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Entrepreneur Profit


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									According to Federal Standards, supplemental appraisal standards may be issued by a financial
institution which augment U.S.P.A.P. The following pages are Regions Mortgage’s Supplemental
Appraisal Guidelines to U.S.P.A.P.

Basic Guidelines

Follow the instructions shown below for appraising REO (bank-owned) property, not FNMA guidelines.
For items not discussed below, follow the Regions Portfolio Mortgage Appraisal Guidelines,
available on the Realty Services website.

Values Needed:     First, estimate an “AS REPAIRED” value on the FNMA appraisal form (comps in
                   average marketable condition). Then estimate the “AS IS” value on the Regions
                   Mortgage REO Appraisal Guidelines & Comments on Valuing Bank Foreclosed
                   Property form (see Forms & Instructions Section of Realty Services website for

Buyer’s Incentive: Estimate an entrepreneur profit (or buyer’s incentive) when estimating the “AS IS”
                   value. The appraiser must support his assumptions if a buyer’s incentive is not
                   included on the REO form.

Comp. Listings:    Three comparable listings are to be provided on an appraisal form grid, adjusted,
                   placed on a detailed map, with photos provided of each one.

Photos: A.               Excellent digital or 35mm exterior photos of subject front & rear (showing all
                         four sides), street scene both ways, and water frontage, if applicable.
                    B.   A minimum of 6 interior photos of each living unit including kitchen, bath, and
                         stairways. Interior photos show subject’s interior condition, finish and any
                         needed repairs. Photos show finished area on all levels (including basement).
                    C.   Photo of any item that needs repairing (ex. roof shingles, floor covering,
                         painting, roof leak damage, rotten wood, termite damage, settlement, etc.) or is
                         functionally inadequate (ex. ceiling height with less than 8 ft. clearance,
                         inadequate crawlspace or ventilation, etc.). Provide an estimated cost to repair
                         each item.
                    D.   Photo of basement or crawlspace to show its condition. (ex. dampness,
                         settlement, structural soundness, etc.)
                    E.   Photo of any exterior improvement on subject site assigned over $1000 in value
                         in the adjust grid. (Ex: swimming pool, shop, etc.)
                    F.   Photos of any detrimental item regarding subject's site or improvements that
                         might effect the subject's marketability, appeal, or value stability. Also, provide
                         photos of positive and negative improvements in the subject’s neighborhood
                         that might have an effect on marketability, appeal, or value (ex. large attractive
                         homes, homes not being maintained, etc.).
                    G.   Photo of property across the street, on each side of subject, and behind the
                         subject. Also provide photo from balcony of all condos.
                    H.   Exterior photos of all comparables (sales-listings-rents) used in the report (are
                         the comparables similar to the subject?) Comparable photo should show the
                         driveway surface, if the comparables have curbs & gutters, and what the street
                         surface is in front of comparable. Is the street similar to subjects?

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Basic Guidelines (cont’d)

Maps:                At least 2 maps: one showing entire area showing subject’s location to
                     metropolitan area; one showing street names showing the subject and all
                     comparables used (sales, listings, and rents) - detailed enough for a reviewer to
                     drive by subject & comparables.

Sketch:              Exterior building sketch with dimensions and basic floor plan of each living unit,
                     showing location of rooms and stairways on each floor-level (for condos, show
                     interior dimensions).

Appraisal Forms:     Use the FNMA or FHLMC form that fits the subject property: -FNMA Form 1004
                     (single-family residential) -FNMA Form 1025 (multi-family residential)

                      Required Addenda: Complete the following 3 forms and submit
                                        the forms with your completed appraisal
                                        (these forms can be found on the Realty
                                        Services website): -Regions Portfolio
                                        Mortgage “History of the Subject Property” -
                                        RegionsPortfolio Mortgage “Repair Form” -
                                        Regions Mortgage REO Appraisal Guidelines
                                        on Valuing Bank Foreclosed Property

Note: If you did the original appraisal when the loan was made, please explain the difference in value
from when the loan was made and the REO value.

Required Attachments to ALL Appraisals Prepared for Regions Mortgage REO Properties

Regions Mortgage requires the following forms be attached to the appraisal reports prepared for all REO
Properties (these forms are available on the Realty Services website)--

1. Realty Services Appraisal Request Form
    Attaching this form along with your invoice to your report will insure prompt payment.
2. Regions Portfolio Mortgage Appraisal Checksheet
    This is a guideline for completing appraisals for portfolio loans.
3. RegionsPortfolio Mortgage History of the Subject Form
    This assists the appraisal reviewer/underwriter evaluate the property.
4. Regions Portfolio Mortgage Repair Form
    This lists all the items that need repairing, even if they are not required in the appraisal.
5. Regions Valuing Foreclosed Property Form
    This is to be used only with appraisals on foreclosed properties.

NOTE: All other standard appraisal data and attachments should be included in each report.

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Sales and Listing Comparables

Regions Mortgage wants market data that would be a truly competitive alternative to the subject
property. A competitive alternative would be a property that a purchaser would consider buying if
they could not get the subject property. It would be similar to the subject in size, quality, location,
price, features, and year built.

Appraisals on Regions Mortgage Foreclosed (REO) Properties are required to include a
minimum of 3 comparable sales and 3 comparable listings. These sales and listings are to be
placed on an appraisal “grid”, adjusted, mapped on a detailed location map, with photos included for
each one.

If it is necessary for the appraiser to utilize comparable properties from outside the subject’s
subdivision, explain why these sales or listing were used. Also, explain why the other area would be a
competitive alternative to the subject area. Regions would prefer the appraiser to stay in the subject
area even if they select sales 2 or 3 years old. Location is key to value. In an accelerating market, the
appraiser can add listings or pending sales as comps 4-5-6 when older historical data from subject’s
area does not show the upward trend in price. Remember, Regions will accept comparable sales that
sold 2 or 3 years ago. Therefore, get your comparable sales from the subject’s neighborhood.

Type of Property                          Type of Comparables
a. Condos                                 Units in the subject’s building
b. Vacant lot or New House                Lots or New Houses in the subject’s subdivision
c. SFR in developed area                  SFRs 3-4 blocks from subject
d. Land only                              Land with similar acreage and usage

True comparable sales & listings will also lead you to the correct value estimate where poor
comparables (fillers) will lead you to the wrong value estimate regardless of the number of
adjustments. The final value estimate is no better than the comparables used in the report.

Buyer’s Incentive (Entrepreneur Profit)

It is the policy of Regions Mortgage to typically do cosmetic repairs before listing a foreclosed property
for sale. Therefore, Regions wants the appraiser to estimate value in “AS REPAIRED” condition and an
“AS IS” condition. (“As Repaired” means a property in good “marketable” or “livable” condition.)

Experience has taught Regions that it almost always pays to do curable cosmetic repairs for physical
deterioration before listing the property for sale. These repairs add value equal to or greater than the
cost to cure. The repaired property also sells in a shorter time reducing holding cost. Assume these
repairs will be done when estimating your "AS REPAIRED” value –

    1. Remove all debris from the site and the improvements & do a general clean-up.
    2. Paint all previously painted surfaces on the interior & exterior.
    3. Put all electrical, plumbing and mechanical equipment in working-order.
    4. Install new floor covering or refinish the hardwood floors.
    5. Replace all missing items such as appliances, plumbing fixtures, wood trim, and any other item
       that is missing or not completed.
    6. Any other necessary repairs to make the house livable or marketable where it shows well.
    7. Make an attractive exterior by mowing yard, trimming shrubs, and any other clean up.
    8. Install new central heat & air conditioning in homes without central heat & air.

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Buyer’s Incentive (Entrepreneur Profit) (cont’d)

If the appraiser is unable to find market evidence to prove otherwise, it is the opinion of Regions
Mortgage that the value difference between "AS IS" value and the "AS REPAIRED" value
should be
repair cost plus entrepreneur profit (or buyer incentive). Foreclosed properties will suffer a
reduction in
value in excess of the direct cost to cure physical deficiencies. The market normally penalizes
more than the actual out of pocket cost. Buyers typically do not trade dollar for dollar. There
must be a
financial incentive for a buyer to go through the hassle of buying a house in poor condition and
taking the
risk, time, and effort to fix it up.

Regions believes the market would support that a knowledgeable buyer would factor in an incentive for
risk, time, and effort. Therefore, if the market would factor in an incentive then according to appraisal
principles and standards, the appraiser should also do it. The appraiser should support his assumption if
he does not believe the market would make an adjustment for entrepreneur profit (or buyer incentive). To
support this assumption, show sales that were bought under similar physical and market conditions as the
subject, repaired, and resold, showing the difference in the sales prices as just the cost of repairs.

It is Regions’s recommendation that the appraisers first estimate the subjects value in "AS REPAIRED”
condition. After the appraiser has a "as repaired" value the appraiser can estimate the subject’s "AS IS"
value by subtracting repair cost and entrepreneur profit (or buyer incentive). This would be the approach
to estimate "AS IS" value if the appraiser cannot find sales that sold under similar physical & market
condition as was the subject when it was first inspected by the appraiser.

For Example --
Subject’s REPAIRED Value (as shown on URAR) $ ________________________
<minus> Out of Pocket Direct Cost $ ________________________
<minus> Entrepreneur Profit or Buyer Incentive $ ________________________
"AS IS" Value $ ________________________

Mobile Homes

In valuing mobile homes with land, Regions Mortgage wants a land evaluation performed on the
FNMA Land Form, with an N.A.D.A. valuation report done on the mobile home. These values are to
be added with the appraiser’s estimation of contributing value of other improvements (i.e., porch,
skirting, septic, etc.) for a final value.

Indicate in the appraisal report the Make, Model, Year, Dimensions, and Quality for the mobile home.
The comparables to be used should be land sales of similar acreage, location, and usage. The
comparables on the appraisal grid should indicate acreage amount, use, and zoning, and be placed on
a location map with photos.

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Repair Recommendation

Regions Mortgage requires a list of what needs repairing, even if the appraiser does not require the
repairs to be made. A repair list should take into consideration the necessary repairs to protect the
collateral, as well as what will effect its marketability (roof cover replacement, exterior painting,
etc). Use the Regions Portfolio Mortgage Repair Form.

Structural, System, and Environmental Conditions

If the appraiser has knowledge of any hazardous condition (whether it exists on the subject property
or on any site within the immediate vicinity of the property) that affects the value of the subject
property -- such as the presence of hazardous wastes, toxic substances, asbestos-containing materials,
urea-formaldehyde insulation, radon air pollution, etc. -- he or she must comment on the hazard's
influence on the property's value and marketability and make appropriate adjustments in the overall
analysis of the property's value.

Status of an Appraisal Assignment

If you have any questions with your appraisal request, contact Realty Services (if the request came from
Realty Services) at:
                                Tel: 800-530-7999
                                Fax: 601-554-2025

Turnaround Time

Regions Mortgage places great emphasis on receiving quality appraisals within 7 calendar days of
the request. If you are unable to provide the desired quality of service within the stated time frame,
please notify us. We are anxious to build a strong on-going business relationship with professionals
who consistently meet our standards.

Delivery and Invoice Instructions

When you have completed the assignment, send your report and invoice to Realty Services via
its website at (if the appraisal request came from Realty
Services). If you are unable to deliver the report in this manner, send the report in a “.PDF”
format to Realty Services’ email address:

or send a paper copy to Realty Services’ physical address:

                                   Realty Services
                                   215 Forrest Street, 6th Floor
                                   Hattiesburg, MS 39401

*If the appraisal report is not submitted to Realty Services, Realty Services cannot guarantee payment.

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