U.S. HOUSING & URBAN DEVELOPMENT (HUD)
REO APPRAISAL REQUIREMENTS
Please read the below instructions thoroughly. You must acknowledge and return this
form to us via email or fax before any additional appraisal orders will be placed with
Appraisers are required to abide by all provisions as set forth by The U.S. Department of Housing and Urban
Development (HUD), the Federal Housing Administration (FHA), the Uniform Standards of Professional Appraisal
Practice (USPAP), the Management and Marketing Contractors (M&M) and LRES Corp., d.b.a. Lighthouse Real
Estate Solutions (Lighthouse) when completing HUD REO interior appraisals as assigned by Lighthouse.
Lighthouse requires all appraisers return an acknowledgment of this form to our office. Failure to do so may
result in Lighthouse discontinuing use of appraiser. Failure to read or acknowledge either this document
or any subsequent amendments or instructions does not relieve the appraiser from complying with the
directives issued by HUD/FHA or as set forth in this document and any subsequent amendments and/or
instructions issued by HUD/FHA, the M&M and/or Lighthouse. Lighthouse reserves the right to withhold
payment of completed appraisals if the appraiser refuses to comply with said guidelines and subsequent
amendments as outlined in (but not limited to) the contents of this document and subsequent amendments and/or
instructions. The matters addressed in this document are NOT exclusive of how a HUD REO appraisal is to be
completed by the appraiser. Appraisers MUST refer to ALL required guidelines, directives, requirements and
amendments when completing the appraisal orders. Please note that requirements may change from time to
Section 1 APPRAISAL COMPLETION
Appraiser MUST complete the appraisal in accordance with HUD Handbook 4150.2 Appendix A,C & D,
(HUD 4150.2), Mortgagee Letters 99-18, 00-27, 00-30, 05-02, 05-34, 05-48, Uniform Standards of
Professional Appraisal Practice (USPAP), the Federal Housing Administration (FHA), the Management
and Marketing Contractor and Lighthouse Real Estate Solutions’ requirements.
Section 2 INSPECTION OF THE PROPERTY
2.01 Inspection of property MUST be completed by an FHA CERTIFIED APPRAISER ONLY and Appraiser
MUST be active on the FHA Roster. Under no circumstances will a non-FHA Certified appraiser be
allowed to conduct the physical inspection of the property OR execute the completed appraisal.
Section 3 COVER PAGE
3.01 Appraiser MUST include a traditional photo cover page showing the following:
a. A front view of the property that is free from any personal property (auto, boat etc)
b. FHA case number at the top right corner of the page
c. Correct property address
d. Appraisal date
e. Appraiser’s name
Section 4 FORMS
4.01 Appraiser MUST utilize the following forms in accordance to FHA/HUD Guideline 4150.2 Appendix D
when completing the valuation:
A. 1004 March 2005 – for one unit property or PUD
B. 1004C March 2005 – for manufactured home
C. 1073 March 2005 – for individual condominium unit
D. 1025 March 2005 – for small residential income – 2 to 4 unit
4.02 Appraiser MUST complete the following forms and attach to the completed report:
A. Environmental Compliance Form – MUST be completely filled out and have signature
B. Lead Based Paint Certification Form (January 1990 “Revised Lead Based Paint Certification
– Second Revisions) - must be completed and signed
B1. If no defective paint surfaces found, appraiser must reflect a “0” or “NA” in the
section for estimated cost to treat.
4.03 Appraiser MUST NOT USE/INCLUDE the following forms:
A. Environmental Addendum
B. Appraisal Addendum for HUD Owned Property
C. Multi-Purpose Addendum
Section 5 SUBJECT
5.01 BORROWER : Appraiser MUST enter “NONE” or “NA”
5.02 OWNER OF PUBLIC RECORD : Appraiser MUST enter “HUD.” If appraiser, after conducting his/her
required due diligence, discovers that public records do not reflect HUD as the owner, appraiser must
notify Lighthouse prior to completing the appraisal.
5.03 LEGAL DESCRIPTION : Appraiser MUST provide legal description or attach information as addendum
5.04 OCCUPANT : Appraiser MUST mark VACANT. If appraiser discovers property is occupied upon
inspection, appraiser must notify Lighthouse prior to completing appraisal.
5.05 HOA : Appraiser MUST provide monthly HOA $ if PUD (4150.2 Appendix D-15)
5.06 ASSIGNMENT TYPE : Appraiser MUST mark OTHER and enter “HUD Real Estate Owned (REO)
5.07 LENDER/CLIENT : Appraiser MUST enter “HUD/NHMS”
ADDRESS : Appraiser MUST enter appropriate client address as listed on order form.
5.08 REPORT DATA SOURCE(S) USED ETC : Appraiser MUST enter “The subject property is to be offered
for sale as a HUD REO property in the near future.”
Section 6 CONTRACT
6.01 Appraiser MUST mark “Did not analyze the contract” and enter “The subject property is currently not
Appraiser MUST enter “NA” for not applicable for all other information in this section. (4150.2 Appendix
Section 7 NEIGHBORHOOD
7.01 ONE UNIT/MANUFACTURED/CONDO/2-4 UNIT HOUSING : Appraiser MUST provide exact “price” and
“age” and may NOT provide a range for the Predominant Price and Age with the exception of
7.02 PRESENT LAND USE % : This section MUST be equal to 100%. Appraiser MUST note use of “other” %
Section 8 SITE
8.01 DIMENSIONS : Appraiser MUST list dimensions of site and include sketch or legal description on
irregular sites. (4150.2 D-18)
8.02 AREA : Appraiser MUST enter the site area in acreage.
8.03 UTILITIES : Appraiser MUST completed this section appropriately and describe and provide distance of
any non-public utilities from the subject property if applicable. (4150.2 D19)
8.04 Appraiser MUST indicated if a property is within the FEMA Special Flood Hazard Area by marking either
“Yes” or “No” (4150.2 D20)
A. Appraiser MUST provide FEMA Zone, Map Date and Map No. If not shown, enter “Not
B. Appraiser MUST attach a copy of the flood map panel for properties located within flood
8.05 Appraiser MUST make typical comments concerning the site and if applicable, discuss external
obsolescence and/or positive external influences in this section.
Section 9 IMPROVEMENTS
9.01 Appraiser MUST enter actual year built and effective age. (An effective age with +/- or a range is
9.02 Appraiser MUST provide explanation for wide variance between age and effective age. (A difference of
20 years between them.)
9.03 Appraiser MUST enter the type and condition of all Exterior and Interior Materials.
9.04 Appraiser MUST access the attic (if applicable)
9.05 APPLIANCES : Appraiser MUST report all appliances at the property, and enter “P” if personal property.
9.06 Appraiser MUST complete the number of rooms section thoroughly.
9.07 Appraiser MUST note the type of car storage and the number of cars that can be reasonably parked, or
mark NONE. (4150.2 D-26)
9.10 CONDITION OF THE PROPERTY : Appraiser MUST state the overall condition of the subject dwelling.
Make the statement, “The following utilities were not on at the time the appraisal was conducted: electric,
gas, water (as applicable) – unable to verify their functionality. See Additional Comments section on
page 3 of this form.” This will refer the user of the report to what had been reported on page 5 of the VC
9.11 PHYSICAL DEFICIENCIES : Appraiser MUST note and describe ANY deficiency or condition (included
in the preceding section or on page 3) significantly affecting the property value. Also, describe ANY
significant and/or atypical functional obsolescence that affects property.
9.12 PROPERTY CONFORMITY : Appraiser MUST note atypical/significant functional obsolescence and/or
external obsolescence, and explain why and analyze the impact on value due to non-conformity(ies).
Section 10 SALES COMPARISON ANALYSIS
10.01 Comparables should be within reasonable proximity (1 miles or less) of the subject property. Appraiser
MUST provide explanation of use of comparables outside a reasonable proximity.
10.02 Comparables should be within a 6 month period from date of appraisal and MUST NOT exceed more
than 12 months from date of appraisal. Appraiser MUST provide explanation of use of comparables
10.03 Appraiser MUST ensure utilization of comparables that are similar in age, style and size of subject
10.04 Appraiser MUST ensure that he/she is consistent in adjustments given specifically concerning (but not
inclusive of) Gross Living Area (GLA), Age and Land.
10.05 Appraiser may utilize REO comparables as long as they meet the following requirements:
A. in the subject neighborhood or reasonable proximity
B. comparable property subject to reasonable adjustment
C. sold with willing buyer and seller
D. exposed to market for a reasonable period
NOTE: It is not the intent of HUD for only REO comparables to be utilized. ONLY use REO comparables
if they meet ALL of the above criteria. If comparables such as these are not available, regular market
comparables are to be used. HUD 4150.2 Appendix A A.1.1 B. identifies that the appraiser must utilize
REO comparables however, please note that this section does NOT specify that ALL comparables must
by REO. In an effort to ensure a fair market value, if appraiser utilizes 2 or more REO comparables,
please include 1 additional regular market comparable for each REO comparable utilized and
ensure sufficient weight is employed. If REO comps are used, please note that comps must meet 4 HUD
10.06 Appraiser MUST ensure that adjustments for significant size or value be determined by “Sales Paired
Analysis.” (Rural areas may be an exception.)
10.07 Adjustments MUST NOT exceed +/- 10% for individual line items and the total adjustments to
comparables should not exceed 15% Net and 25% Gross. Appraiser must provide a comp specific
explanation for adjustments that exceed the parameters. (4150.2 D-31) Canned / Boiler plate
comments are not acceptable.
10.08 Appraiser MUST provide an analysis of all prior transfers (includes sales, foreclosures, deeds in lieu of
foreclosure, tax sales, etc.) of the subject property that occurred within three (3) years prior to the
effective date of the appraisal. (HUD Mortgagee Letter 2005-02; ASB USPAP AO-4)
10.09 In the Sales Comparison Analysis, Sales or Financing Concessions Section, the appraiser MUST provide
analysis of all prior transfers (includes sales, foreclosures, deeds in lieu of foreclosure, tax sales, etc.) of
the comparable sales that occurred within one (1) year prior to the effective date of the appraisal. If the
data is unavailable, the appraiser must note what steps were taken during the normal course of business
to obtain and report the information. (HUD Mortgagee Letter 2005-02; ASB USPAP AO-4)
(Typically, the subject is transferred to HUD within the past three years)
10.10 DATA SOURCE : Appraiser MUST provide 2 sources. Verification source can read MLS/Public Records,
the actual recording number or map/book/page numbers are not required AND MLS cannot be listed
alone as a source. (4150.2 D-32)
Section 11 RECONCILIATION
11.01 Appraisal MUST be made “As-Is” (HUD 4150.1 Appendix A, A-1). Appraisal may not be marked “Subject
11.02 Appraisal MUST state “Cost Approach and Income Approach are not applicable.” Explain your rationale.
Section 12 COST APPROACH
12.01 Generally, the cost approach is not developed for REO properties. If the cost approach is justified,
appraiser is required to follow specifications as outlined in HUD 4150.2 Chapter 4 Valuation Analysis.
(HUD 4150.2 A A-1 1.A) If the cost approach was excluded, report it in the reconciliation and insert the
rationale for its exclusion. (HUD 4150.2 4-5 Reporting Requirements.)
12.02 Appraiser MUST provide exact remaining economic life. Appraiser MUST give careful consideration in
determining the remaining economic life of the property. (Property must have at least a remaining
economic life of 30 years to be insurable by HUD; therefore, appraiser must utilize considerable
judgment in this area.)
A Remaining Economic Life with +/- or range is unacceptable.
12.03 Appraiser MUST provide Site Value
Section 13 INCOME APPROACH
13.01 Appraiser MUST enter “N/A” in this section. (4150.2 D-36)
Section 14 PUD INFORMATION (if applicable)
14.01 Appraiser MUST mark either “Yes” or “No” if property is in control of an HOA and provide relevant
information as applicable.
Provide the information only if the developer is in control of the HOA and the subject property is an
attached dwelling unit.
Section 15 HUD DATA PLATE (if applicable)
15.01 Appraiser MUST completely fill out this section. (4150.2 D-52)
15.02 Appraiser MUST provide photos of the HUD Data Plate/Label
Section 16 LOCATION MAP
16.01 Appraiser MUST include a legible street map showing the location of the subject property and each of
the comparable sales and addresses for each. (4150.2 D-13)
Section 17 SKETCH
17.01 Appraiser MUST include property sketch including exterior dimensions of house, patios, porches,
garages, breezeways and other offsets. (4150.2 D-13)
17.02 Appraiser MUST indicate and sketch the distance between the well, septic tank, drain field and property
lines. (if applicable)
17.03 Appraisers are required to provide a floor plan or room layout. (HUD 4150.2, Appendix A, Section 1
Section 18 PHOTO REQUIREMENTS
18.01 Appraiser MUST provide photos as follows:
A. Front, sides, rear and street views of subject property.
B. All improvements on subject property that provide contributory value.
C. ALL interior and/or exterior problem areas (any areas needing MPS/MPR repairs).
D. Current front view photo of each comparable. MLS and stock/file are UNACCEPTABLE.
E. A separate .jpeg file of the front view of the subject property with each completed order.
F. Photo of HUD Date Plate and Certification Label if subject property is a Manufactured Home
or Modular Home
G. If no problem areas, HUD still requires at least one interior photo to be included.
18.02 Appraiser MUST label all photos – describe rooms/areas needing repairs
18.03 Appraiser should avoid taking front view photos of subject property that includes people, vehicles or
other personal property.
Section 19 ADDITIONAL COMMENTS / ADDENDUM
19.01 Appraiser MUST indicate the INTENDED USE and INTENDED USER
Intended use of appraisal MUST read: “The intended use of the appraisal is to provide the “as-is” value
for marketing and bidding purposes.”
Intended users of appraisal MUST be noted as: HUD, the HUD Management and Marketing Contractor,
potential buyer and/or potential buyer’s lender.”
19.02 PROPERTY CONDITION REPORT (PCR)
19.021 A PCR will be provided with each appraisal order. Appraiser MUST immediately notify
Lighthouse if the PCR is not attached or is not in a readable format.
19.022 Appraiser MUST review the PCR for any inconsistencies with the appraiser’s actual findings
and note any discrepancies.
19.023 If appraiser is unable to personally check the mechanical systems, he/she MUST note whether
the PCR indicates that a systems check was completed and MUST also note the condition of
the systems as stated on the PCR.
The below verbiage MUST be used:
“According to the PCR dated MM/DD/YY (revised MM/DD/YY), the systems were checked and
operable.” The underlined statement may vary depending on what is on the PCR. State any
systems that are not checked or operable (whichever is applicable).
IMPORTANT NOTE - the date of the PCR must be referenced in the appraiser’s comment.
Appraiser is NOT assuming responsibility for the systems functionality, rather, the appraiser is
merely commenting what the PCR states is the condition of the mechanical systems.
*** Appraisal WILL NOT be accepted without reference to the PCR as described. If
appraiser has questions regarding this matter, he/she should contact Lighthouse
19.024 Appraiser MUST include a copy of the PCR provided in the appraisal report, after the last page
of the appraisal.
19.03 MPR/MPS SECTION
19.031 Appraiser MUST itemize MPS/MPR repair estimates with each repair needed to satisfy the
“intent” of HUD’s MPS/MPR. These repairs only include those that relate to the safety,
soundness and/or structural integrity of the subject property. (i.e. bare floors, broken windows,
missing gutters, etc.).
19.032 Appraiser MUST refer to Mortgagee Letter 2005-48 regarding FHA Repairs and Inspection
Requirements for Existing Properties
19.033 Appraiser MUST provide total of MPS/MPR repair estimates (enter $0, if applicable)
19.04 MARKETING RECOMMENDATIONS
19.041 Appraiser MUST provide recommendations for marketing (HUD 4150.2 Appendix A A-1 F) by
utilizing the below applicable verbiage:
A. “Insurable in its „as is‟ condition without repairs” – This marketing
recommendation is to be utilized when $0 estimated required repair costs are needed
in order for the property to meet HUD’s minimum property standards.
B. “Insurable in its „as is‟ condition with repairs costing $5,000 or less” – This
marketing recommendation is to be utilized when no more than $5,000 estimated
required repair costs are needed in order for the property to meet HUD’s minimum
property standards. All estimated repair costs must be itemized.
C. “Uninsurable due to repair costs greater than $5,000.” - This marketing
recommendation is to be utilized when estimated required repairs costs needed in
order for the property to meet HUD’s minimum property standards exceeds $5,000. All
estimated repair costs must be itemized if it is over $10,000, or must be summarized if
it is over $10,000.
NOTE : “Insurable with conditions” is NOT a marketing option, please DO NOT utilize this
Section 20 OTHER REQUIREMENTS
20.01 Appraiser MUST respond within 24 hours to confirm acceptance of order.
20.02 Appraiser MUST sign this Appraisal Acknowledgement.
20.03 If appraiser is unable to access the property, appraiser SHOULD take a photo of their visit showing why
they were unable to access (wrong lock, boarded property, condo unit with private entrance etc) and
submit to Lighthouse.
20.04 Appraiser MUST access the Crawl Spaces unless blocked. Crawl spaces locked with padlock MUST be
accessed utilizing the HUD padlock key provided. Appraisers not accessing crawl spaces that are
secured with padlock will be required to return to property to gain access. Trip fees will not be approved
for revisiting properties where access was initially available utilizing HUD padlock key.
20.05 Appraiser MUST insert the FHA case number provided on the upper portion of each page of the
20.07 Appraiser MUST carry Errors and Omissions (E&O) Insurance.
20.08 A hard copy with an original “wet” signature will be required on an “upon request” basis.
20.09 Lighthouse will communicate with appraiser, any corrections that may be required to the completed
appraisal. Appraiser MUST respond to requests for corrections within 24 hours or he/she will not
receive any new orders from Lighthouse and will not be compensated if he/she fails to comply.
20.10 Appraiser MUST NOT communicate any information regarding Appraisal Fees or Values to anyone other
than Lighthouse. This is grounds for Cancellation on any current and future assignments.
20.11 Appraiser MUST attempt to follow the format that is attached to the order request. (File name: FHA-REO
template.pdf) Please advise Lighthouse if you do not have a copy of it.
20.12 Appraiser MUST respond within 24 hours to any condition or correction requests that are sent out by
Please acknowledge receipt and understanding of these instructions. Please contact our office IMMEDIATELY
should you have any questions regarding any of the requirements.
Appraiser understands that by accepting an order from Lighthouse to complete an FHA REO appraisal
that he/she agrees to abide by ALL provisions both outlined and referred to in this Acknowledgement.
Failure to do so can and may result in appraiser NOT being compensated for the completed appraisal.