PHFA Appraisal Review Sheet

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PHFA Appendix I required if the water is collected at the subject property and then run through a filtration system. If the water is supplied from a public utility that pumps the water into the storage tank, no potability test is needed. Septic certifications – are not required by PHFA unless the appraiser and/or the agreement of sale comments on a potential problem. Shared septic systems are not eligible unless they are monitored by DEP. Holding tanks – how often must the tank be emptied? This cost must be reflected in the borrower’s PITI ratios. Are holding tanks acceptable to the township? Provide a statement why the property is using a holding tank and ascertain if a regular system may be installed. The appraiser is to use comparables that use holding tanks or make the appropriate adjustments. Wildcat sewer systems – the appraiser must state if it is common to the area and what effect it may have on value and marketability. The SEO or township official must provide a statement that they are aware of this type of system and due to specific reasons (such as topography) it is acceptable and no changes are required. The appraiser is to provide at least one comparable with this type of sewage system. The borrowers are to provide a hold-harmless letter. Cesspools – the appraiser is to state if they are acceptable and common to the area. A qualified inspector must certify that the system is working properly. The appraiser should use comparables with cesspools or make appropriate adjustments. 60 AMP electrical service – the appraiser is to state that this is common to the area or the service must be upgraded to 100 AMPS. If common, at least one comparable must have service less than 100 AMPS. Knob and Tube Wiring – all visible knob and tube wiring must be replaced, and a qualified electrician must provide a statement that the system is in satisfactory condition. Also, the borrower(s) must sign a statement acknowledging that they understand: (1) they cannot insulate exterior wall cavities or floor/ceiling joist spaces that contain knob and tube wiring as it could lead to fire; (2) knob and tube wiring is not grounded but grounding can be accomplished by replacing existing older receptacles connected to knob and tube wiring with GFI receptacles, or protecting the circuit with a GFI breaker. DESCRIPTION AND IMPROVEMENTS AREA: Damp basement – must be repaired unless the appraiser states that it is common to the area and will have no effect of marketability. If there is standing water in the basement the source of the problem must be identified and corrected. Settlement – needs to be addressed if the appraiser makes any derogatory comments about it. Dirt basements – must be cemented unless the appraiser states that they are common to the area and will have no effect on marketability. The mechanical systems must be on concrete slabs. Coal furnaces – verify if auto or manual fed system. If manual fed there must be a back-up heating system that provides heat to all living spaces. The appraiser is to comment if these systems are accepted and common to the area and what affect, if any, it will have on marketability. Outdoor (wood) Furnaces – Property must have a back-up heating system that provides heat to all living areas. The appraiser is to comment if these systems are accepted and common to the area and what affect, if any, it will have on value and marketability. Verification it is acceptable in the community and that there is no ordinance against their use. Unheated living spaces – ALL living areas must have a heat source - the minimum requirement is the installation of floor/wall registers. Space heaters must be vented and properly operating. Manufactured homes – single-wide homes are only eligible if FHA insured. Double-wide homes – please refer to Chapter 8 of the Seller’s Guide. Two-Unit Properties – loans can be conventional, FHA insured or VA guaranteed. Must be side-by-side or stacked on top of each other. A finished basement, attic or unit above a garage does not qualify. If the borrower(s) is using the rental income to qualify, the appraiser must complete the “Estimated Market Rent” and the “Gross Rent Multiplier” section of the appraisal. Basement kitchen/bathroom – if the only kitchen is located in the basement there must be an outside entry or the loan cannot be done as a conventional product. If the only bathroom is in the basement the loan cannot be done as a conventional product. If either of these conditions exists the loan must be under the FHA or VA program. Underground fuel/gas tanks – if the tanks are for residential heating purposes then they are acceptable. Gasoline tanks must be removed and the soil tested for contamination. “Fair” ratings on appraisal – repairs must be completed in order to upgrade the ratings to “average” or better; if the appraiser is referring to “cosmetic” items (paint, carpet, etc) repairs are not necessary. Gas wells – is the well on the subject property? If not, provide a recorded maintenance agreement and a right-of-way to the well. A back-up heating system is required and must be identified by the appraiser. Disclose the number of properties serviced by the well. Is the amount of gas produced consistent throughout the year or does it fluctuate? Provide a history of the well confirming that it is sufficient to service the number of homes stated. July 2011
PHFA Appendix I COST APPROACH AREA: Remaining economic life – this section of the appraisal must be completed for FHA, VA and RD loans. The remaining economic life must be at least 30 years. This is not required on conventional loans; however, if that section is completed on the appraisal, it must state the life to be at least 30 years. RECONCILIATION AREA: Asbestos – if deteriorating, provide proof it has been contained or removed and provide a hold-harmless letter from the borrower. Exterior asbestos shingles are acceptable. Termite certificates – inspections are required for all existing properties. If damage is referenced the property must be evaluated by a qualified individual and repaired. If the structural integrity is questioned a qualified engineer must evaluate the property. The inspection must have been done within the last 4 months. Mold – if the appraiser cites the presence of mold provide a hold-harmless letter from the borrower. LEASEHOLD REQUIREMENTS: Not permitted with Balloon Mortgages Must be in an area where leaseholds are acceptable in the marketplace Mortgage must cover the property improvements and the mortgagor’s leasehold interest in the property The leasehold estate and the improvements must constitute real property, be subject to the mortgage lien and be insured by a lender’s title policy The term of the estate should run for at least five years beyond the maturity date of the mortgage The leasehold estate must be assignable or transferable The leasehold must contain no default provisions that could give rise to forfeiture or termination of the lease except for non-payment of the lease rents and should guarantee the investor the right to receive notice of any default by the Borrower and to cure the default The lease provides provisions to protect the mortgagee’s interests in the event of a property condemnation The Borrower must not be in default under any other provision of the lease, nor may such a default have been claimed by the lessor The lease must be valid, in good standing and in full force and effect The lease must provide that the Borrower will pay taxes, insurance and any owner’s association dues related to the land in addition to those he/she is paying on the improvements The Borrower must retain voting rights in any owner’s association The lease is not required to include an option for the Borrower to purchase the fee interest in the land, but if included the purchase must be: - At the Borrower’s sole option and there can be no time limit within which the option must be exercised. Both the lease and the option to purchase must be assignable. - The purchase price must be the lower of the current appraised value of the land or the amount results when a percentage of the total original appraised value that represented the land alone is applied to the current appraised value of the land and improvements The lease must provide that the leasehold can be transferred, mortgaged and sublet an unlimited number of times either without restriction or on payment of a reasonable fee and delivery of reasonable documentation to the lessor The lessor may not require a credit review or impose other qualifying criteria on any transferee, mortgagee or sublessee The leasehold estate and the mortgage must not be impaired by any merger of title between the lessor and lessee or by any default of a sublessor. July 2011
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PHFA Appraisal Review Sheet

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