The Uniform Residential Appraisal Report, filed on Fannie Mae Form 1004 (also known as Freddie Mac Form 70), is the standard document a lender uses to determine a home’s market value before approving a mortgage. A licensed appraiser fills it out after inspecting the property in person and analyzing recent sales of similar homes nearby. The number on that form controls how much the lender will finance, so if it comes in below your purchase price, it can force a renegotiation or kill the deal. Any loan sold to Fannie Mae or Freddie Mac must use this format and comply with the Uniform Appraisal Dataset specifications.
What the Form Contains
The top of Form 1004 identifies the property: street address, legal description from the deed, tax parcel number, and current owner of record. These come from public tax records and title documents and anchor the report to a specific legal parcel.
The neighborhood section characterizes the surrounding area — urban, suburban, or rural; property values increasing, stable, or declining; how quickly homes are selling relative to supply; and the predominant price range and age of homes. Identical houses in different neighborhoods sell for different prices, and lenders need to see that the appraiser accounted for that.
Most of the valuation work happens in the sales comparison section. The appraiser selects recently sold properties (comps) that share location, size, room count, condition, and style with your home. Fannie Mae requires at least three closed comparable sales, drawn from the same market area as the subject property whenever possible.1Fannie Mae. Comparable Sales When the appraiser reaches outside the immediate neighborhood, the report has to explain why.
Each comp appears in a side-by-side grid. The appraiser lists the sale price, sale date, and key features next to those of the subject property, then applies dollar adjustments for every meaningful difference. If a comp has an extra bathroom your home lacks, value comes off that comp’s sale price. If your lot is bigger, a positive adjustment goes on. Fannie Mae requires the final indicated value to fall within the range of those adjusted comp prices. Fannie Mae does not impose specific caps on net or gross adjustments; the adjustments have to reflect how the market actually reacts to differences between properties.2Fannie Mae. Adjustments to Comparable Sales
For each comp, the appraiser reports the straight-line distance to your property in miles with a directional indicator, such as “1.75 miles NW.”1Fannie Mae. Comparable Sales A comp five miles away in a different school district raises more questions than one down the same road.
Form 1004 also includes a cost approach section, where the appraiser estimates what it would cost to rebuild the home from scratch, subtracts depreciation, and adds the land value. This carries less weight than the sales comparison for most existing homes but serves as a cross-check, particularly for newer construction or properties with few comparable sales.
The final pages hold the appraiser’s certifications and limiting conditions. The appraiser signs off that they personally inspected the property, have no financial interest in the transaction, and performed the analysis in compliance with the Uniform Standards of Professional Appraisal Practice (USPAP).3U.S. Department of the Interior. Licensure Requirements and Appraisal Standards The form also records the appraiser’s state license number, credential expiration date, inspection date, and effective date of the valuation.
Why the Square Footage May Not Match the Listing
Fannie Mae requires full compliance with the ANSI Z765 standard for measuring square footage.4Fannie Mae. Standardizing Property Measuring Guidelines A few details catch homeowners off guard:
- If there’s an opening to the floor below, such as a double-height entryway, that open space does not count toward the upper floor’s square footage.
- Finished rooms must have a ceiling height of at least seven feet. In rooms with sloping ceilings, at least half the finished area must meet the seven-foot minimum, and no portion can fall below five feet.
- Above-grade finished space attached to the home but lacking direct interior access is reported separately, not combined with the main living area.
The appraiser’s square footage may not match what the listing agent advertised or what the county tax records show. The ANSI measurement is what the lender uses.
Who Orders the Appraisal
Federal rules and Fannie Mae policy keep the people who originate a loan separate from the people who appraise the property. Loan officers, mortgage brokers, real estate agents, and anyone else paid a commission tied to closing are classified as “restricted parties” and may not order the appraisal, select the appraiser, or have any substantive communication with the appraiser about valuation.5Fannie Mae. Appraiser Independence Requirements The lender selects and pays the appraiser, not the borrower and not the real estate agent.
Lenders must also keep their sales and production staff structurally separated from their appraisal functions. Employees involved in sales cannot be involved in appraisal operations.5Fannie Mae. Appraiser Independence Requirements Many lenders satisfy this by using an appraisal management company as an intermediary. That’s why your loan officer can’t just call “their” appraiser.
Your Right to Receive a Copy
Under the Equal Credit Opportunity Act’s implementing regulation, your lender must give you a copy of the appraisal report promptly upon completion, or at least three business days before closing, whichever comes first. The lender must also notify you of this right in writing within three business days of receiving your loan application. You can waive the three-day pre-closing delivery window, but only in writing and at least three days before the closing date. If the loan falls through, the lender still owes you a copy within 30 days of determining the transaction won’t close.6Consumer Financial Protection Bureau. 1002.14 Rules on Providing Appraisals and Other Valuations
Read it when you get it. Errors in square footage, room counts, or condition ratings affect the appraised value directly, and catching them early gives you time to act.
How Long the Appraisal Stays Valid
For conventional loans sold to Fannie Mae, the appraisal’s effective date must be within 12 months of the note and mortgage date. If the effective date is more than four months old but less than 12 months, the lender must obtain an appraisal update on Form 1004D, where the appraiser re-inspects the exterior and reviews current market data to confirm the property hasn’t declined in value. If it has, a completely new appraisal is required.7Fannie Mae. Appraisal Age and Use Requirements Desktop appraisals expire faster: a new appraisal is required once the original is more than four months old.
FHA loans follow a different clock. The FHA sets an initial validity period of 180 days from the effective date, and the agency eliminated the optional 30-day extension that previously existed.8U.S. Department of Housing and Urban Development. FHA Implements Revised Appraisal Validity Period Guidance and Appraisal Logging Changes in FHA Connection If your closing is tight, confirm with your lender that the appraisal won’t expire first.
What to Do if the Appraisal Comes in Low
When the appraised value falls below the purchase price, the lender will finance only against the lower number, leaving a gap the buyer has to cover or negotiate away. You have several options.
Request a Reconsideration of Value
Both Fannie Mae and FHA have formal processes for challenging an appraisal you believe is inaccurate. Fannie Mae calls it a Reconsideration of Value (ROV), and the lender must have an ROV process in place and disclose it to you when they deliver the appraisal.9Fannie Mae. Appraisal Quality Matters You get one ROV per appraisal, and you cannot submit one after the loan closes.
An ROV request must include your name, the property address, the effective date of the appraisal, the appraiser’s name, and the date of your request. You also need to identify specific problems (incorrect square footage, a missed renovation, comps that aren’t truly comparable) and supply supporting data such as recent closed sales (not active listings), corrections to property details, or documentation of upgrades.9Fannie Mae. Appraisal Quality Matters “We need a higher number to make the deal work” is not a valid basis. The appraiser must correct factual errors even if they don’t change the value, and the lender must work with the appraiser to resolve material deficiencies.10Fannie Mae. Reconsideration of Value (ROV)
For FHA loans, borrowers who believe an appraisal contains material deficiencies or potential fair housing violations can initiate an ROV through their lender. If the original appraiser can’t or won’t resolve the issue, the lender’s underwriter may order a second appraisal at the lender’s expense.11U.S. Department of Housing and Urban Development. Mortgagee Letter 2024-07 – Appraisal Review and Reconsideration of Value Updates If you suspect discrimination played a role in the valuation, you can file a complaint using HUD Form 903.1 or call the Fair Housing Complaint Hotline at 1-800-669-9777.
Other Options When the Value Falls Short
If the ROV doesn’t produce a higher value, the deal isn’t necessarily dead. Common alternatives:
- Ask the seller to lower the purchase price to match the appraisal, or meet somewhere in the middle.
- Increase your down payment to cover the gap in cash.
- Use your appraisal contingency, if your purchase contract includes one, to walk away without losing your earnest money.
- Request seller concessions on closing costs, effectively narrowing the gap.
Walking away is always an option, but without an appraisal contingency in your contract, you risk forfeiting your earnest money. Experienced buyers’ agents push for that contingency language before the contract is signed, because by the time the appraisal comes back low, it’s too late to add one.