II.D.3.b. Application of Minimum Property Requirements and Minimum Property Standards by Construction Status (09/14/15)

Owned by Kacey Olson
Nov 21, 2018
2 min read

© HUD Single Family Housing Policy Handbook 4000.1

Included in this section are:

i. Existing Construction
ii. New Construction
iii. Determination of Defective Conditions
iv. Inspection by a Qualified Individual or Entity

i. Existing Construction

(A) DefinitionExisting Construction refers to a Property that has been 100 percent complete for over one year or has been completed for less than one year and was previously occupied.

(B) StandardFor Existing Construction, the Appraiser must notify the Mortgagee of the deficiencies when the Property does not comply with FHA’s MPR.

ii. New Construction

(A) DefinitionNew Construction refers to Proposed Construction, Properties Under Construction, and Properties Existing Less than One Year as defined below:

  • Proposed Construction refers to a Property where no concrete or permanent material has been placed. Digging of footing is not considered permanent.
  • Under Construction refers to the period from the first placement of permanent material to 100 percent completion with no Certificate of Occupancy (CO) or equivalent.
  • Existing Less than One Year refers to a Property that is 100 percent complete and has been completed less than one year from the date of the issuance of the CO or equivalent. The Property must have never been occupied.

(B) StandardFor New Construction, the Appraiser must notify the Mortgagee of the deficiencies when the Property does not comply with FHA’s MPR and MPS, including 24 CFR §§ 200.926a-200.926e.

iii. Determination of Defective Conditions

(A) DefinitionDefective Conditions refer to defective construction, evidence of continuing settlement, excessive dampness, leakage, decay, termites, environmental hazards or other conditions affecting the health and safety of occupants, collateral security or structural soundness of the dwelling.

(B) StandardThe Appraiser must identify readily observable defective conditions. Defective Conditions Requiring Repair The Appraiser must identify defective conditions that are curable and will make the Property comply with HUD’s MPR, and provide an estimated cost to cure.

iv. Inspection by a Qualified Individual or Entity

If the Appraiser cannot determine that a Property meets FHA’s MPR or MPS, an inspection by a qualified individual or Entity may be required.

Conditions that require an inspection by qualified individuals or Entities include:

  • standing water against the foundation and/or excessively damp basements;
  • hazardous materials on the site or within the improvements;
  • faulty or defective mechanical systems (electrical, plumbing or heating/cooling);
  • evidence of possible structural failure (e.g., settlement or bulging foundation wall, unsupported floor joists, cracked masonry walls or foundation);
  • evidence of possible pest infestation;
  • leaking or worn-out roofs; or
  • any other condition that in the professional judgment of the Appraiser warrants inspection.

Appraisers may not recommend inspections only as a means of limiting liability. The reason or indication of a particular problem must be given when requiring an inspection.

Required Analysis and Reporting

The Appraiser must observe, analyze and report defective conditions and must also provide photographic documentation of those conditions in the appraisal report.

If inspection is required, the Appraiser must cite the reason for requiring an inspection.