Fannie Mae appraisal requirements govern every conventional loan sold on the secondary mortgage market: the appraiser must use the standardized form that matches your property type, rate the home’s condition and construction quality on fixed scales, support the value with recent comparable sales, and deliver the report within set age limits. Some loans qualify to skip the traditional appraisal entirely through a waiver or a lighter inspection, and borrowers have one formal path to challenge a low value. Getting any of these pieces wrong at the appraisal stage can delay your closing, shrink your loan, or kill the deal.
Which Appraisal Form Applies to Your Property
The form is the first thing a lender checks, and using the wrong one is a common reason files come back for correction. Fannie Mae matches a specific form to each property type.1Fannie Mae. Appraisal Report Forms and Exhibits
- Form 1004 is the default for one-unit homes and properties in planned unit developments. It calls for an interior and exterior inspection.
- Form 1025 covers two- to four-unit properties, including duplexes and triplexes in PUD, condo, or co-op projects.
- Form 1073 is for condo units. Detached condos can sometimes be appraised on Form 1004, but the appraiser has to include information about homeowners association fees and project maintenance.
- Form 1004C covers manufactured homes, including MH Advantage properties.
- Form 2090 is used for co-op units.
- Form 1004D updates an aging appraisal or confirms repairs were completed.
Desktop and hybrid versions of Forms 1004 and 1073 exist for transactions that don’t require a traditional in-person inspection.
What the Appraiser Must Include
Every report comes with a footprint sketch showing exterior dimensions measured to the nearest tenth of a foot, used to calculate gross living area. A floor plan replaces the simple footprint whenever the layout is atypical or functionally obsolete. A street map locates the subject property and each comparable sale.
Photographs are mandatory. The appraiser documents the front, back, and a street scene of the subject, plus the front of each comparable. Interior shots must cover the kitchen, every bathroom, main living areas, all bedrooms, and any below-grade space, along with examples of physical deterioration or recent updates.
Condition and Quality Ratings
Every appraiser assigns two ratings: a condition rating (C1 through C6) and a quality-of-construction rating (Q1 through Q6). These are the scales lenders use to decide whether the property is even eligible for the loan.
The C1–C6 Condition Scale
- C1: brand-new construction, never occupied, zero physical depreciation.
- C2: no deferred maintenance; nearly all components are new or recently rehabilitated.
- C3: well-maintained with limited wear; some components may be updated but not every major system.
- C4: minor deferred maintenance and normal deterioration, requiring only minimal cosmetic or mechanical repairs.
- C5: obvious deferred maintenance requiring significant repairs; still livable, but overall usefulness is diminished.
- C6: substantial damage or deferred maintenance severe enough to affect safety, soundness, or structural integrity.
Properties rated C1 through C5 are eligible in as-is condition. A C6 rating makes the property ineligible for sale to Fannie Mae, so any safety or structural deficiency has to be repaired and the condition upgraded to at least C5 before the loan can close.2Fannie Mae. Property Condition and Quality of Construction of the Improvements
The Q1–Q6 Quality Scale
Quality ratings describe the materials and craftsmanship of the structure, not its current state of repair. A Q1 home is a unique architect-designed residence with high-end finishes; a Q6 reflects basic, economy-grade construction. The quality rating stays relatively fixed over the life of the property because it describes how the home was built, not how well it has been kept up.
When the Appraisal is Completed Subject to Repairs
If the appraiser spots problems affecting safety or structural integrity, the appraisal is completed “subject to” the completion of specific repairs. The condition and quality ratings in that report reflect the home as it will be after the work is done, not as it stands at inspection. When the appraiser isn’t qualified to evaluate the needed work, the report notes the deficiency and is completed subject to a satisfactory inspection by a qualified professional such as a structural engineer or licensed contractor.
Evidence of infestation, dampness, or abnormal settlement triggers the same requirement. The lender then has to obtain proof the condition was corrected or get a professional report confirming no threat of structural damage. Once repairs are done, the lender documents completion in the loan file. A Form 1004D re-inspection by the appraiser isn’t always required; the lender decides based on the circumstances.
Comparable Sales and Adjustments
The heart of any appraisal is the sales comparison approach. Fannie Mae requires a minimum of three closed sales, generally within the past 12 months, though the Selling Guide acknowledges the best comparables aren’t always the most recent ones.3Fannie Mae. Selling Guide B4-1.3-08 – Comparable Sales
Comparables should share similar physical and legal characteristics with the subject home. The appraiser reports the straight-line distance in miles to each comparable with a directional indicator. Fannie Mae doesn’t set a specific distance cap, but the appraiser has to justify reaching further afield when closer sales exist. Suburban and urban appraisals that rely heavily on distant comparables tend to get extra scrutiny because geographic differences introduce more uncertainty.
How Adjustments Work
Appraisers adjust each comparable to account for differences in square footage, bedroom count, lot size, amenities, and other features. If a comparable sold for $400,000 but has an extra bathroom the subject lacks, the appraiser adjusts that sale price downward so it better reflects what the subject would sell for. The goal is to isolate the subject’s value by neutralizing every meaningful difference.
Market condition adjustments (sometimes called time adjustments) account for price changes between the comparable’s contract date and the appraisal’s effective date. In a rising market, a sale from eight months ago might be adjusted upward; in a declining market, it could be adjusted downward. Each comparable gets its own market condition adjustment based on when it went under contract, rather than one blanket percentage.4Fannie Mae. Market Condition Adjustments
One point that surprises many borrowers: Fannie Mae does not set caps on net or gross adjustment percentages. The Selling Guide explicitly states that the number or dollar amount of adjustments alone should not determine whether a comparable is acceptable.5Fannie Mae. Adjustments to Comparable Sales Large adjustments still invite more lender scrutiny, so appraisers try to pick comparables that keep adjustments small.
How Long the Appraisal Stays Valid
An appraisal doesn’t last forever. The property must be appraised within the 12 months before the date of the note and mortgage. If the original appraisal is between four and 12 months old at closing, the appraiser has to complete an update on Form 1004D. That update includes an exterior inspection and a review of current market data to determine whether value has declined.6Fannie Mae. Appraisal Age and Use Requirements
If the update shows a decline, the lender must order an entirely new appraisal. If value held steady or increased, the original report still works. Once the appraisal passes the 12-month mark, no update can save it. A new appraisal is required.
Desktop appraisals follow a tighter timeline. If the effective date of a desktop appraisal is more than four months from the note date, a new appraisal is required. There is no update option for desktop reports.
When No Appraisal Is Required
Not every transaction needs a traditional appraisal with an in-person inspection. Fannie Mae offers several alternatives depending on the risk profile of the loan, and knowing which one your transaction qualifies for can save hundreds of dollars and days of waiting.
Value Acceptance (the Appraisal Waiver)
Value acceptance is Fannie Mae’s appraisal waiver. When a loan casefile is submitted through Desktop Underwriter and gets an Approve/Eligible recommendation, DU may issue a value acceptance offer. Accept it and no appraisal is required. The offer is available for one-unit properties including condos, principal residences, second homes, and certain investment property refinances.7Fannie Mae. Value Acceptance
Several transaction types are ineligible: two- to four-unit properties, co-ops, manufactured homes, new construction, renovation loans, leasehold properties, and any transaction where the purchase price or estimated value is $1,000,000 or more. The lender also can’t use value acceptance if it obtains an appraisal for the transaction. Order one, you own it. The value acceptance offer expires four months from the DU submission date.
A rural high-needs variation is limited to purchase transactions on one-unit principal residences where the borrower’s income doesn’t exceed 100 percent of area median income, and it permits LTV ratios up to 97 percent.
Value Acceptance Plus Property Data
This option skips the appraisal but requires a trained, vetted property data collector to visit the home, photograph it, and submit interior and exterior observations through Fannie Mae’s Property Data API. The collector isn’t an appraiser; they observe and report using a device that captures data in compliance with the Uniform Property Dataset and ANSI measurement standards. The lender vets the collector annually through background checks and makes sure the person has no financial interest in the loan or property.8Fannie Mae. Value Acceptance + Property Data
If the data collection reveals safety, soundness, or structural issues, the lender may need a report from a qualified professional to confirm eligibility or verify repairs before selling the loan to Fannie Mae. The data collection stays valid for 12 months from the collection date.
Desktop and Hybrid Appraisals
A desktop appraisal is completed by a licensed appraiser using tax records, MLS data, and other secondary sources rather than visiting the property. It’s reported on Form 1004 Desktop and must include a floor plan. Manufactured homes, condos, and co-ops aren’t eligible.
A hybrid appraisal adds physical verification. A trained third party, which could be a real estate agent, insurance inspector, or another appraiser, collects interior and exterior property data and sends it to the appraiser, who completes the report on Form 1004 Hybrid or Form 1073 Hybrid. Hybrid appraisals are available for transactions that don’t qualify for value acceptance or lack reliable prior observations of the property.
Accessory Dwelling Units
Accessory dwelling units, whether guest houses, converted garages, or basement apartments, come with their own appraisal rules. An ADU is any additional living area with cooking, sleeping, and bathroom facilities on the same parcel as the primary home. The key distinction is whether the property qualifies as a one-unit home with an ADU or as a multi-unit property, which changes the eligible loan programs and the required form.9Fannie Mae. Improvements Section of the Appraisal Report
The square footage of an ADU is not included in the primary dwelling’s above-grade living area. The appraiser reports and adjusts for it on a separate line in the sales comparison grid, describes it, analyzes its effect on value and marketability, and backs that analysis with at least one comparable sale that has a similar unit.
An ADU that doesn’t comply with local zoning can still be eligible if the lender confirms the non-compliant use won’t jeopardize insurance claims, the use conforms to the surrounding neighborhood, the property is appraised based on current use, and the report includes at least two comparable sales with the same non-compliant zoning use. The appraisal must clearly state that the improvements represent an illegal use.
Solar Panels
Whether solar panels help or complicate your appraisal depends entirely on whether you own them or lease them.
Owned panels, paid for in cash, included in the purchase price, or financed and fully repaid, follow standard appraisal and insurance requirements, and the appraiser can attribute contributory value to them. If the panels were separately financed and haven’t been repaid, they can’t contribute to the property value unless the financing documents confirm the panels can’t be repossessed on default. When ownership is unclear, the lender must run a UCC personal-property search to confirm no other lender claims the panels as collateral before any value can be assigned.10Fannie Mae. Special Property Eligibility Considerations
Leased panels and power purchase agreements (PPAs) are treated very differently. The panels’ value can’t be included in the appraised value or factored into LTV calculations. The monthly lease payment generally counts toward the borrower’s debt-to-income ratio, though PPA payments calculated solely on energy produced may be excluded. The lease or PPA must also include specific protective provisions: the equipment owner is responsible for any installation or malfunction damage, agrees not to be named on the homeowner’s insurance policy, and gives the lender options in a foreclosure, including the right to terminate the agreement and require panel removal.
If the Appraisal Comes in Low
A low appraisal is one of the most stressful moments in a home purchase. When the appraised value falls below the contract price, the lender can only lend against the lower figure. You renegotiate, cover the gap in cash, or walk away. One formal tool exists before you reach that point: a reconsideration of value (ROV).
Every lender must have an ROV process. You get one borrower-initiated ROV per appraisal, and the lender has to give you a written disclosure explaining the process when it delivers your appraisal report. To submit an ROV, you provide your name, the property address, the appraisal’s effective date, and the appraiser’s name, along with a description of what you believe is unsupported or inaccurate. You can submit up to five additional comparable properties with MLS listing numbers and an explanation of why that data supports a higher value.11Fannie Mae. Appraisal Quality Matters
The lender completes its own appraisal review before sending your request to the appraiser. An underwriter or appraisal subject matter expert validates that your ROV has enough detail, then relays your data and concerns to the appraiser using standardized language that complies with Appraiser Independence Requirements. The appraiser reviews the information and decides whether to revise the report. Whatever the outcome, the lender remains responsible for ensuring the final value opinion is reliable and adequately supported.
Appraiser Independence
Fannie Mae’s Appraiser Independence Requirements prevent anyone involved in the loan from influencing the appraiser’s value conclusion. Loan officers, real estate agents, and borrowers can’t pressure, coerce, or steer an appraiser toward a predetermined number. The lender must adopt written policies, train staff on the rules, and have disciplinary procedures in place.12Fannie Mae. Appraiser Selection Criteria
If a lender has reason to believe an appraiser is violating applicable laws or engaging in unethical conduct, it must refer the matter to the state appraiser licensing agency or other regulatory body. Violations can implicate the Truth in Lending Act, Regulation Z, and the Uniform Standards of Professional Appraisal Practice.13Fannie Mae. Appraiser Independence Requirements The appraiser also must hold a valid state license or certification and have local market knowledge of the area.
Typical Appraisal Costs
Fannie Mae doesn’t set appraisal fees, and costs vary by location, property type, and complexity. A standard single-family home appraisal generally runs between $300 and $600 in most markets, though fees in high-cost areas or for unusual properties can exceed $1,000. Multi-unit appraisals and manufactured home inspections tend to cost more because of the extra analysis. Desktop and hybrid appraisals, when available, usually cost less than a full in-person inspection. The fee is typically collected from the borrower at closing or when the appraisal is ordered, and it’s not refundable if the loan falls through.