Appraisal Report and Property Eligibility FAQ

Yes. Appraisers may use comparable sales that sold and settled more than 12 months prior to the date of the appraisal. In some markets, particularly rural markets, there is often much less sales activity than in more populated locations. Appraisers must justify and support their decision to use aged comparable sales and include market supported adjustments as warranted. The Uniform Standards of Professional Appraisal Practice (USPAP) requires an appraiser to provide credible assignment results that are not misleading.

Yes. The best comparables may be located more than one mile from the subject property. For all assignments, appraisers must use data and analysis to determine which are the most appropriate comparable sales. Additionally, appraisers must justify and support their decision to use comparable sales that are located outside of the subject market area. The Uniform Standards of Professional Appraisal Practice (USPAP) requires an appraiser to provide credible assignment results that are not misleading.

No. Although Single-Family Seller/Service Guide (Guide) Section 5604.2 allows for the use of multiple listing service (MLS) photographs, this section of the Guide also requires the photographs to be clear images of the comparable sales. Drawings or artists renderings might not represent the actual features of the comparable sale.

Yes. Freddie Mac purchases mortgages secured by properties that are unique or may not conform to neighborhood residential characteristics in terms of type, design, age or the materials and techniques used in construction.

Appraisers must be able to evaluate and report on how the nonconformity affects the value or the marketability of the subject property. When appraising a unique property, appraisers may use more traditionally designed properties as comparable sales. However, the appraiser must determine if adjustments for differences between the subject property and the comparable sales are warranted and justify and support the use of the comparable sales in the appraisal report.

Mortgages secured by homes built using 3D technology will be eligible for sale to Freddie Mac, as long as the collateral requirements in the Guide are met.

Freddie Mac does not have special underwriting requirements for homes built using 3D technology, as long as the home is built with conventional building materials and has a traditional property design . As with any property, the appraiser must demonstrate the Mortgaged Premises is acceptable to typical purchasers in the market area in which the property is located.

A 3D-printed home that is constructed with conventional building materials and a traditional property design is not considered a unique property type. If a 3D printed home has a non-traditional property design and does not conform to the neighborhood, it is a unique property type and must meet the unique property type eligibility requirements in Guide Section 5605.5(e).

Question: [NEW 05/03/2024] Freddie Mac identifies the use of unsupported or subjective terms or statements to assess or rate as unacceptable appraisal practices. The appraisal forms require the appraiser to identify the growth of the neighborhood as “rapid”, “stable”, or “slow”. How should an appraiser comply with Freddie Mac’s requirements? 

Answer: Freddie Mac’s policy permits the use of such terms if the appraiser provides a foundation for analysis and contextual information. The appraiser must provide the foundation or contextual information for their conclusion related to the identification of the growth of the neighborhood as “rapid”, “stable”, or “slow” in the appraisal report.

A group home for individuals with disabilities is a dwelling that is or will be occupied by unrelated persons with disabilities and is generally primarily residential in nature. A group home for individuals with disabilities is not a boarding house and is not transient housing. See Guide Section 5601.1(b) for eligibility requirements.

A mortgage secured by a residential investment property owned by an individual Borrower(s) and leased to a business entity for use as a group home may be eligible for purchase if it meets the requirements of Guide Section 5601.1(b). The investment property is not considered a commercial property solely because a business entity is the lessee. However, Freddie Mac does require the Borrower to be an individual(s) or a Living Trust subject to the conditions in Guide Chapter 5103. See the Guide Glossary definition of “Borrower” for more information.

In addition to the examples provided in Guide Section 5605.5(a)(ii), below are additional examples of adverse conditions that must be remedied prior to delivery of the Mortgage (unless the repairs are to be made as part of the CHOICERenovation^® Mortgage). It’s important to note that the additional examples provided below are not a comprehensive list of all the scenarios that may be encountered, which could result in an ineligible property. 

The following examples are not meant to imply that minor damage, typically considered deferred maintenance, results in the property being ineligible. Appraisals on properties with minor deficiencies may be completed “as is” as described in Guide Section 5605.5(a)(iv)

• The property has a marginally operational kitchen and/or bathroom(s) as a result of disrepair (e.g., missing cabinets and/or countertops)
• Window frames, siding, soffits, etc. that have evidence of wood rot which impacts the structural integrity of the property
• Roof and/or framing of the porch, covered patio, screened porch, deck, or similar feature is in disrepair such that normal use is adversely impacted, or the structural integrity is questioned
• Missing or damaged gutters or downspouts that would allow water to enter the dwelling and impact the structural integrity of the property if not replaced or repaired
• Roofing materials show obvious deterioration such that the roof has exceeded its life expectancy and no longer ensures the structural integrity of the dwelling
• Missing railings at open areas (e.g., stairwell, loft, foyer, etc. such that they are exposed to an open area)

In order to meet Freddie Mac’s guidelines, the appraisal report must indicate a property condition rating for the subject property of C4 or better. Therefore, if deficiencies exist such that the property is in C5 or C6 condition, the appraiser must provide an appraisal completed “subject to” the repair of the deficiencies that result in a C5 or C6 rating. In that case, the appraiser will report the property condition as C4 or better under the hypothetical condition that the repairs or alterations have been completed.

The appraiser must identify and describe the deficiencies and the property must be appraised "subject to" an inspection by a qualified professional. If the inspection indicates that repairs are required, those repairs must be made prior to delivery and the provisions within Guide Section 5605.5(a)(iii) and Section 5605.8 must be met prior to delivery to Freddie Mac.

The Warranty of Completion of Construction or Repairs/Alterations completion report can be used to verify completion of new or proposed construction or completion of repairs or alterations of existing properties. See Guide Section 5605.8 for documentation requirements.

To provide flexibility, Sellers may use this form or create their own version of this form, provided it contains the same content as Freddie Mac’s version and allows for the inclusion of required photos and signatures. Regardless of method, the documentation including photos must be retained in the loan file.

A virtual inspection is an inspection of the subject property where the appraiser is located remotely off-site and with the assistance of an individual on-site, views the property via livestream using technology to capture the photographs required to verify completion.

No. All appraisal reports and PDRs require a physical inspection of the property which includes an on-site visual inspection, except for desktop appraisals which do not require an interior/exterior inspection of the property. Virtual inspections may only be used by an appraiser to verify completion of new or proposed construction or completed repairs or alterations of existing properties.

Irrespective of whether the lease automatically renews, the current term of the lease must run for at least 5 years beyond the Maturity Date of the Mortgage, unless fee simple title to the Mortgaged Premises vests with the Borrower at an earlier date. This means that, prior to any automatic renewal, the term of the lease must extend at least 5 years beyond the Maturity Date of the Mortgage.