FHA Property Analysis Minimum Property Standards
Transcript Of FHA Property Analysis Minimum Property Standards
FHA – Minimum Property Standards General Information
Minimum Property Standards
The following criteria define standards for existing properties to be eligible for FHA mortgage insurance. Decisioners/Underwriters bear primary responsibility for determining eligibility; however, the appraiser is the on-site representative for Wells Fargo and provides preliminary verification that the standards have been met.
The following standards form the basis for identifying the deficiencies of the property that the appraiser must note within the appraisal form and which must be addressed by the lender before closing. When examination of existing construction reveals non-compliance with the standards, the appraiser will note repairs necessary to make the property comply with FHA’s minimum property standards together with a cost to cure. If correction is not feasible and compliance can only be affected by major repairs or alterations, the property should be rejected. The appraiser is only required to note those conditions that are readily observable.
Continued on next page
1: FHA – Sec. 08: Property Analysis – Minimum Property Standards
For Internal RDP Use Only August 7, 2008
General Information, Continued
Minimum Property Standards (continued)
Required repairs are those necessary to preserve the continued marketability of the property (structure and soundness) and to protect the health and safety of the occupants.
Any operable or useful element that has reached the end of its useful life within two years should be replaced. Good judgment should be used with respect to such deferred maintenance items.
The following is a general outline of the minimum property standards established by FHA. Eligible houses include detached, semi-detached, multiplex, row houses, and individual condominium units.
Continued on next page
2: FHA – Sec. 08: Property Analysis – Minimum Property Standards
For Internal RDP Use Only August 7, 2008
General Information, Continued
Minimum Property Standards (continued)
Eligible Properties
Each property must comprise a single, readily marketable real estate entity. The property must be free of health and safety hazards.
Utilities and other facilities should be independent for each unit and must include: • A continuing and sufficient supply of safe, potable water under adequate
pressure and of adequate quality for all household uses; • Sanitary facilities and a safe method of sewage disposal; • Heating adequate for health and comfort; • Domestic hot water; and • Electricity for lighting and equipment.
A borrower can purchase or refinance: • Single family, • Condominium, • PUD, • Two- to four-unit family, • Modular, or • Manufactured home.
See Property Analysis – Condominium/PUD.
Continued on next page
3: FHA – Sec. 08: Property Analysis – Minimum Property Standards
For Internal RDP Use Only August 7, 2008
General Information, Continued
Access
Each property must be provided with a safe and adequate pedestrian and vehicular access from a public or private street. All streets must have an all-weather surface with access to all buildings for essential and emergency use. FHA defines all-weather surfaces as a road over which emergency vehicles can pass in all types of weather.
All streets must either be public or privately maintained by permanent recorded easements. Private streets must be protected by permanent easements. A joint maintenance agreement is no longer required or all properties, however, if the appraisal contains adverse conditions/derogatory comments from the appraiser, or there are other indications in the loan file of deferred maintenance, payment disputes related to the roadway, etc., the underwriter should require a road maintenance agreement.
Each living unit must be accessible without passing through another living unit. Access to the rear yard must be provided without passing through another living unit. For a row-type dwelling, the access may be by means of alley, easement, passage through the subject dwelling, or other acceptable means.
Continued on next page
4: FHA – Sec. 08: Property Analysis – Minimum Property Standards
For Internal RDP Use Only August 7, 2008
General Information, Continued
Accessory Unit/Motherin-law apartment
An accessory dwelling unit (ADU) is a habitable living unit added to, created within, or detached from a single family dwelling that provides the basic requirements for living, sleeping, eating, cooking, and sanitation.
Accessory dwelling units are commonly understood to be a separate additional living unit, including a separate kitchen, sleeping and bathroom facilities, attached or detached from the primary residential unit, on a single family lot. ADUs are usually subordinate in size, location, and appearance to the primary unit and may or may not have separate means of egress or ingress.
Attached units, contained within a single-family home, often called “motherin-law apartments” are the most common type of ADU. Accessory units may not be subdivided or otherwise segregated in ownership from the primary residence. The accessory unit must be connected to the utilities (except telephone, televison and cable) of the dwelling unit and may not have separate services. Some ADUs may predate local zoning ordinances and may therefore be classified as legal nonconforming units.
If the unit is income producing, it is not considered an ADU but a second unit.
A 2-4 unit with an accessory unit is not eligible for FHA financing.
The appraiser will determine if the unit is an ADU or second unit. The information will be available in the site analysis section of the report where zoning, highest and best use, and legal use are addressed.
Continued on next page
5: FHA – Sec. 08: Property Analysis – Minimum Property Standards
For Internal RDP Use Only August 7, 2008
General Information, Continued
Airport Noise and Hazards
Locations near an airport may be subject to the noise and hazard of low-flying aircraft. Therefore, consideration must be given to the desirability of an affected location in comparison with unaffected locations that are improved with or are appropriate for competitive structures.
HUD requires that the buyer of a property located in a Runway Clear Zone/Clear Zone is advised that the property is located in such a zone and of the implications associated with that location. This includes the possibility that the airport operator could acquire the property in the near future.
Continued on next page
6: FHA – Sec. 08: Property Analysis – Minimum Property Standards
For Internal RDP Use Only August 7, 2008
General Information, Continued
Airport Noise and Hazards – New Construction, Proposed, Under Construction, and Existing Less Than One Year
New, proposed construction, under construction, and properties less than oneyear old within Runway Clear Zones at civil airports or within Clear Zones at military airfields are ineligible for home mortgage insurance.
Properties located in Accident Potential Zone I at military airfields may be eligible for FHA insurance provided that the property is compatible with Department of Defense guidelines.
See Property Analysis – New Construction – Appraisals – Builders Certification-Hazards.
Airport Noise and Hazards – Existing Properties and Greater Than One Year Old
Existing properties are not to be rejected solely because of airport influences if there is evidence of acceptance in the market. HUD’s position is that since the dwellings are in use and are expected to continue so in the foreseeable future, their marketability should be the strongest indicator of their acceptability.
Marketability should account for the following considerations: • Plans and future expansion of airport facilities. • Prospective increases in the number of planes or flights using the field or
specific runways.
Continued on next page
7: FHA – Sec. 08: Property Analysis – Minimum Property Standards
For Internal RDP Use Only August 7, 2008
General Information, Continued
Airport Noise and Hazards – Existing Properties and Greater Than One Year Old (continued)
• The timing and frequency of the volume of flights. • Any other factors that may increase the annoyance of having the airport
nearby. • Excessive noise.
If changes are likely, the appraiser must anticipate any adverse effect that these changes are likely to have on the marketability of the property. The appraiser should judge each situation on its merits. Compare the effect of aircraft activity on the desirability of a particular location with other locations that are: • Improved with similar structures. • Considered competitive with those located in the subject neighborhood.
Existing dwellings more than one year old are acceptable provided the prospective purchaser acknowledges awareness that the property is located in a Runway Clear Zone/Clear Zone. The acknowledgment “Notice to Prospective Buyers of Properties Located in Runway Clear Zones and Military Airport Clear Zones” must be used in every instance where applicable and should be used without change. The signed acknowledgment must be sent to underwriting with the appraisal. The acknowledgment must read as follows:
Continued on next page
8: FHA – Sec. 08: Property Analysis – Minimum Property Standards
For Internal RDP Use Only August 7, 2008
General Information, Continued
Airport Noise and Hazards – Existing Properties and Greater Than One Year Old (continued)
“NOTICE TO PROSPECTIVE BUYERS OF PROPERTIES LOCATED IN RUNWAY CLEAR ZONES AND MILITARY AIRPORT CLEAR ZONES
The property that you are interested in purchasing at _______________ _______________________ is located in the Runway Clear Zone/Clear Zone for ___________________________. Studies have shown that if an accident were to occur, it is more likely to occur within the Runway Clear Zone/Clear Zone than in other areas around the airport/airfield. Note that we are not discussing the chances that an accident will occur, only where one is most likely to occur. You should also be aware that the airport/airfield operator might wish to purchase the property at some point in the future as part of a clear zone acquisition program. Such programs have been underway for many years at airports and airfields across the country. We cannot predict if or when this might happen since it is a function of many factors, particularly the availability of funds, but it is a possibility.
We wanted to bring this information to your attention. Your signature on the space below indicates that you are now aware that the property you are interested in is located in a Runway Clear Zone/Clear Zone.
_______________________________ Signature of prospective buyer
__________ Date
_______________________________ Type or print name of prospective buyer”
See Property Analysis – Minimum Property Standards – Noise Hazard – Traffic and Property Analysis – New Construction – Builders Certification.
Continued on next page
9: FHA – Sec. 08: Property Analysis – Minimum Property Standards
For Internal RDP Use Only August 7, 2008
General Information, Continued
Asbestos
Although asbestos has been used in many products in the past, it is not an easily recognized material. It may be found anywhere in a home but may not be obvious to the appraiser. While an appraiser may recognize an asbestos shingle roof or asbestos siding on a house, asbestos used in this manner does not pose a danger as would be if the material were deteriorating within the confines of a home. Where it is used as an insulation wrap for hot water pipes, it is usually covered and poses no danger. When the material is deteriorating into a fine powder and can be inhaled, it may pose a danger to one’s health. Also it could be in hidden areas to which the appraiser has no access.
Asbestos wrapping around hot water pipes in the basement of a dwelling is usually found only in very old homes. If an appraiser notices this, he/she should make a note on the appraisal report that there appears to be asbestos insulation wrap around the hot water pipes. Appraiser to identify condition of area.
Asbestos Condition
If there is no obvious deterioration of the asbestos such as punctures or other damage If there is obvious damage or significant deterioration is noted, then
Action Taken It should be left alone.
An inspection by a professional in the field is to be done.
In addition to these guidelines, any local or state requirements that exceed these guidelines must also be met.
Continued on next page
10: FHA – Sec. 08: Property Analysis – Minimum Property Standards
For Internal RDP Use Only August 7, 2008
Minimum Property Standards
The following criteria define standards for existing properties to be eligible for FHA mortgage insurance. Decisioners/Underwriters bear primary responsibility for determining eligibility; however, the appraiser is the on-site representative for Wells Fargo and provides preliminary verification that the standards have been met.
The following standards form the basis for identifying the deficiencies of the property that the appraiser must note within the appraisal form and which must be addressed by the lender before closing. When examination of existing construction reveals non-compliance with the standards, the appraiser will note repairs necessary to make the property comply with FHA’s minimum property standards together with a cost to cure. If correction is not feasible and compliance can only be affected by major repairs or alterations, the property should be rejected. The appraiser is only required to note those conditions that are readily observable.
Continued on next page
1: FHA – Sec. 08: Property Analysis – Minimum Property Standards
For Internal RDP Use Only August 7, 2008
General Information, Continued
Minimum Property Standards (continued)
Required repairs are those necessary to preserve the continued marketability of the property (structure and soundness) and to protect the health and safety of the occupants.
Any operable or useful element that has reached the end of its useful life within two years should be replaced. Good judgment should be used with respect to such deferred maintenance items.
The following is a general outline of the minimum property standards established by FHA. Eligible houses include detached, semi-detached, multiplex, row houses, and individual condominium units.
Continued on next page
2: FHA – Sec. 08: Property Analysis – Minimum Property Standards
For Internal RDP Use Only August 7, 2008
General Information, Continued
Minimum Property Standards (continued)
Eligible Properties
Each property must comprise a single, readily marketable real estate entity. The property must be free of health and safety hazards.
Utilities and other facilities should be independent for each unit and must include: • A continuing and sufficient supply of safe, potable water under adequate
pressure and of adequate quality for all household uses; • Sanitary facilities and a safe method of sewage disposal; • Heating adequate for health and comfort; • Domestic hot water; and • Electricity for lighting and equipment.
A borrower can purchase or refinance: • Single family, • Condominium, • PUD, • Two- to four-unit family, • Modular, or • Manufactured home.
See Property Analysis – Condominium/PUD.
Continued on next page
3: FHA – Sec. 08: Property Analysis – Minimum Property Standards
For Internal RDP Use Only August 7, 2008
General Information, Continued
Access
Each property must be provided with a safe and adequate pedestrian and vehicular access from a public or private street. All streets must have an all-weather surface with access to all buildings for essential and emergency use. FHA defines all-weather surfaces as a road over which emergency vehicles can pass in all types of weather.
All streets must either be public or privately maintained by permanent recorded easements. Private streets must be protected by permanent easements. A joint maintenance agreement is no longer required or all properties, however, if the appraisal contains adverse conditions/derogatory comments from the appraiser, or there are other indications in the loan file of deferred maintenance, payment disputes related to the roadway, etc., the underwriter should require a road maintenance agreement.
Each living unit must be accessible without passing through another living unit. Access to the rear yard must be provided without passing through another living unit. For a row-type dwelling, the access may be by means of alley, easement, passage through the subject dwelling, or other acceptable means.
Continued on next page
4: FHA – Sec. 08: Property Analysis – Minimum Property Standards
For Internal RDP Use Only August 7, 2008
General Information, Continued
Accessory Unit/Motherin-law apartment
An accessory dwelling unit (ADU) is a habitable living unit added to, created within, or detached from a single family dwelling that provides the basic requirements for living, sleeping, eating, cooking, and sanitation.
Accessory dwelling units are commonly understood to be a separate additional living unit, including a separate kitchen, sleeping and bathroom facilities, attached or detached from the primary residential unit, on a single family lot. ADUs are usually subordinate in size, location, and appearance to the primary unit and may or may not have separate means of egress or ingress.
Attached units, contained within a single-family home, often called “motherin-law apartments” are the most common type of ADU. Accessory units may not be subdivided or otherwise segregated in ownership from the primary residence. The accessory unit must be connected to the utilities (except telephone, televison and cable) of the dwelling unit and may not have separate services. Some ADUs may predate local zoning ordinances and may therefore be classified as legal nonconforming units.
If the unit is income producing, it is not considered an ADU but a second unit.
A 2-4 unit with an accessory unit is not eligible for FHA financing.
The appraiser will determine if the unit is an ADU or second unit. The information will be available in the site analysis section of the report where zoning, highest and best use, and legal use are addressed.
Continued on next page
5: FHA – Sec. 08: Property Analysis – Minimum Property Standards
For Internal RDP Use Only August 7, 2008
General Information, Continued
Airport Noise and Hazards
Locations near an airport may be subject to the noise and hazard of low-flying aircraft. Therefore, consideration must be given to the desirability of an affected location in comparison with unaffected locations that are improved with or are appropriate for competitive structures.
HUD requires that the buyer of a property located in a Runway Clear Zone/Clear Zone is advised that the property is located in such a zone and of the implications associated with that location. This includes the possibility that the airport operator could acquire the property in the near future.
Continued on next page
6: FHA – Sec. 08: Property Analysis – Minimum Property Standards
For Internal RDP Use Only August 7, 2008
General Information, Continued
Airport Noise and Hazards – New Construction, Proposed, Under Construction, and Existing Less Than One Year
New, proposed construction, under construction, and properties less than oneyear old within Runway Clear Zones at civil airports or within Clear Zones at military airfields are ineligible for home mortgage insurance.
Properties located in Accident Potential Zone I at military airfields may be eligible for FHA insurance provided that the property is compatible with Department of Defense guidelines.
See Property Analysis – New Construction – Appraisals – Builders Certification-Hazards.
Airport Noise and Hazards – Existing Properties and Greater Than One Year Old
Existing properties are not to be rejected solely because of airport influences if there is evidence of acceptance in the market. HUD’s position is that since the dwellings are in use and are expected to continue so in the foreseeable future, their marketability should be the strongest indicator of their acceptability.
Marketability should account for the following considerations: • Plans and future expansion of airport facilities. • Prospective increases in the number of planes or flights using the field or
specific runways.
Continued on next page
7: FHA – Sec. 08: Property Analysis – Minimum Property Standards
For Internal RDP Use Only August 7, 2008
General Information, Continued
Airport Noise and Hazards – Existing Properties and Greater Than One Year Old (continued)
• The timing and frequency of the volume of flights. • Any other factors that may increase the annoyance of having the airport
nearby. • Excessive noise.
If changes are likely, the appraiser must anticipate any adverse effect that these changes are likely to have on the marketability of the property. The appraiser should judge each situation on its merits. Compare the effect of aircraft activity on the desirability of a particular location with other locations that are: • Improved with similar structures. • Considered competitive with those located in the subject neighborhood.
Existing dwellings more than one year old are acceptable provided the prospective purchaser acknowledges awareness that the property is located in a Runway Clear Zone/Clear Zone. The acknowledgment “Notice to Prospective Buyers of Properties Located in Runway Clear Zones and Military Airport Clear Zones” must be used in every instance where applicable and should be used without change. The signed acknowledgment must be sent to underwriting with the appraisal. The acknowledgment must read as follows:
Continued on next page
8: FHA – Sec. 08: Property Analysis – Minimum Property Standards
For Internal RDP Use Only August 7, 2008
General Information, Continued
Airport Noise and Hazards – Existing Properties and Greater Than One Year Old (continued)
“NOTICE TO PROSPECTIVE BUYERS OF PROPERTIES LOCATED IN RUNWAY CLEAR ZONES AND MILITARY AIRPORT CLEAR ZONES
The property that you are interested in purchasing at _______________ _______________________ is located in the Runway Clear Zone/Clear Zone for ___________________________. Studies have shown that if an accident were to occur, it is more likely to occur within the Runway Clear Zone/Clear Zone than in other areas around the airport/airfield. Note that we are not discussing the chances that an accident will occur, only where one is most likely to occur. You should also be aware that the airport/airfield operator might wish to purchase the property at some point in the future as part of a clear zone acquisition program. Such programs have been underway for many years at airports and airfields across the country. We cannot predict if or when this might happen since it is a function of many factors, particularly the availability of funds, but it is a possibility.
We wanted to bring this information to your attention. Your signature on the space below indicates that you are now aware that the property you are interested in is located in a Runway Clear Zone/Clear Zone.
_______________________________ Signature of prospective buyer
__________ Date
_______________________________ Type or print name of prospective buyer”
See Property Analysis – Minimum Property Standards – Noise Hazard – Traffic and Property Analysis – New Construction – Builders Certification.
Continued on next page
9: FHA – Sec. 08: Property Analysis – Minimum Property Standards
For Internal RDP Use Only August 7, 2008
General Information, Continued
Asbestos
Although asbestos has been used in many products in the past, it is not an easily recognized material. It may be found anywhere in a home but may not be obvious to the appraiser. While an appraiser may recognize an asbestos shingle roof or asbestos siding on a house, asbestos used in this manner does not pose a danger as would be if the material were deteriorating within the confines of a home. Where it is used as an insulation wrap for hot water pipes, it is usually covered and poses no danger. When the material is deteriorating into a fine powder and can be inhaled, it may pose a danger to one’s health. Also it could be in hidden areas to which the appraiser has no access.
Asbestos wrapping around hot water pipes in the basement of a dwelling is usually found only in very old homes. If an appraiser notices this, he/she should make a note on the appraisal report that there appears to be asbestos insulation wrap around the hot water pipes. Appraiser to identify condition of area.
Asbestos Condition
If there is no obvious deterioration of the asbestos such as punctures or other damage If there is obvious damage or significant deterioration is noted, then
Action Taken It should be left alone.
An inspection by a professional in the field is to be done.
In addition to these guidelines, any local or state requirements that exceed these guidelines must also be met.
Continued on next page
10: FHA – Sec. 08: Property Analysis – Minimum Property Standards
For Internal RDP Use Only August 7, 2008