Appendix D-2 - COMPREHENSIVE VALUATION PACKAGE PROTOCOL
D-2 VALUATION CONDITION REQUIREMENTS
This section describes the specific conditions of the subject property that the appraiser must review and note in the Valuation Conditions Form of the Comprehensive Valuation Package. The physical condition of existing building improvements is examined at the time of appraisal to determine whether repairs, alterations or additions are necessary - essential to eliminate conditions threatening the continued physical security of the property. Required repairs will be limited to necessary requirements commonly referred to as the three S's Rule:
> Preserve the continued marketability of the property (Saleability)
> Protect the health and safety of the occupants (Safety)
> Protect the security of the property (Security) These are typical conditions that require repairs or replacements: > Termite damage
> Damaged, inoperative or inadequate plumbing, heating or electrical systems
> Broken or missing fixtures
> Rotten or worn-out counter tops
> Any structural failure in framing members
> Defective paint surfaces
> Masonry and foundation damage
> Drainage problems
> Damaged floors worn through to the finish
> Broken plaster or sheetrock The appraiser must review each of the conditions specified below and note "YES" if any of the deficiencies exist and "NO" if they do not exist, except for VC-1. Unlike the other VC's, where a "YES" mark indicates a limiting condition on the appraisal, in VC-1, "YES" renders the property ineligible and the appraisal must be returned to the lender. Guidelines are set forth below to assist in the examination of the property. To perform this analysis, the appraiser must have full access to all areas listed. If unable to visually evaluate the improvement in their entirety, return the appraisal to the lender until a complete visual inspection can be performed. The appraiser is not required to disturb insulation, move personal items, furniture, equipment, plant life, soil, snow, ice or debris that obstructs access or visibility. An inspection done in accordance with the guidelines listed below is visual and is not technically exhaustive. These guidelines are applicable to buildings with four or less dwellings units and their garages or carports. This inspection does not offer warranties or guarantees of any kind.
SITE CONSIDERATIONS
This section considers the evidence of hazards. Hazards, as defined below, endanger the health and safety of the occupants and/or marketability of the property.
VC-1 Site Hazards And Nuisances
The appraiser must note and comment on all hazards and nuisances affecting the subject property. These hazards endanger the health and safety of the occupants and/or the marketability of the property, including subsidence/ sink holes, slush pits, heavy traffic areas, airport noise and hazards, proximity to high-pressure gas or petroleum lines, immediate proximity to overhead high-voltage transmission lines, smoke, fumes, offensive noises and odors. For detailed descriptions of these hazards, see Chapter 2-2, Special Neighborhood Hazards and Nuisances, in this Handbook. These hazards will render a property ineligible, and the appraisal should be returned to the lender. | Field | Protocol | | Subsidence/Sinkholes (Handbook Chapter 2-2 C) | If there is surface evidence of subsidence, the location is ineligible. Mark "YES" in the VC. | | Operating oil or gas wells within 300 feet of existing construction (Handbook Chapter 2-2 D) | If the property is located closer than 300 feet from an active or planned drilling site, the location is ineligible. Mark “YES” in the VC. | | Operating oil or gas wells within 75 feet of new construction (Handbook Chapter 2-2 D) | If the property is built within 75 feet of an operating well, the location is ineligible. Mark “YES” in the VC. | | Abandoned oil or gas wells within 1 0 feet of new or existing construction without a letter from State agency (Handbook Chapter 2-2 D) | If the property is located closer than 10 feet from an abandoned well, the location is ineligible. Mark “YES” in the VC. | | Slush Pits (Handbook Chapter 2-2 E) | If a property is proposed near an active or abandoned well, call for a survey to locate the pits and their impact on the subject property. If there is any readily observable evidence of a slush pit, the location is ineligible. Mark “YES” in the VC. | | Excessive noise or hazard from heavy traffic area (Handbook Chapter 2-2 F) | If there is excessive noise or unsafe traffic conditions that endangers the occupants or affects the marketability of the property the location may be ineligible. Mark “YES” in the VC. | | New and proposed construction in Runway Clear Zone (Handbook Chapter 2-2 I) | If the property is proposed construction or construction existing less than one year and located within a Runway Clear Zone, (Runway Protection Zone), for civil airports or a Clear Zone at military airfields, the location is ineligible. Mark “YES” in the VC. | | High-pressure gas or petroleum lines within 10 feet of property (Handbook Chapter 2-2 I) | If the property is less than ten feet from the outer boundary of a pipeline easement, the location is ineligible. Mark “YES” in the VC. | | Overhead high-voltage transmission lines within engineering (designed) fall distance (Handbook Chapter 2-2 J) | If the property is located in the fall zone (tower height) of high voltage transmission lines, the location is ineligible. Mark “YES” in the VC. | | Excessive hazard from smoke, fumes, offensive noises or odors (Handbook Chapter 2-2 K) | If excessive smoke, fog, chemical fumes or noxious odors result in hazards to the occupants, the location is ineligible. Mark “YES” in the VC. | | Stationary storage tanks containing more than 1000 gallons of flammable or explosive material (Handbook Chapter 2-2 M) | If the property is within 300 feet of a stationary, storage tank containing more than 1000 gallons of flammable or explosive material, the site is ineligible. Mark “YES” in the VC. |
PROPERTY CONSIDERATIONS
Any deficiency noted as "YES" is a limiting condition in the appraisal. Each condition requires repair or further inspection. The appraisal is prepared "as-repaired" and the valuation is limited by those noted conditions. For the mortgage to be eligible for FHA insurance, these conditions must be satisfied before closing.
VC-2 Soil Contamination
| Field | Protocol | | On-site septic system shows readily observable evidence of system failure (Handbook Chapter 3-6 A.3) | Visually inspect the septic system and its surrounding area. If there are obvious or readily observable signs of system failure, require further inspection to ensure that the system is in proper working order. Mark "YES" in the VC, condition the appraisal on the inspection or repair and prepare the appraisal "as-repaired" subject to satisfaction of the condition. | | Surface evidence of an Underground Storage Tank (UST) on site (Handbook Chapter 3-6 A.3) | If there is any readily observable evidence of underground storage tanks, make a requirement for further analysis. Mark "YES" in the VC, condition the appraisal on that requirement and prepare the appraisal "as-repaired" subject to the satisfaction of the condition. | | Proximity to dumps, landfills, industrial sites or other sites that could contain hazardous materials (Handbook Chapter 3-6 A.3) | Note the proximity to dumps, landfills, industrial sites or other sites that could contain hazardous wastes. If there is readily observable evidence of hazardous substances in the soil, make a requirement for further analysis. Conditions that could indicate soil contamination include pools of liquid, pits, ponds, lagoons, stressed vegetation, stained soils or pavement, drums or odors. If any of these conditions exist, the appraiser should call for an environmental assessment. Mark "YES" in the VC, condition the appraisal on an environmental assessment and prepare the appraisal "as-repaired" subject to the satisfaction of the condition. | | Presence of pools liquid, pits, ponds, of Lagoons, stressed vegetation, stained soils or pavement, drums or odors (Handbook Chapter 3-6 A.3) | If there is readily observable evidence of on-site contamination, make a requirement for further inspection. Mark "YES" in the VC, condition the appraisal on the inspection or repair and prepare the appraisal "as-repaired" subject to satisfaction of the condition. |
VC-3 Grading and Drainage | Field | Protocol | | Grading does not provide positive drainage from structure (Handbook Chapter 3-6 A.4) | Examine the subject property to determine if there is proper grading and drainage. Proper drainage may include gutters and downspouts or appropriate grading or landscaping to divert the flow of water away from the foundation. If the grading does not provide positive drainage from the structure, make a repair requirement. Condition the appraisal on the requirement, mark “YES” in the VC and prepare the appraisal “as repaired” subject to satisfaction of the condition. | | Standing water proximate to structure (Handbook Chapter 3-6 A.4) | Note any readily observable evidence of standing water near the property that indicates improper drainage. If the standing water is problematic, make a repair requirement, condition the appraisal on the requirement, mark “YES” in the VC and prepare the appraisal “as repaired” subject to this condition. |
VC-4 Well, Individual Water Supply and Septic | Field | Protocol | | Property lacks connection to public water (Handbook Chapter 3-6 A.5) | Note the source of domestic water. If the property is already connected to a public system, mark "NO' in the VC form. If the property is equipped with a well, determine whether connection to a public system is feasible. If connection is feasible (3% or less of the estimated value of the property), hookup is MANDATORY. Condition the appraisal on connection to hookup, mark "YES" in the VC and prepare the appraisal "as-repaired" subject to the satisfaction of that condition. For wells, condition the appraisal on the water-testing requirement. | | Property lacks connection to public/community sewer system (Handbook Chapter 3-6 A.5) | Note the sewage connection-public/community or septic. If property is already connected to a public system, mark "NO" in the VC form. Determine whether connection to a public system is feasible. If connection is feasible, hookup is MANDATORY. Condition the appraisal upon its hookup, mark "YES" in the VC and prepare the appraisal "as-repaired" subject to the satisfaction of the condition. If the property is served by dug wells, springs, lakes, cisterns or rivers, it is ineligible. Mark "YES" in the VC and explain. |
VC-5 Wood Destroying Insects | Field | Protocol | | Structure and accessory buildings are ground level and/or wood is touching ground (Handbook Chapter 3-6 A.6) | If yes, require a pest inspection, mark "YES" in VC-5, condition the appraisal on that requirement and prepare the appraisal "as-repaired" subject to the satisfaction of the condition. | | The house and/or other structures within the legal boundaries of the property indicate evidence of active termite infestation (Handbook Chapter 3-6 A.6) | Examine the subject property for readily observable evidence of wood boring insect infestation and excessive dampness or large areas where the vegetation is dead. Indications that a licensed pest control professional should be required for an inspection of the subject property include mud tunnels running from the ground up the side of the house, swarms around wood structures and small piles of wings around windows. If the above conditions exist, make the requirement for a termite inspection from a licensed pest control contractor, condition the appraisal on the requirement, mark "YES" in the VC and prepare the appraisal "as-repaired" subject to the satisfaction of the condition. Do not require a pest inspection based solely on the age of a property. Inspections are necessary whenever there is evidence of decay, pest infestation, suspicious damage or when it is customary to the area or required by state law. |
VC-6 Private Road Access and Maintenance | Field | Protocol | | Property inaccessible by foot or vehicle (Handbook Chapter 3-6 A-7) | All roads must have vehicular and pedestrian access. If the property is inaccessible by foot or by vehicle, mark "YES" in the VC, make a repair requirement and prepare the appraisal "as-repaired" subject to the satisfaction of the condition. | | Property accessible only by private road or drive (Handbook Chapter 3-6 A-7) | In all cases where a private road exists, submit evidence that the road is protected by a permanent recorded easement (non-exclusive, non-revocable roadway, driveway easement without trespass from the property to a public street/road) and that there is an acceptable maintenance agreement recorded on the property or that is owned and maintained by a Home Owners Association (HOA). If there is no such easement, mark "YES" in the VC, condition the appraisal on attaining the easement and prepare the appraisal "as repaired" subject to the satisfaction of the condition. | | Property is not provided with an all-weather surface (gravel is acceptable) (Handbook Chapter 3-6 A-7) | FHA defines all-weather surface as a road surface over which emergency vehicles can pass in all types of weather. If the property is not provided with an all-weather surface, condition the appraisal on its repair, mark "YES" in the VC and prepare the appraisal as-repaired" subject to satisfaction of the condition. |
VC-7 Structural Conditions
This chapter addresses the structural components of the subject property and the effect that their condition may have on the habitability and enjoyment of the property (Chapter 3-6). An appraiser must examine the flooring, framing, walls, ceiling, attic and roofing for structural soundness. The appraiser will examine the following conditions: | Field | Protocol | Floor Support Systems (Handbook Chapter 3-6 A.8)
| Examine the flooring/joists for any signs of water leakage or damage, holes, large cracks in concrete slabs, leakage and readily observable evidence of rodent or termite infestation/damage, temporary supports or jacks or piers. If these conditions exist, condition the appraisal on their repair, mark "YES" in the VC and prepare the appraisal "as-repaired" subject to the satisfaction of the condition. | Framing/Walls/Ceiling (Handbook Chapter 3-6 A.8)
| Examine all framing, walls and ceilings for soundness, significant cracks that are visible in the exposed portions of the walls and could effect structure, gaping holes and significant water damage. If these conditions exist, condition the appraisal on their repair, mark "YES" in the VC and prepare the appraisal "as-repaired" subject to the satisfaction of the condition. | | Attic (Handbook Chapter 3-6 A-8) | Enter the attic and observe the interior roofing for insulation, deficient materials, leaks or readily observable evidence of significant water damage, structural problems, previous fire damage, RFT sheathing, exposed and frayed wiring and adequate ventilation by vent, fan or window. If any of these deficiencies exist, condition the appraisal on their repair, mark "YES" in the VC and prepare the appraisal "as-repaired" subject to the satisfaction of the condition. |
VC-8 Foundation Basement | Field | Protocol | Foundation/Basement (Handbook Chapter 3-6 A.10)
| Examine the foundation/basement for inadequate access, dampness or readily observable evidence of significant water damage and readily observable cracks or erosion that effect structural soundness. The foundation/basement must have a vapor barrier. If these deficiencies exist, condition the appraisal on their repair, mark "YES" in the VC and prepare the appraisal "as-repaired" subject to the satisfaction of the condition. | Crawl Space (Handbook Chapter 3-6 A.11)
| Examine the crawl space for inadequate access, distance from floor joists to ground, insulation, ventilation and any other structural problems. Access to the space should be clear. Enter the crawl space to observe conditions except when access is obstructed, when entry could damage the property or when dangerous and adverse situations are suspected. Access should be provided by the homeowner/seller. The space should be adequate for maintenance and repair, typically greater than 18 inches. The support beams should be intact and of structural soundness. The space must not have excessive dampness or ponding of water. In houses where moisture is present, the problem must be corrected by installing a sump pump, correcting the exterior drainage or by providing proper cross-ventilation. If any of these inadequacies exist, condition the appraisal on their repair, mark "YES" in the VC and prepare the appraisal 'as-repaired" subject to the satisfaction of the condition. |
VC-9 Roofing | Field | Protocol | | Condition of Roofing (Handbook Chapter 3-6 A.12) | View the roof from ground level to determine if the integrity of the roof is sufficient. Observe roof coverings, roof drainage systems, flashing, skylights, chimneys and roof penetrations and readily observable evidence of leakage or abnormal condensation on building components. It is not necessary to observe attached accessories, including but not limited to solar systems, antennae and lightning arrestors. Note if the roof covers the entire home, if the roof has been repaired or patched substantially, if the material used on the roof was suitable for the subject property and any other visible signs of deterioration resulting in holes, puddles, leakage, clogged or inadequate drains or missing sections. If the subject property has a flat roof, note that an inspection is required, mark "YES" in the VC and prepare the appraisal "as-repaired" subject to the satisfaction of the condition. Note any warranties still in effect and if the remaining physical life is at least two years. If the roof will last less than two years, call for a new roof. If a roof is completely snow-covered, re-inspect it later when weather permits. Condition the appraisal on repair of any of the roof items, mark "YES" in the VC and prepare the appraisal “as-repaired" subject to the satisfaction of the condition. |
VC-10 Mechanical Systems
An appraiser must examine all mechanical, plumbing and electrical systems in the subject property to ensure that they are in proper working order. This examination entails turning on the applicable systems and observing their performance. | Field | Protocol | | Inoperable systems due to weather conditions (Handbook Chapter 3-6 A.13) | Explain in VC-10 Condition the appraisal on repair and assumed functionality, mark "YES" in the VC and prepare the appraisal "as-repaired" subject to the satisfaction of the condition. | | Furnace/Heating System and Air Conditioning (central) (Handbook Chapter 3-6 A.14) | Turn on the furnace/heating/air conditioning system to observe whether the system performs appropriately and that no unusual noises are heard, no odors or smoke are emitted indicating a defective unit, etc. Note significant holes/deterioration on the unit Determine whether there is an installed heat or cool-air source in each room by using the system's normal operating controls. It is not necessary to observe the uniformity of heat or cool-air to various rooms. Unit shuts down prior to reaching desired temperature In most instances it will be possible to activate the air conditioner in the winter and the heater in the summer. However, do not operate the systems if doing so may damage equipment or when outside temperatures will not allow system to operate. Note any noncompliance with this condition and explain it in the VC form. Turn on the hot water to ensure that the hot water heater is operating appropriately. If these conditions exist, condition the appraisal on the repair of the condition, mark "YES" in the VC and prepare the appraisal "as-repaired" subject to satisfaction of the condition. | | Electrical System (Handbook Chapter 3-6 A.13) | Examine the electrical box to ensure that there are circuit breakers with no visible frayed wiring or exposed wires in living areas and that there is adequate amperage for the appliances present in the property. If the appliances present at the time of the inspection do not appear to be reasonable (undersized), determine if there is adequate amperage to run “standard" appliances, as per municipal code. | | Electrical System (Handbook Chapter 3-6 A.13) |
Ensure that the electrical switches and outlets operate property. Operate a representative number of installed smoke detectors, lighting fixtures, switches and receptacles inside the house, garage and on exterior walls. Note presence of sparks or smoke from outlets. It is not required to insert any tool, probe or testing device inside the panels, to test or operate any over-current or to dismantle any electrical device or control. It is not required to observe telephone, security, cable TV, intercoms or other ancillary wiring. If any of the above deficiencies exist, condition the appraisal on their repair, mark "YES" in the VC and prepare the appraisal "as-repaired" subject to the satisfaction of the condition. | | Plumbing System (Handbook Chapter 3-6 A.5) | Flush the toilets and turn on all faucets to determine that the plumbing system is intact, that it does not emit foul odors, that faucets function appropriately, that both cold and hot water run and that there is no readily observable evidence of leaks or structural damage under fixtures. Turn on several cold water faucets in the house to check water pressure and flow. Flushing a toilet at the same time will also reveal any weaknesses in water pressure. If the property has a septic system, inspect it for any signs of failure such as odor, rust or surface evidence of malfunction. If any of the above deficiencies exist, condition the appraisal on their repair, mark "YES" in the VC and prepare the appraisal "as-repaired" subject to the satisfaction of the condition. |
VC-11 Other Health and Safety Deficiencies
This chapter addresses the interior components of the subject property and the effect that their condition may have on the habitability and enjoyment of the property. The appraiser is not required to observe storm windows, storm doors, screens, shutters, awnings and similar seasonal accessories, fencing, garage door remote control transmitters, wallpaper, carpeting, draperies, blinds, household appliances or recreational facilities. | Field | Protocol | | Other Health and Safety Deficiencies (Handbook Chapter 3-6 A.14) | Operate a representative number of windows, interior doors and all exterior and garage doors. Verify that the electric garage door opener will automatically reverse or stop when met with reasonable resistance during closing. Note and make a repair requirement for any health or safety deficiencies as they relate to the subject property, including broken windows/doors/steps, inadequate/blocked doors and steps without a handrail. If any of the conditions exist, condition the appraisal on their repair, mark "YES" in the VC and prepare the appraisal "as-repaired" subject to the satisfaction of the condition. |
VC-12 Lead-Based Paint Hazard | Field | Protocol | | Lead-Based Paint (Handbook Chapter 3-6 A.15) | If the home was built before 1978, note the condition of all defective paint surfaces and their location in the home. Comment on the deterioration of painted surfaces of the subject property Inspect all interior and exterior surfaces, such as walls, stairs, deck porch, railing, windows or doors for defective (chipping, flaking or peeling) paint. (Exterior surfaces include surfaces on fences, detached garages, storage sheds and other outbuildings and appurtenant structures.) If there is evidence of defective paint surfaces, condition the appraisal on their repair, mark "YES" in the VC and prepare the appraisal “as-repaired" subject to the satisfaction of the condition. |
VC-13 Condominiums and Planned Urban Developments (PUD)
If the subject property is located in a Planned Unit Development or condominium setting, it must be on FHA's approval list or accepted through reciprocity. The property should meet the owner-occupancy standards and completion standards defined below. | Field | Protocol | | This project is not on FHA's approval list | Verify that the approval number exists. The lender must supply the approval number on the appraisal. If the project is not approved, mark "YES" in the VC and condition the appraisal on this information. | | The property does not meet owner-and occupancy standards | The project must be at least 51% owner-occupied. If owner-occupancy rates are less than 51%, mark "YES" in the VC condition the appraisal on this information. | | This property does not meet completion standards | The project must be at least 2/3 complete. If completion rate is less than 2/3, mark "YES" in the VC and condition the appraisal on this information. |
Radon. Currently, HUD does not require radon testing of homes that are to be insured by this agency. Addenda | Field | Protocol | | A. Assessed Market Value | Enter the assessed market value in the VC addenda. (It varies by municipality but is entered only when the value is represented as current.) The total of all taxes should be included. Excessive taxes can have a negative effect and must be reflected in the value. If there is no method to relate the assessment to market value, such as for new construction, mark the assessed market "N/ A". | | B. Estimated Repair Costs | Quantify the costs associated with the repairs in the VC. These costs relate strictly to repair and not marketability. Use standard cost information, such as Marshall and Swift, in preparing the estimate. |
D-3 HOMEBUYER SUMMARY The Homebuyer Summary intends to protect the homebuyer by informing him/her of any material conditions that typically make the property ineligible for FHA mortgage insurance. If any of the VC's are marked "YES" in the VC form, the appraiser must denote it in the appropriate box of the Homebuyer Summary and explain, in detail, the nature of the problem. The lender is legally bound to address these problems before closing on the property. | Field | Protocol | | Site Hazards | Mark "Y" under problem if any of the sections in VC-1 are marked "yes". | | Soil Contamination | Mark "Y" under problem if any of the sections in VC-2 are marked "yes". | | Grading and Problems Drainage | Mark "Y" under problem if any of the sections in VC-3 are marked "yes". | | Well, Individual Water Supply and Septic Problems | Mark "Y" under problem if any of the sections in VC-4 are marked "yes". | | Wood Destroying Insects | Mark "Y" under problem if any of the sections in VC-5 are marked “yes". | | Private Road Access and Maintenance Problems | Mark "Y" under problem if any of the sections in VC-6 are marked “yes”. | | Structural Deficiencies | Mark "Y" under problem if any of the sections in VC-7 are marked “yes”. | | Foundation Deficiencies | Mark "Y" under problem if any of the sections in VC-8 are marked “yes”. | | Roofing Deficiencies | Mark "Y" under problem if any of the sections in VC-9 are marked “yes”. | | Mechanical Systems Problems | Mark "Y" under problem if any of the sections in VC-10 are marked “yes”. | | General Health and Safety Deficiencies | Mark "Y" under problem if any of the sections in VC-11 are marked “yes”. | | Deteriorated Paint | Mark "Y" under problem if any of the sections in VC-12 are marked "yes". |
Glossary of Terms > Component: A readily accessible and observable construction element of a system, including a floor, wall, framing or roof construction that can be considered individually - but not individual pieces such as boards or nails.
> Dangerous or Adverse Situations: Situations that pose a threat of injury and/or require the use of special protective clothing or safety equipment.
> Dismantle: To take apart or remove any component, device or piece of equipment that is bolted, screwed or fastened by other means and that would not be taken apart by a homeowner for normal household maintenance.
> Household Appliance: Kitchen and laundry appliances, room air conditioners and similar appliances.
> HVAC: Heating, ventilation and air-conditioning system - one combined system or separate systems.
> Normal Operating Controls: Devices used by homeowner in the operation of a system, such as a thermostat, wall switch or safety switch.
> Observe: The act of making a visual examination.
> Operate: To cause systems or equipment to function.
> Recreational Facilities: Spas, saunas, steam baths, swimming pools, tennis courts, playground equipment and other exercise equipment, entertainment or athletic facilities.
> Representative Number: For multiple identical components such as windows and electrical outlets, one such component per room. For multiple identical exterior components, one such component on each side of the building.
> Roof Drainage Systems: Components used to carry water off a roof and away from a building such as gutters, downspouts, leaders, splash blocks.
> System: A combination of interacting or interdependent components, assembled to carry out one or more functions. |
