The Fannie Mae appraisal guidelines set the condition standards, report format, comparable-sale rules, and independence protections that every appraisal must follow before a conventional loan can be sold to Fannie Mae. If the property or the report falls short, the loan doesn’t close through conventional financing until the problem is fixed. Here’s what those rules actually require, and where they most often affect buyers, sellers, and homeowners refinancing.
Condition and Quality Ratings That Can Disqualify a Home
Every appraiser assigns the property two standardized scores. The condition scale runs from C1, meaning brand-new with no wear, through C6, meaning severe damage or deferred maintenance affecting safety and structural integrity. The quality scale runs from Q1, architect-designed custom construction, through Q6, the lowest-cost materials.1Fannie Mae. Property Condition and Quality of Construction of the Improvements
A C6 rating makes the property ineligible. The deficiencies have to be repaired to bring the home to at least a C5 before the lender can sell the loan to Fannie Mae.1Fannie Mae. Property Condition and Quality of Construction of the Improvements No shortcut around it.
When Repairs Are Required Before Closing
If the appraiser finds physical deficiencies affecting safety, soundness, or structural integrity, the appraisal is issued “subject to” completion of specific repairs. Common triggers include active roof leaks, foundation settlement, water seepage, and inadequate electrical or plumbing systems.2Fannie Mae. Requirements for Verifying Completion and Postponed Improvements A home in good repair receives an “as-is” value instead.
A subject-to appraisal means the lender cannot deliver the loan to Fannie Mae until the repairs are verified. Verification usually happens on Form 1004D, a completion report signed by the appraiser or an acceptable alternative.2Fannie Mae. Requirements for Verifying Completion and Postponed Improvements That follow-up inspection typically runs $125 to $260. If the seller refuses to make the repairs and the buyer can’t move to another loan program, the deal stalls.
What the Appraisal Report Must Contain
The standard single-family appraisal is recorded on the Uniform Residential Appraisal Report, Form 1004. It captures the neighborhood analysis, property description, comparable sales, and final opinion of value in a format that lenders and secondary-market investors can review consistently.3Fannie Mae Selling Guide. Appraisal Report Forms and Exhibits
Every report must include a specific set of exhibits. If any are missing, the report is incomplete and unusable for a conventional loan:
- Exterior photographs of the front, back, and a street scene showing the subject property and adjoining homes.
- Interior photographs of the living room, family room, dining room, all bedrooms, kitchen, bathrooms, and all finished and unfinished basement areas.4Fannie Mae. Effective Date for Main Living Area Photographs in Appraisals
- Photographs of each comparable property used in the analysis.
- A floor plan sketch showing exterior dimensions, each floor’s layout, and the calculated gross living area.
- A street map locating the subject and all comparable sales.
The appraiser must visually inspect all accessible areas but isn’t responsible for hidden conditions behind walls or under finished surfaces.1Fannie Mae. Property Condition and Quality of Construction of the Improvements Crawl spaces and attics fall inside that requirement to the extent they’re reasonably reachable. Nobody expects the appraiser to move insulation or open sealed panels.
How Comparable Sales Are Chosen and Adjusted
The opinion of value hinges on comparable-sale selection, and Fannie Mae has clear preferences. Sales from within the same neighborhood or subdivision are the best indicators because they share the subject’s location characteristics.5Fannie Mae. Comparable Sales The guidelines don’t mandate a distance radius, but the appraiser must report the exact straight-line distance and direction to each comp.
Three closed sales is the minimum. Ideally these closed within the past 12 months, though Fannie Mae acknowledges the best comparables aren’t always the most recent.5Fannie Mae. Comparable Sales Additional sales or active listings can be added to show market trends. Rural properties get more flexibility: when few nearby sales exist, the appraiser can reach farther, provided they explain why those are the best available indicators.
New subdivisions and recently converted condo projects have tighter rules. At least one comp must come from inside the project and at least one from outside, with the third from either. Resales inside the project are preferred over builder sales when available.5Fannie Mae. Comparable Sales
When a comparable differs from the subject in size, features, or condition, the appraiser adds dollar adjustments reflecting what a typical buyer would pay for the difference. One common misconception: Fannie Mae does not set percentage caps on adjustments. There is no official 15% net or 25% gross threshold. The guidelines state explicitly that the number or size of adjustments alone cannot determine whether a comparable is acceptable. What matters is whether the adjustments are reasonable and supported by market data.6Fannie Mae. Adjustments to Comparable Sales Underwriters still scrutinize appraisals where heavy adjustments suggest a poor comp match, so appraisers generally try to pick closer comps rather than fix a poor selection with large adjustments.
How Long the Appraisal Stays Valid
An appraisal has an expiration date. The effective date must fall within 12 months of the note and mortgage date. If it’s more than four months old but still inside that 12-month window, the appraiser must perform an update before closing. Past 12 months, the appraisal has expired entirely and a new one is required.7Fannie Mae. Appraisal Age and Use Requirements
Desktop appraisals have a shorter shelf life. If the effective date is more than four months from the note date, a new appraisal is required rather than an update.7Fannie Mae. Appraisal Age and Use Requirements If your closing gets delayed, watch those dates. A four-month-old appraisal is fine, but a day past and you’ll pay for an update or start over.
When You Can Skip the Traditional Appraisal
Not every transaction needs a full appraisal. Fannie Mae’s Value Acceptance program, sometimes called an appraisal waiver, uses the Desktop Underwriter system to compare the property against its database of prior valuations. When the system has high confidence in the estimated value, the lender can skip the traditional appraisal.8Fannie Mae. Value Acceptance
Value Acceptance is available for one-unit properties including condos, on principal residences, second homes, and investment property refinances. It is not available for two-to-four-unit properties, co-ops, manufactured homes, new construction, properties valued at $1 million or more, or manually underwritten loans. The offer expires after four months.8Fannie Mae. Value Acceptance
A middle option, Value Acceptance + Property Data, skips the licensed appraiser but sends a data collector to the home. That person captures interior and exterior measurements, photos, and condition observations on a handheld device and uploads everything for verification.9Fannie Mae. Value Acceptance + Property Data Both approaches cut time and cost, but you can’t request either one. Desktop Underwriter decides based on the loan’s risk profile.
Fannie Mae also allows a full desktop appraisal on Form 1004 Desktop, where the appraiser performs a complete analysis without visiting the property. They work from MLS data, public records, tax assessments, and information supplied by the homeowner or a third party, including virtual tours, digital photos, and machine-generated floor plans. When data comes from someone with a financial interest in the transaction, the appraiser must verify it against a disinterested source before relying on it.10Fannie Mae. Desktop Appraisals
Rules That Only Apply to Certain Property Types
Condominiums
Condo appraisals use Form 1073, which evaluates the individual unit and the project as a whole.3Fannie Mae Selling Guide. Appraisal Report Forms and Exhibits The appraiser reviews the HOA’s finances, insurance, and any pending litigation. Projects where more than 35% of total space is allocated to commercial use are ineligible.11Fannie Mae. Ineligible Projects For investment-property loans in established projects, at least 50% of units must be owned or conveyed to principal-residence or second-home buyers.12Fannie Mae. Full Review Process
Two-to-Four-Unit Properties
Multi-unit properties use Form 1025, the Small Residential Income Property Appraisal Report.3Fannie Mae Selling Guide. Appraisal Report Forms and Exhibits The form requires an analysis of actual and potential rental income for each unit, and each unit needs its own condition assessment and rent comparison. That’s part of why multi-unit appraisals cost significantly more than single-family reports.
Manufactured Homes
Manufactured homes face some of the strictest rules. The home must be at least 12 feet wide, contain at least 400 square feet of above-grade finished area, and be permanently attached to a foundation according to the manufacturer’s specifications. It must be legally classified as real property, not personal property, and comply with Federal Manufactured Home Construction and Safety Standards established June 15, 1976. Anything built before that date is ineligible. The appraisal uses Form 1004C and must include photos of the HUD Data Plate or Certification Label.13Fannie Mae Selling Guide. Special Property Eligibility and Underwriting Considerations: Factory-Built Housing
Accessory Dwelling Units
Fannie Mae allows one accessory dwelling unit on a primary one-unit property, but not on two-to-four-unit properties. The ADU must be smaller than the main dwelling and have its own entrance, kitchen (with cabinets, countertop, sink, and a stove or stove hookup), sleeping area, and bathroom. A hotplate or microwave doesn’t count as a stove. If the only way to reach the ADU is through the primary dwelling with no expectation of privacy, Fannie Mae doesn’t recognize it as an ADU.14Fannie Mae. Special Property Eligibility Considerations
Zoning matters. If current zoning permits the ADU, you’re fine. If zoning prohibits ADUs, the property can still be eligible as long as the lender confirms the ADU won’t jeopardize future insurance claims and the appraisal handles the zoning situation properly.14Fannie Mae. Special Property Eligibility Considerations
Solar Panels
Solar treatment turns entirely on whether the panels are owned or leased. Owned panels can contribute to appraised value, and the appraiser addresses any value impact in the improvements section.14Fannie Mae. Special Property Eligibility Considerations If the panels were separately financed and that financing is still outstanding, they cannot add value unless the financing terms prevent the lender from repossessing them if you default.
Leased panels, or panels under a power purchase agreement, get no value credit at all. They can’t be included in appraised value or LTV calculations. The property must also keep access to conventional electric power meeting community standards, and the lease has to make the panel owner responsible for damage from installation, malfunction, or removal.14Fannie Mae. Special Property Eligibility Considerations If you’re buying a home with leased solar, treat the panels as invisible to the appraisal.
Appraiser Independence and Prohibited Practices
Nobody involved in loan origination is allowed to influence an appraiser’s conclusions. Fannie Mae’s Appraiser Independence Requirements prohibit coercion, intimidation, bribery, and less obvious pressure such as conditioning payment on hitting a target value, sharing a desired value range before the assignment, or letting a loan officer pick the appraiser from an approved list.15Fannie Mae. Appraiser Independence Requirements
Lenders can’t withhold future business from an appraiser who delivers a low value, can’t promise bonuses for favorable results, and can’t suggest a scope of work that conflicts with what the appraiser determines is necessary. Providing comparable sales to the appraiser before engagement is prohibited, though sending the purchase contract is allowed.15Fannie Mae. Appraiser Independence Requirements If your agent or loan officer offers to “talk to the appraiser” about the value, that’s a red flag.
Fannie Mae also bars appraisers from basing any part of their valuation on the race, sex, color, religion, disability, national origin, or familial status of the current or prospective occupants, or of people in the surrounding area. Specific subjective language that has historically served as a proxy for bias is prohibited:16Fannie Mae. Unacceptable Appraisal Practices
- “Pride of ownership” or “lack of pride of ownership”
- “Good neighborhood” or “poor neighborhood”
- “Desirable” or “undesirable” location
- Any reference to crime or crime rates
Unsupported assumptions and personal opinions about neighborhood factors are also prohibited. A report containing this language or discriminatory reasoning is unacceptable for delivery to Fannie Mae.16Fannie Mae. Unacceptable Appraisal Practices
Challenging a Low Appraisal
If the value comes in low, you can request a Reconsideration of Value through your lender. The ROV gives you one chance to show the appraiser missed something or made an error, so build the request carefully. You submit it to the lender, who routes it to the appraiser through standardized channels.17Fannie Mae. Appraisal Quality Matters
The strongest ROVs rest on concrete evidence, not disagreement with the conclusion. Useful supporting material includes:
- Up to three alternative comparable sales the appraiser didn’t use, with address, sale price, date, lot size, square footage, and an explanation of why each fits better.
- Documentation of errors in property characteristics, such as wrong square footage, bedroom count, or lot size, backed by a prior appraisal, county assessor records, or a measured sketch.
- Receipts, photographs, or contractor invoices for improvements the appraiser undervalued or missed.
- Evidence that a comp the appraiser used was a distressed sale, had undisclosed concessions, or differs more from your home than the report reflects.
Fannie Mae doesn’t set a specific deadline for lenders to respond, but lenders must establish their own turn-time expectations as part of their ROV policies.17Fannie Mae. Appraisal Quality Matters Most residential lenders limit borrowers to one ROV per appraisal, and it must be submitted before closing. If the ROV doesn’t change the value, your options are to renegotiate the price, bring extra cash to closing, or walk away if your contract has an appraisal contingency.
Your Right to a Copy and What It Costs
Federal law requires your lender to give you a copy of every appraisal or written valuation connected to your loan application at no charge. For loans secured by a first lien on a dwelling, the lender must deliver the copy promptly upon completion or at least three business days before closing, whichever comes first.18Consumer Financial Protection Bureau. Regulation B 1002.14 – Rules on Providing Appraisals and Other Valuations The lender must notify you of this right within three business days of receiving your application. If the loan doesn’t close, you’re still entitled to the appraisal within 30 days of the lender deciding the transaction won’t close. You can waive the three-day advance delivery, but not the right to the report itself.
Appraisal fees are paid by the borrower and vary with property type, location, and complexity. A standard single-family appraisal generally runs $300 to $500, higher in expensive markets or for complex properties. Two-to-four-unit reports typically cost $600 to $1,000 because each unit needs its own analysis. Condo appraisals usually fall in the $300 to $500 range, and manufactured homes may cost more because of the additional documentation. When repairs trigger a subject-to appraisal, the follow-up completion inspection adds another $125 to $260. You’ll pay the appraisal fee whether or not the loan closes, which is worth remembering before committing to a property with obvious condition problems.