Ofori & Associates, PC
Appraisal Report Guidelines
**** THESE ARE HUD REO APPRAISAL REPORTS ****
**** which are different from FHA Financing Appraisals ****
Further guidance can be found in either HUD Handbook 4150.2, Change 1, Appendix A or the specified
pages of Appendix D, Mortgagee Letter (ML) 2006-9 dated May 4, 2006 and subsequent HUD directives.
Appraisal Report Format:
The Appraisal Report shall consist of the applicable specific property form, and all required exhibits at the
end of the Appraisal Report.
Required exhibits include:
1. Location Map(s), Property Card/Tax Record,
2. LBP Addendum,
3. Environmental Compliance Record (ECR) Addendum,
4. For Your Protection: Get a Home Inspection Addendum,
5. Fannie Mae 1004MC - Market Conditions Addendum,
6. Sketch with dimensions/rooms properly labeled,
7. Subject photos with elevations,
8. Original comparables photos,
9. Sign-in sheet,
10. Data Plate and Certification Labels/Seals for manufactured and modular housing (see D-44), and
11. The most current version of the Property Condition Report (PCR)
All Appraisal Reports and supporting documents should be uploaded to TenD in PDF format. Upon
completion, the appraiser will upload four (4) documents to TenD
1. Completed Appraisal Report with PCR Included
2. Environmental Compliance Record
3. Main Property Photo
4. Invoice
Appraiser Invoice:
All invoices must contain the following in order to be a complete and acceptable invoice:
 Vendor Complete Name
 Vendor Address
 Vendor Phone Number
 Unique Invoice Number
 A reference to the Ofori assigned Work Order Number
 Complete FHA Case Number
 Complete Property Address
 Description of work performed
 Invoice Amount
 Invoice Date
Appraisal Report Terms:
Owner of Public Record: Should either say “HUD” or it should say “See Attached Addendum” with the
addendum stating the following: “Due to the time-lag inherent in updating public records, as of the
Effective Date of this appraisal, current public records do not yet reflect HUD as the owner of record”.
Assignment Type: For Assignment Type, mark the box labeled “Other”, followed by:
“HUD Real Estate Owned (REO) property”
Improvements Data:
Describe Condition: Include positive features such as updating, if applicable, as well as negatives
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Physical Deficiencies: In addition to your regular comments, also include the following Lead-Based
Paint Statement:
“A lead-based paint test is required for all properties constructed before 1978
where FHA financing is obtained”
Please note that the appraiser may include a cost to address defective paint, but it should not be
considered an MPR/MPS item as HUD will inspect each property that is sold with FHA financing and
constructed prior to 1978 for deteriorated lead based paint.
Sales Comparison Approach:
Comp Identification: REO vs. Non-REO: All comps are to be labeled as being either REO or Non-REO
sales.
Prior Sales / Transfers Research: HUD OWNS ALL PROPERTIES YOU ARE APPRAISING FOR Ofori
& Associates, PC. As such, you will ALWAYS check the box reflecting that your research DID reflect a
prior sale or transfer of the subject property within the previous three years, even if the specific data is not
available to you.
Summary of Sales Comparison Approach: Explain how you arrived at your adjustments, such as for
View or Age or Condition, etc…
Reconciliation:
Sales Comparison Approach: The Sales Comparison Approach is given the most consideration
(weight) as it best reflects the actions of buyers and sellers in the subject’s market.
Cost Approach: The Cost Approach was not developed based on the age of the subject property making
it difficult to accurately calculate depreciation, plus providing an opinion of land value as there is a lack of
available land sales.
Income Approach: The Income Approach was not developed as single-family houses are not typically
income-producing properties, thus resulting in little to no available rental data.
Written Addendum:
Intended Use / Intended User: Per Appendix A page A-3 #F, the following definitions MUST be in every
Appraisal Report:
“The Intended Use for an REO appraisal is to establish
the “as is” market value of the subject property.”
“The intended user of an REO appraisal is the M&M III Vendor, the lender (under certain
circumstances) and HUD/FHA.”
REO Appraisals vs. FHA Financing Appraisals:
REO Appraisals
The appraisal process is HUD’s primary tool for determining the listing price of FHA REO properties. FHA
appraisers provide preliminary verification that FHA’s Minimum Property Requirements (MPR) for existing
housing have been met for properties evaluated as “insurable” or “insurable with repair escrow” prior to
being listed for sale. The guidance provided in Appendix D, Appraisal Protocol, to Handbook 4150.2,
applies equally to REO properties, unless otherwise indicated in the guidance presented in Appendix A.
REO properties are to be appraised “AS IS”.
FHA Financing Appraisals
The appraisal process is the lender’s tool for determining if a property meets the minimum requirements
and eligibility standards for a FHA-insured mortgage. Underwriters bear primary responsibility for
determining eligibility; however, the appraiser is the on-site representative for the lender and provides
preliminary verification that the General Acceptability Criteria standards have been met. In the
performance of an FHA appraisal, the appraiser must denote any deficiency in the appropriate section(s)
(site issues in the site section, improvement issues in the improvements section) of the Appraisal Report.
The appraiser is to note those repairs necessary to make the property comply with FHA’s Minimum
Property Requirements (MPR) together with the estimated cost to cure. The lender will determine which
repairs for existing properties must be made for the property to be eligible for FHA-insured financing.
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Information to Include in the Appraisal Report:
1004MC Market Conditions Addendum to the Appraisal Report: Must be included with all appraisal
reports.
Repair Photos: Photo documentation of property condition, interior and exterior, is always advisable. If
you have MPR repair items, if at all possible, include a photo of the item to be repaired.
Required Attachments:
1. Lead Based Paint Addendum (LBP)
2. Environmental Condition Report (ECR)
3. For Your Protection: Get A Home Inspection
4. Property Condition Report (PCR)
Utilities Status: Generally, an REO appraisal is secured with the utilities de-activated. The appraiser
must state in the Appraisal Report if the appraisal was completed without the utilities turned on, and/or
which, if any, were on.
Reference the PCR: When an Appraisal is completed without the utilities turned on and/or the
mechanical systems functioning, the appraiser must note this in the Appraisal Report and must rely upon
the information provided by the M&M contractor in its Property Condition Report (PCR). Reference the
PCR in the applicable sections of the Appraisal Report (condition of property or physical deficiencies) as
well as append a copy of the PCR to the appraisal report.
Minimum Property Requirements (MPR) Repair items/Cost List: The appraiser then must rely on the
information in the PCR for condition, functionality and remaining life of major mechanical systems as well
as physical/structural components, and include an appropriate statement to that affect.
Any discrepancies from the PCR observed by the appraiser are required to be noted and
highlighted with the appraisal report. The appraiser is responsible for including estimated repair
costs for MPR/MPS items.
Insurability Statements:
One of the following statements of insurability is required in each REO Appraisal Report, in bold font, in
the Comment section or on the Repair & Maintenance Addendum:
1. Insurable as-is without repairs, or
2. Insurable as-is with repair escrow, as the repairs are estimated to be $5,000 or less to meet
FHA’s MPR, or
3. Uninsurable; as-is repairs are estimated to exceed $5,000 to meet FHA’s MPR.
Lead Based Paint Statement: is required on all appraisals:
“A lead-based paint test is required for all properties constructed before 1978 purchased with FHA
financing.” Please follow the guidance in Mortgagee Letter 2010-17 dated May 7, 2010, which amends
4150.2, Appendix A, Section A-3 for further clarification.
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