FHA Site Condo Appraisal (Form 1073): HUD Submission and Commitment

An FHA site condo appraisal is completed on Fannie Mae Form 1073 (Freddie Mac Form 465), the Individual Condominium Unit Appraisal Report, even though the home itself is a detached single-family house. The site condo designation lets the property skip full FHA condominium project approval, but the lender still has to assemble specific documentation, the appraiser still has to confirm the property meets HUD’s definition, and the finished report still has to travel through HUD’s Electronic Appraisal Delivery portal before underwriting can move.¹

What Counts as a Site Condominium

HUD Handbook 4000.1 recognizes two configurations. One is a project made up entirely of single-family detached dwellings with no shared garages or other attached buildings. The other is a project of detached or horizontally attached townhouse-style dwellings where each unit includes both the structure and the land beneath it, contains no manufactured housing, and is recorded under a condominium declaration.¹

Physical layout is only half of it. Insurance and maintenance of the dwelling must be the unit owner’s sole responsibility, with landscaping the one permitted exception. If the HOA handles the roof, exterior paint, or structural upkeep out of common dues, the property does not qualify as a site condo and would need full condo project approval instead.¹ HUD’s older Condominium Project Approval and Processing Guide states the same principle a bit more precisely: the unit must consist of the entire structure plus the site and airspace, none of which can be classified as common or limited common area, and any association assessments should cover only amenities outside the individual lot.²

Properties that meet these tests do not require Condominium Project Approval or Single-Unit Approval, which is the reason site condos close on a shorter timeline than standard condo loans.

Why Form 1073 and Not Form 1004

The most frequent error on a site condo file is appraising it on Fannie Mae Form 1004, the standard single-family report. Handbook 4000.1 requires the Individual Condominium Unit Appraisal Report — Form 1073 / Form 465 — because the legal ownership structure is still a condominium regardless of how the home looks on the lot.¹ Using Form 1004 can trigger a rejection when the file reaches HUD’s system.

Form 1073 has a project information section that Form 1004 does not. The appraiser records the project’s legal name, total unit count, the split between owner-occupied and rental units, and a description of the common elements. On a site condo those common elements tend to be minimal: shared roads, signage, maybe a small park. The report has to make clear that the individual owner is responsible for the dwelling, the roof, and the surrounding land.

The report must also confirm that every unit in the project satisfies the site condominium definition. That doesn’t mean inspecting each house. It means documenting, usually through the CC&Rs and a drive-through of the development, that the project consists entirely of detached dwellings or qualifying townhouses with no shared structural elements.¹

Comparable Sales

Because site condos are physically detached, the strongest comparables are other detached homes, whether other site condos in the same development, similar houses in nearby subdivisions, or a mix. When the comps are fee-simple detached homes, the appraiser adjusts for the condominium ownership structure, since association dues and any use restrictions can affect marketability. Reaching outside the project for comparables is normal and expected in newer developments or projects with thin sales history.

Documents the Lender Assembles

Before the appraiser starts, the lender pulls together a specific file. Handbook 4000.1 calls for:¹

A condominium rider to the mortgage or deed of trust, acknowledging the condo form of ownership and the borrower’s association obligations.
A completed Form 1073 appraisal showing that every unit in the project meets the site condo definition.
A hazard insurance certificate or full policy covering the entire dwelling. Because the owner carries all maintenance responsibility, this is typically an HO-3 homeowner’s policy rather than the HO-6 walls-in policy used on traditional condos.
Flood insurance when the property sits in a Special Flood Hazard Area, with a certificate or policy copy covering the whole dwelling.

The appraiser will also want the recorded condominium declaration and the CC&Rs to confirm the detached nature of the units and the maintenance split, plus a plat map or site plan to establish the legal boundaries of the individual lot. Having the project’s legal name and total unit count in hand early saves back-and-forth during report writing.

Property Inspection and Minimum Property Requirements

The appraiser inspects the home in person and measures it against FHA’s Minimum Property Requirements, organized around safety, security, and soundness. On a site condo that means:

Roof with at least two years of remaining useful life, no missing shingles, no holes, sound flashing around chimneys and vents, and proper gutter connections.
Foundation with ground sloping away from the house and no major cracks, settling, or water pooling.
Lead-based paint scrutiny on homes built before January 1, 1978; any chipping or peeling paint must be scraped and repainted before closing.
Working heating, electrical, and plumbing systems, with no exposed wiring, proper grounding, and hot water at every fixture.
Handrails on any staircase with three or more steps, inside or out.
Ventilated crawl space or basement with no standing water, moisture damage, or termite evidence.
Year-round vehicle access to a public street, or a documented private road with proper easements.
Water testing and separation requirements when the property is on well and septic.

When the appraiser finds problems, the report is completed subject to repairs. Each item is listed with an estimated cost to cure.³ Repairs have to be finished before closing, and the original appraiser typically reinspects. This is where site condos diverge from traditional condos: any roof, siding, or exterior repair falls on the borrower or seller, because the association isn’t responsible for the dwelling.

Getting the Report to HUD

The lender first assigns an FHA case number through FHA Connection. That step validates the borrower and property, confirms an active loan application exists, and produces a unique ten-digit number that follows the property through the process.⁴

Once the appraisal is finished, the lender submits it through HUD’s Electronic Appraisal Delivery portal. All appraisals on new FHA originations go through EAD; there is no paper path. Lenders can upload reports directly (up to ten at a time), build a system integration for bulk submissions, or authorize a third party such as an appraisal management company to submit on their behalf.⁵

After EAD accepts the file, it pushes data to FHA Connection and pre-populates the Appraisal Logging screen.⁵ The lender opens Appraisal Logging in FHA Connection, enters the case number, and reviews the pre-filled fields. Appraisal Logging must be completed before the lender can submit an insurance application.⁶

The Conditional Commitment

When underwriting reviews the appraisal and supporting file, the outcome is captured on Form HUD-92800.5B, the Conditional Commitment / Direct Endorsement Statement of Appraised Value. This form sets the maximum mortgage amount and lists every condition that has to be met before HUD will endorse the loan for mortgage insurance.⁷

Typical conditions include completion of appraiser-noted repairs, termite clearance, local code compliance, health authority sign-off on well or septic, and flood insurance documentation. On a site condo the underwriter also confirms the condominium rider is executed and the hazard insurance certificate covers the entire dwelling.⁷ The commitment expires 180 days from the appraisal’s effective date, or one year if the lender obtains an appraisal update.

Validity and Cost

An FHA appraisal is valid for 180 days from the effective date, meaning the date the appraiser physically inspected the property. If the deal takes longer, the lender can order an appraisal update that extends validity up to one year from the original effective date. Past that point the file needs a completely new appraisal.

The fee usually runs somewhere between $300 and $700, depending on location and complexity. Site condos on the higher end are typically in rural areas where comparable sales are scarce or on well and septic systems that need extra testing. The borrower pays the fee upfront, and it isn’t refundable if the loan falls through.

When the Value Comes In Low

If the appraised value lands below the purchase price, FHA’s reconsideration of value process lets the lender ask for a second look. The underwriter, not the borrower, submits the request when relevant data existed on the inspection date but wasn’t reflected in the report, and must supply the appraiser with the supporting information, such as comparable sales that were missed.⁸

The appraiser may charge for the reconsideration, but if the missed data wasn’t the borrower’s fault, the borrower cannot be billed for that cost.⁸ A reconsideration is not a guaranteed increase. The appraiser reviews the new material and may leave the value where it was. If the value stays short, the buyer’s options are to renegotiate the price, bring additional cash to close the gap, or walk away.

1
U.S. Department of Housing and Urban Development. FHA Single Family Housing Policy Handbook 4000.1
2
U.S. Department of Housing and Urban Development. Condominium Project Approval and Processing Guide
3
U.S. Department of Housing and Urban Development. FHA Single Family Housing Appraisal Report and Data Delivery Guide
4
U.S. Department of Housing and Urban Development. Case Number Assignment
5
U.S. Department of Housing and Urban Development. Electronic Appraisal Delivery (EAD) Portal
6
U.S. Department of Housing and Urban Development. Logging an Appraisal
7
U.S. Department of Housing and Urban Development. Conditional Commitment Direct Endorsement Statement of Appraised Value
8
U.S. Department of Housing and Urban Development. Rescinding Multiple Appraisal Policy Related Mortgagee Letters