better then C3!
This solution can also be adopted or amended to include the quality component codes of UAD. Just add that to the commentary. Also note, if you use a P code on an individual component item...its not exactly a C6 or required repair tied to a "subject to" condition of the report...it could be but it doesn't have to . Now if I have 4 G's, 2 A's...ie 4C3's and 2 C4's,,Im gonna rate the property a UAD C3 overall. Feel free to copy this as part of your comments, if your wish and feel as I do that this is a logical and practical solutions to these issues.

 

[J Grant]

Fannie DOES NOT WANT the C ratings on page one for components , they stated it, how many ways can that be said? It makes appraisers look ridiculous to be doing it, no matter how elaborate the explanation.

There Is no problem to be solved, appraisers are inventing one out of nothing. It is embarassing