Posts About Appraisal and Appraisers written by the staff of The Robinson Real Estate Appraiser Group, Maryland.

Fannie Mae Guidelines for the Appraiser

Fannie Mae Guidelines for the Appraiser

The Federal National Mortgage Association (Fannie Mae) is a Government Sponsored Enterprises (GSEs), which means it is backed by the government but they are not part of the government. Fannie Mae does not directly offer mortgage loans but instead buy the mortgages from banks, credit unions, and other financial institutions so that they, in turn, can lend to more homeowners. Fannie Mae holds the lender responsible for the accuracy of both the appraisal and its assessment of the marketability of the property. It is imperative for a lender’s underwriters to understand the appraisal process and their relationship to the appraiser.

fannie-maeSome of the Fannie Mae guidelines we would like to cover in this article are the areas regarding the subject verses the comparable properties. Comparable selection will determine the market value and typically this is the area in which most lenders and/or clients need clarification or additional items need to be addressed.

In an ideal world an appraiser would have comparables within the same neighborhood of the same style, square footage, age, lot size, updates/upgrades, exterior amenities, bedrooms/bathroom count, condition and quality of construction. Unfortunately, this NEVER happens. So, upon comparable selection an appraiser chooses properties that are the most reflective of the subject property while also conforming to the wide array of lender and/or Fannie Mae guidelines. These guidelines may have an impact on the appraised value. The following are some of the areas addressed in a report.

– Settled Dates

  •  Fannie Mae, lenders and/or clients prefer the selection of 2 properties that have settled within the past 90 days.
  • Older comparable sales that are the best indicator of value for the subject property can be used if appropriate.
  • Comparable sales that are more than six months old must be must be accompanied by an appraiser explanation for use.
  • A minimum of 3 comparable sales that have been settled or closed within the last 12 months must be reported as part of the sales comparison approach to value.

– Distance

  • Comparables within one mile are typically the standard for lenders and/or Fannie Mae.
  • This is typically achieved in a populated suburban or urban area during a season of typical turnover.
  • Problems with this guideline occur when and the property is located in a rural area.
  • Rural properties often have large lot sizes and rural locations can be relatively undeveloped; therefore, there may be a shortage (or absence) of recent truly comparable sales in the immediate vicinity of a subject property that is in a rural location.
  • Comparable sales located a considerable distance from the subject property can be used if they represent the best indicator of value for the subject property.
  • The appraisal must include an explanation of why the particular comparables were selected. Other factors for the lack of comparable properties within a mile are square footage of dwelling, updates/upgrades, style, bedroom/bathroom count, finished basement and presence of an in ground pool are just a few reasons this one mile stipulation would need to be expanded and commented on in the report.

– Land Value exceeding 30% of market value

  •  The site value is typically required in an appraisal report, with or without the cost approach being included.
  • If this land to market value percentage/ratio exceeds 30% a comment is warranted. This is often the situation on large parcels of land or water front lots.

– Bracketing

In selecting comparables Fannie Mae, clients and/or lender would prefer the of use the bracketing method. Bracketing is a method of using at least one comparable superior and one inferior to the subject. It is preferred to use as many bracketed items as possible:

  •  Unadjusted Sale Price
  •  Adjusted Sale Price
  •  Gross Living Area (GLA)
  •  Lot Size
  •  Adjusted Sale Price
  •  Ground Rents
  •  Other Major Physical Characteristics

– Gross Living Area (GLA) Square Footage

  • Comparables within 20% of the subject are preferred. Anything beyond that typically warrants additional commentary.
  • Differences less than 100 square feet are not usually adjusted.

– Bedroom Count

  • Similar bedroom count is most appropriate.
  • Typically, at least two comps should have same bedroom count.
  •  One more or fewer bedroom is ordinarily acceptable for 3+ bedroom homes.
  • Two bedroom homes being appraised should have one or more two-bedroom comparables.
  • Three and four bedroom homes can usually be compared with appropriate commentary and availability in the market.

– Predominant Value

  • The appraiser must indicate the price range and predominant price of properties in the subject neighborhood.
  • The price range must reflect high and low prevailing prices for the property type being appraised.Isolated high and low extremes should be excluded from the range, which means that the predominant price will be that which is the most common or most frequently found in the neighborhood.
  • The appraiser may state the predominant price as a single figure or as a range, if more appropriate.
  • When the value of the subject property is significantly different than the noted predominant value of the neighborhood, the appraiser must explain why the value is outside the range and comment on the marketability of the property.

– Homes of Different Styles

  • The appraiser is required to state the architectural Design/Style of the subject and comparables.
  •  Design descriptions include colonial, cape cod, split level, split foyer, contemporary, etc.
  •  Fannie Mae and/or the lender require the appraiser to provide at least one closed sale that has the same (or similar) design style as the subject, even if it is necessary to extend the search parameters(in time or distance).
  • If absolutely no such closed sale is available, even after extending standard search parameters, specific commentary MUST be provided describing the research efforts and search parameters.

-Seller Concessions

  • Comparable sales that include sales or financing concessions must be adjusted to reflect the impact, if any, on the sales price of the comparables based on the market at the time of sale.
  • Particular attention must be paid to sales or financing concessions in markets that are experiencing declining property values, an oversupply of properties, or marketing times over six months.


  • Most lenders have guidelines wanting appraisers to stay within a one-mile radius, but there is actually no official “one-mile rule” from Fannie Mae.
  • Urban areas (densely populated) typically have comparables within 1 mile.
  • Rural areas where there are minimal settled sales area available there is no distance rule.
  • Comments and explanations of market areas are typically required if the distance to the subject exceeds 1 mile in an urban area and 5 miles in a rural area.
  • Distance is irrelevant if it takes distance to create a credible appraisal.

There are Fannie Mae and/or lender requirements for each field in an appraisal report to include accuracy, knowledge of the area, determining highest and best use, zoning restrictions, compliance, subject property analysis, comparable property analysis, eligibility criteria, conformity and environmental issues are just a handful of areas that need to be addressed in an appraisal report.

FHA loans differ from Fannie Mae. FHA loans are issued by federally qualified lenders and insured by the Federal Housing Administration (FHA). FHA loans are designed for low to moderate income borrowers who are unable to make a large down payment. FHA and Fannie Mae each have their own set of guidelines possibly resulting in varying values.

Additional data and/or requirements for appraisers, lenders, underwriters, mortgage requirements, liability assessments and eligibility requirements can be found at and  Various data from both sites was used in this report regarding appraisal guidelines.

Lender Letter 2/2015

Become an Appraiser in Maryland

How does someone become an Appraiser in Maryland? To become a real property appraiser, you will need to obtain education and experience, then pass a state-administered licensing or certification exam. One of the best ways to gain experience is to … read more

FHA Appraisals

FHA Appraisals

FHA appraisers perform many of the same functions as appraisers for conventional loans, but with a few extras.

Since FHA loans are government-insured and designed to provide safe housing, there are specific things that FHA appraisals must examine for the home to meet loan program guidelines.

fha-appraisalsWhen inspecting a property with FHA financing, either as a purchase or a refinance, there are areas that may need correction prior to the loan closing. According to HUD, to meet the FHA criteria, a property must be free of hazards that could affect the health or safety of the home’s occupants. A home may still be accepted if identified hazards are properly corrected. A lack of general maintenance or a run-down appearance is acceptable and won’t need to be repaired as long as it does not jeopardize the safety or structural integrity of the home. For example, damaged drywall, worn counter-tops, missing bathroom tiles, poor workmanship, and damaged or missing interior doors are all cosmetic issues. Structural defects that are not acceptable include cracks in the foundation, a sagging roof or floors, wood deteriorated to the point that it needs professional repair, or grading that is not adequate enough to drain water away from the house. A leaking or worn-out roof must be repaired or replaced. An appraiser must examine the condition of the roof from the attic to spot any holes in the roof or water staining.

Typically the most common repair for FHA appraiser inspections is the correction of chipping and peeling paint in homes built prior to 1978. Approximately three-quarters of the nation’s housing stock built before 1978 (approximately 64 million dwellings) contains some lead-based paint. When properly maintained and managed, this paint poses little risk. However, 1.7 million children have blood lead levels above safe limits, mostly due to exposure to lead-based paint hazards.  Every Purchaser of any interest in residential real property on which a residential dwelling was built prior to 1978 is notified that such property may present exposure to lead from lead-based paint that may place young children at risk of developing lead poisoning.  Lead poisoning in young children may produce permanent neurological damage, including learning disabilities, reduced intelligence quotient, behavioral problems, and impaired memory. Lead poisoning also poses a particular risk to pregnant women.  So chipping/peeling paint is a major issue when the appraiser performs the inspection of a property. In an effort to correct all areas prior to inspections check interior and exterior painted surfaces: window trim, sills, frame, doors, thresh holds, walls and railings are some of the most common areas that have chipping and peeling paint due to the amount of usage and exposure to the elements. The typical verbiage in paint correction is “scrape,sand and paint any chipping and peeling paint”: all paint chips must be removed from corrected areas.

Let it be noted that on vacant homes some lenders may require evidence that the chipping paint was corrected per EPA guidelines.

An area on the outside of the home an appraiser would check is the roof. A check for missing and/or worn shingles would be visually noted. If the roof has a life expectancy of two years or less, the FHA appraiser will recommend that it be repaired or replaced. The FHA allows only three layers of roofing material. After there are more, the roof must be replaced when further repair is necessary.

Walk around the exterior of your home to look for conditions that might be deemed unsafe. Walkways should be in good repair and free of tripping hazards.

There are also FHA requirements for well and septic systems. Some homes have their own water supply, usually in the form of a well. But the FHA guidelines for wells is quite specific. For an FHA appraiser to pass your well, it must be at least 50 feet from your septic tank and at least 100 feet from the septic tank’s drain field. In addition, the well cannot be within 10 feet of your property line.

The bulk of FHA repairs are typically on the interior. Some suggested areas (in addition to the chipping/peeling paint if built prior to 1978) to pay particular attention for correction are water stains (indicating leak in need of repair), holes and large cracks. Look for evidence of rodents and termites. Turn on your heat and A/C systems to make sure they work, and that they don’t emit strong odors or smoke. Try all the light switches and power outlets to make sure they’re functioning. Remedy frayed or exposed wiring. Check your plumbing fixtures to make sure they all work and are free of leaks. Verify that your home has adequate water pressure–when more than one plumbing fixture is turned on, water should flow normally from each. Repair miscellaneous items the FHA considers health and safety deficiencies. These include missing handrails along stairways, broken windows and missing or unsafe stairways. Have a working smoke detector on every level. Make sure all windows open, remain open on their own and close. Verify that your garage door reverses or stops when it meets resistance.

All repairs noted from the appraiser are areas that are “readily observable”. The appraiser does not move furniture and notes only areas that can be seen upon inspection.

See the attached worksheet as an additional tool to help eliminate FHA repairs and further understand additional elements that need to be addressed in FHA appraisals.

Valuations Conditions 07 2003


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