What REALTORS ®
Need to Know about the
Uniform Appraisal Dataset from
Fannie Mae & Freddie Mac
Part 4 – 2 HMG, LLC © | The Uniform Appraisal Dataset from Fannie Mae and Freddie Mac
For Further Information on Additional UAD Webinar Education
Northern Michigan University, Continuing Education – Appraisal
1401 Presque Isle Avenue, Marquette, MI 49855
Telephone: 906-227-1514 or Fax: 906-227-2103
Email: [email protected]
Website: http://webb.nmu.edu/Appraiser/index.shtml
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Email: [email protected]
About the Developers & Instructors
Richard Heyn, SRA and Dawn Molitor-Gennrich, SRA are the webinar's
developers and instructors. Both Rich and Dawn are AQB Certified USPAP
instructors and Certified Distance Education Instructors. Dawn is a former
member of the Appraisal Standards Board.
For Educational and Informational Purposes Only
� Suggestions or recommendations presented in this webinar are not
warranted or guaranteed by the developer(s), presenter(s), or
sponsoring organization.
� None of the parties involved in the development, presentation or
sponsorship of the webinar intend any information presented herein
to:
□ constitute an absolute solution to similar types of problems
encountered by real estate professionals. The presentation merely
provides guidance.
□ constitute, or be a substitute for, legal advice or assistance from an
attorney. If legal assistance is necessary, please consult your
personal attorney or other competent legal counsel.
Copyright © 2011 by Heyn, Molitor-Gennrich, LLC, Baroda, MI. All rights reserved.
HMG, LLC © | The Uniform Appraisal Dataset from Fannie Mae and Freddie Mac Part 4 – 3
Introduction
I. The GSEs and Loan Origination
Prior to September of 2011, Fannie Mae and Freddie Mac, also known as the GSEs (for
Government Sponsored Enterprises) received almost no information about the subject property
before they purchased a loan. They relied on a lender to represent and warrant that if the
lender sold a loan to either entity, everything in the loan file from the loan application to the
credit report and on to the appraisal report would be consistent with the requirements outlined
in their respective Selling Guides.
If the loan defaulted, or “turned nonperforming” the GSE would then take a hard look at the loan
file to see if the lender had complied with GSE requirements. If not, they would force the lender
to repurchase the loan. Unfortunately for the GSEs and taxpayers, these policies were
ineffective during times of high levels of defaults.
Realizing that voluntary lender compliance was ineffective, Fannie Mae and Freddie Mac, in
2009, began laying the foundation for a new lending initiative called the Uniform Mortgage Data
Program, or UMDP. This new program would require lenders to electronically deliver loan
documents and appraisal reports prior to the GSEs purchasing the loan from the lender.
Subjecting the loan file to an automated review gives the GSEs the ability to either decline the
purchase or require the lender or appraiser to correct deficiencies prior to acceptance.
Reviewing an appraisal prior to or at the time of purchase may seem like an obvious element in
risk management, but as stated earlier, the GSEs have historically relied on the lender’s ability
to properly underwrite the loan and the lender’s signed representations and warranties, or
“reps and warrants.” Given the volume of loans processed by the GSEs, delays caused by the
simple logistical issues of getting a copy of the appraisal report and reviewing it prior to
purchase were considered too time consuming, therefore, unacceptable. Consequently, the
Uniform Mortgage Data Program instituted two elements to facilitate the electronic review of
appraisals – the Uniform Appraisal Dataset and the Uniform Collateral Data Portal.
II. The UMDP, UAD, and UCDP
The Uniform Mortgage Data Program (UMDP) initiative has a number of components that are
referred to by using different acronyms, so first let’s sort out the “alphabet soup” and then focus
on the two components that have the most significant ramifications regarding appraisal reports.
The general “umbrella” that covers the initiative is known as the Uniform Mortgage Data
Program, or UMDP. Under the UMDP are two requirements that specifically deal with the
appraisal report: the Uniform Appraisal Dataset (UAD) and the Uniform Collateral Data Portal
(UCDP). The objective of the Uniform Appraisal Dataset is to bring more standardization and
uniformity to the data reported by appraisers. The Uniform Collateral Data Portal is the
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“electronic mailbox” that allows the GSEs to receive the appraisal reports transmitted to them
by lenders.
In addition to Fannie Mae and Freddie Mac, two other government agencies– the Federal
Housing Administration (FHA) and Veteran’s Administration (VA) require appraisers to submit
their appraisal reports using the standardized responses of the UAD, although FHA and VA do
not use the UCDP. Consequently, the overwhelming majority of appraisal reports are not
written in the new “language” of the UAD.
III. The Uniform Collateral Data Portal
The Uniform Collateral Data Portal is a means of electronically collecting the appraisal report
data, but it requires a standardized data file format. Once in this format the lender can deliver
to the Enterprises the appraisal report data electronically through the UCDP prior to loan
delivery. So the lender will provide the GSEs a PDF version of the appraisal report and an
electronic version of the appraisal report using a standardized data file format through a
uniform portal. This will allow the GSEs to ensure that the appraisal report "passes" the Rules
Set, which includes the Guide requirements for completeness and standardized responses.
IV. The Uniform Appraisal Dataset
Essentially, the UAD is a series of common appraisal data definitions and standardized
responses that must be used in UAD-complaint appraisal report forms. In the words of the
GSEs, the objective is “to enhance data quality and promote consistency in appraisal data.” In
layperson’s terms, it simply means that if a computer is going to “read” the report, the
responses must be from a list of items that the computer can understand. For example, prior to
the UAD, if an appraiser were reporting on a property that had a view of a golf course, he or she
might state “Golf Course” or “Fairway” in the data field for View. Under UAD requirements,
however, appraisers now pick from a defined list in their forms preparation software that has a
line item for Golf Course view. When the report prints to PDF or to paper, “Glfvw” appears on
the report.
In addition to dozens of new abbreviations and acronyms that appraisers must use, the GSEs
implemented new rating systems for condition and quality. These new rating systems are of
particular interest to REALTORS ® as loans involving properties with certain ratings are
ineligible for delivery to the GSEs.
For ease of adoption for lenders, vendors and appraisers the GSEs did not making significant
changes to the actual appraisal report forms. Instead, the primary focus is on developing clear
appraisal definitions (datasets) that will produce standardized responses to key data fields in
the report. These data fields are the ones that the GSEs have determined to be material to
understanding the value and for which the data, in their opinion, had previously been
insufficient.
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A. The four UAD-Compliant Appraisal Report Forms
The only forms to which the uniform dataset applies are:
� Uniform Residential Appraisal Report (Form 1004/70) and Exterior-Only Inspection
Residential Appraisal Report (Form 2055/2055)
� Individual Condominium Unit Appraisal Report (Form 1073/465) and Exterior-
Only Inspection Individual Condominium Unit Appraisal Report (Form 1075/466)
The GSEs will also accept other appraisal report forms completed using the uniform dataset
standards, where applicable. In other words, if an appraiser uses the standardized
responses on GSE report forms other than the ones identified above it will be acceptable to
the GSEs.
V. UAD Specifications Guide and Other UAD Resources
The Uniform Appraisal Dataset Specification: Appendix D was released by the GSEs on December
16, 2010. While not published specifically or exclusively for appraisers, it serves as a guide for
appraisers wanting to comply with the UAD. It is an essential document for REALTORS ® who
want to be able to “decipher” the cryptic abbreviations now found in appraisal reports and
properly understand the condition and quality ratings. The URL for this publication at the time
this handbook was developed is:
https://www.efanniemae.com/sf/lqi/umdp/pdf/uadappendixdfieldreqs.pdf
The GSEs occasionally distribute FAQs on the UAD and UMDP. These can be obtained by
visiting Fannie Mae’s webite at:
www.efanniemae.com
At the homepage, click on “appraisers” and when the next page appears, click on “UAD Page”
which will take you to a page with a number of UAD resources, including any recent FAQs.
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VI. Significant URAR Data Fields
This handout reviews significant data fields in the order that they appear on the appraisal
report, using the URAR form as the example. Not every data field is addressed, only those
pertinent to REALTORS®.
A. Contract section
The UAD calls for the appraiser to identify the “sale type” using a predefined list created by the
GSEs. This requirement applies to the comparables as well, so don’t be surprised if you receive
more calls or emails from appraisers than occurred in the past regarding the circumstances
behind the sale, for example an appraiser may ask if the transaction is a short sale, and what
were the short-sale processing fees.
Fannie Mae’s and Freddie Mac’s guidelines require a lender to provide the appraiser with a
copy of the sales contract in a purchase transaction. The guidelines clearly state that “the
lender must provide the appraiser with a copy of the complete, ratified sales contract and all
addenda for the property that is to be appraised…” Additionally, it is considered unacceptable
practice for an appraiser to fail to analyze and report on the sales contract. While these
requirements have been in effect for some time, it was difficult for the GSEs to enforce it prior to
the existence of UCDP.
While GSE guidelines specifically address the lender, any party to the transaction can provide
the sales contract to the appraiser; it does not have to be only the lender or the lender’s agent.
If the appraiser is not supplied with a copy of the contract and checks the “did not analyze”
checkbox, the UCDP will notify the lender of a “hard stop” and the lender will have to put the
transaction on hold until the appraiser is supplied with and reviews the contract. The file will
then need to be resubmitted to the UCDP.
The obvious point here for REALTORS ® is to simply make sure the appraiser has received a
copy of the sales contract to avoid UCDP problems that will delay the timely processing of the
transaction.
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B. Site section
1. View - Requirement
The data field for “View” is a good example of what the GSEs refer to as a
“repurposed” data field – i.e., a data field that has been assigned new and additional
functions by the GSEs. The way that appraisers respond to this data field is a two-
step process.
a. Step 1: Overall View Rating
The first step is for the appraiser to rate the view to describe the overall effect
on value and marketability. Only one selection is allowed.
b. Step 2: View Factor
In the second step of the process the appraiser reports the “View Factor” from a
list of GSE approved, abbreviated entries. At least one, but not more than two,
view factors can be selected. If the property has more than two view factors, the
appraiser can include additional description in the comments of the Site Section
or on an addendum.
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� Other. If a view factor not on the list materially affects the value of the
subject property, the appraiser can enter a description of the view factor
associated with the property in the allowed space under “View.” The
description will print on the appraisal report (the word “Other” will not).
c. Competing views
Properties that have both “Beneficial” and “Adverse” views are not reported as
“Neutral.” A good view and a bad view, per the GSEs, do not “offset” or
“neutralize” each other. The word “neutral” in this context means a view that is
neither beneficial nor adverse regarding the value and marketability of the
property. Basically, a “neutral” view has no effect on the value. Therefore, if the
appraiser reported the view as “neutral” it would be considered misleading.
The appraiser is to report which of the view factors would be most influential,
given the market are and price range. The design of the dwelling and manner in
which it's oriented on the site will likely be a factor. If the design and
orientation take advantage of the beneficial view and minimize the adverse
view, it is likely that the good view will a greater influence on the value.
Likewise, if the design and orientation emphasize the adverse view it will likely
affect the value negatively.
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C. Improvement section
The GSEs have instituted some significant new requirements regarding the data field for
property condition. The new requirements call for a rating system wherein you select an overall
condition rating of “C1” through “C6.” As stated earlier, this new rating system is important to
REALTORS® because properties with condition ratings of C5 or C6 are may be considered to be
unacceptable by the GSEs.
1. Labeling condition – Is it relative or absolute?
It is important to understand the perspective from which to view the condition of the subject
property – relative or absolute.
Illustration: Is condition relative or absolute?
Question: Does the condition of other neighborhood properties affect how an
appraiser should report the condition of the subject property?
Suppose the subject dwelling has a worn-out roof, but most of the other neighborhood
properties have worn out roofs as well. Should the “condition” of the subject, therefore,
be reported differently than if the other homes in the neighborhood mostly had roofs
in good condition?
Answer: No. A property’s condition is not somehow elevated from poor to average just
because it’s surrounded by homes that are in similar condition.
2. Condition Rating Definitions: C1 through C6
C1 Rating
The improvements have been very recently constructed and have not
previously been occupied. The entire structure and all components are new
and the dwelling features no physical depreciation.* (Bold added for
emphasis.)
*Note: Newly constructed improvements that feature recycled materials and/or
components can be considered new dwellings provided that the dwelling is
placed on a 100% new foundation and the recycled materials and the recycled
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components have been rehabilitated/re-manufactured into like-new condition.
Recently constructed improvements that have not been previously occupied are
not considered “new” if they have any significant physical depreciation (i.e.,
newly constructed dwellings that have been vacant for an extended period of
time without adequate maintenance or upkeep).
The key words in the definition are “recently constructed,” “not previously occupied,” “new,”
and “no physical depreciation.” This rating is for improvements where all the components are
new (including the substructure and superstructure) and have suffered no physical
deterioration.
The definition allows for the use of recycled materials and components in “like-new” condition.
However, a C1 improvement must have a new foundation (substructure); otherwise, an
improvement cannot be categorized as C1.
Furthermore, even if a dwelling has never been occupied, to qualify for the C1 rating, it must not
display any physical deterioration. Consider the case of a “new” dwelling that has been vacant
for an extended period of time without adequate maintenance or upkeep.
C2 Rating
The improvements feature no deferred maintenance, little or no physical
depreciation, and require no repairs. Virtually all building components are new
or have been recently repaired, refinished, or rehabilitated. All outdated
components and finishes have been updated and/or replaced with
components that meet current standards. Dwellings in this category either
are almost new or have been recently completely renovated and are similar in
condition to new construction. (Bold added for emphasis.)
The key words in the definition are “no deferred maintenance,” “updated,” “renovated,” “almost
new,” and “meets current standards.” This rating applies to improvements with no deferred
maintenance (no repairs are needed) and little or no physical deterioration. Virtually all
components (short-lived items) must be new or recently repaired, refinished, and/or
rehabilitated. All outdated components and finishes must be updated and/or replaced with
components that meet current standards.
This rating applies to homes that are nearly new or older homes that essentially have been
gutted and renovated, but with the substructure and superstructure remaining intact. In other
words, C2 homes don’t quite meet the C1 category because they are not 100% new.
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C3 Rating
The improvements are well maintained and feature limited physical
depreciation due to normal wear and tear. Some components, but not every
major building component, may be updated or recently rehabilitated. The
structure has been well maintained. (Bold added for emphasis.)
The key words in the definition are “well maintained,” “limited physical depreciation,”
“updated,” and “rehabilitated.” Some components, but not every building component (including
the substructure, superstructure, and short-lived items), may be updated or recently
rehabilitated. The improvement, however, is not new or nearly new.
C4 Rating
The improvements feature some minor deferred maintenance and physical
deterioration due to normal wear and tear. The dwelling has been adequately
maintained and requires only minimal repairs to building
components/mechanical systems and cosmetic repairs. All major building
components have been adequately maintained and are functionally adequate.
(Bold added for emphasis.)
The key words in the definition are “adequately maintained,” “minimal repairs,” “cosmetic
repairs,” and “functionally adequate.” All building components (including the substructure,
superstructure, and short-lived items) have been, at best, adequately maintained and is
functionally adequate, but not updated or recently rehabilitated.
C5 Rating
The improvements feature obvious deferred maintenance and are in need of
some significant repairs. Some building components need repairs,
rehabilitation, or updating. The functional utility and overall livability is
somewhat diminished due to condition, but the dwelling remains useable and
functional as a residence. (Bold added for emphasis.)
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The key words in the definition are “obvious deferred maintenance,” “some significant repairs,”
“livability…diminished,” and “useable.” This rating is for improvements that feature obvious
deferred maintenance and are in need of some significant repairs. Due to the improvement’s
condition, the functional utility and overall livability are diminished; although the dwelling
remains useable.
C6 Rating
The improvements have substantial damage or deferred maintenance with
deficiencies or defects that are severe enough to affect the safety,
soundness, or structural integrity of the improvements. The improvements
are in need of substantial repairs and rehabilitation, including many or most
major components. (Bold added for emphasis.)
The key words in the definition are “deficiencies or defects,” “affect…safety, soundness, or
structural integrity,” and “substantial repairs.” Due to the improvement’s condition, the safety,
soundness, or structural integrity is at risk, as are the occupants.
3. Condition Rating – Quick reference guide
Ratings Quick Reference Definitions
C1 New; never before occupied and on a new foundation.
C2 Almost new condition; could be a few years old but still in
near-perfect condition or of any age if it has been totally
renovated and is in near-new condition, but is not on a
new foundation.
C3 Well maintained and displays little (if anything) in the
way of deferred maintenance.
C4 Adequately maintained and needs only minimal repairs.
C5 Livable condition but shows obvious signs of deferred
maintenance and needs repairs, rehabilitation, or
updating.
C6 Severe deficiencies or defects in structural integrity that
could affect the safety of the occupants.
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4. Properties that make loans ineligible for delivery to the GSEs
SPECIAL NOTE ON C5 RATING:
Fannie Mae will purchase loans that involve C5 properties while Freddie Mac will not.
Also, many lenders simply do not make loans on properties that are not C4 or better.
Remember that a C4 rating is an improvement, which is “adequately maintained”
meaning it only needs “minimal repairs,” and is “functionally adequate.” Any
improvement inferior to a C4 rating is either a C5 or C6.
SPECIAL NOTE ON C6 RATING:
The C6 rating is a “special case” and triggers significant loan and appraisal requirements
that must be fulfilled before the loan is saleable to either GSE; therefore, expect a C6
rating to cause delays in processing a loan and obtaining financing. Whereas the other
ratings are based on an “overall” condition that considers all aspects of the dwelling, the
C6 rating is an “either/or” rating. Either a dwelling does have or does not have issues
related to safety, soundness or structural integrity. In other words, if any portion of a
dwelling is affected by safety, soundness or structural integrity, the entire dwelling must
be rated a C6 overall. Conversely, even if a dwelling is in “rough shape” if issues
affecting safety, soundness or structural integrity are not present, the dwelling would be
rated a C5 or better, but not a C6 rating.
5. Recommendations for REALTORS ® regarding C5 and C6 properties.
• Be realistic about the property’s condition with yourself and the buyer. Waiting for the
appraiser to state obvious inadequacies will only forestall inevitable conflicts.
• Be familiar with the policies of lenders you use regarding C5 and C6 properties.
• Sellers should be informed that they will either have to make repairs or wait for the
right buyer, such as an all-cash investor who will accept the property as-is.
• Buyers should be informed that property’s purchased in as-is condition will require
their own funds to be expended for repairs or alterations.
• Recognize that the need to “match” certain properties with certain buyers takes on a
greater importance with C5 and C6 dwellings.
6. Kitchens & Bathrooms – Updated, Not Updated, Remodeled? – Requirement
After the appraiser rates the condition, he or she will, in their forms preparation
software, be asked an additional set of “string questions” using “lists” that are not on the
appraisal report form. This is another example of what the GSEs refer to as a
“repurposed” data field.
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Question: Any Material Work. The appraiser mist first answer if the property has had
any material work done to the kitchen(s) or bathroom(s) in the prior 15 years.
1. If the answer is “No.” The text entry, “No updates in the prior 15 years” is
automatically generated by the software.
2. If the answer is “Yes.” The appraiser will select responses from “lists” for both
the kitchen(s) and bathroom(s) regarding the updating or remodeling of those
improvements.
a. Question: Level of Work Completed. The first selection from the kitchen and
bath lists will relate to the level of work completed. The appraiser indicates
whether the room has not been updated, has been updated, or has been
remodeled. There can only be one entry for level of work for the kitchen and
bathroom, even if there is more than one kitchen or bathroom.
b. Question: Timeframe Identified. The appraiser then selects the timeframe
within which the majority of the updating or remodeling took place. The list is:
� Less than one year
� One to five years ago
� Six to ten years ago
� Eleven to fifteen years ago and
� Timeframe unknown
Definitions of Updated, Not Updated, and Remodeled – Requirement
Updated
The area of the home has been modified to meet current market
expectations. These modifications are limited in terms of both scope and
cost.
An updated area of the home should have an improved look and feel, or
functional utility. Changes that constitute updates include refurbishment and/or
replacing components to meet existing market expectations. Updates do not
include significant alterations to the existing structure.
Implicit in the definition is that the market expectations are measured within the
context of the neighborhood and submarket’s price range. In other words, purchasers of
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modest, less expensive homes are not expecting fixtures and finish materials not
typically found in that price range.
The definition states that the updated area should have an “improved” look and feel, or
functional utility. Updates do not include significant alterations.
Not Updated
Little or no updating or modernization. This description includes, but is
not limited to, new homes.
Residential properties of fifteen years of age or less often reflect an original
condition with no updating, if no major components have been replaced or
updated. Those over fifteen years of age are also considered not updated if the
appliances, fixtures, and finishes are predominantly dated. An area that is “Not
Updated” may still be well maintained and fully functional, and this rating does
not necessarily imply deferred maintenance or physical/functional
deterioration.
A kitchen or bathroom that is labeled not updated means just that – not updated; no
material work has been done to those improvements. The definition is not restricted to
improvements more or less than 15 years of age. While it may seem counterintuitive,
this category includes new homes (new construction) as well as the “perfectly
preserved” home – the one with all the original flooring, wallpaper, cabinets, counters,
fixtures, etc., in mint condition.
Remodeling
Significant finish and/or structural changes have been made that increase
utility and appeal through complete replacement and/or expansion.
A remodeled area reflects fundamental changes that include multiple alterations.
These alterations may include some or all of the following: replacement of a
major component (cabinet(s), bathtub, or bathroom tile), relocation of
plumbing/gas fixtures/appliances, significant structural alterations (relocating
walls, and/or the addition of square footage). This would include a complete
gutting and rebuild.
Remodeling is considered more extensive than updating. The definition uses the terms
“fundamental changes” and “multiple alterations” followed by examples that include
replacement of major building components, relocation of fixtures and appliances,
significant alterations, and increasing the size of the dwelling.
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Do not confuse updating or remodeling with overall condition. It’s important to
remember that this discussion about updating and remodeling applies only the kitchens
and baths and is distinct from the overall condition.
Just because an improvement had a recently updated or remodeled kitchen or bathroom
does not automatically result in a condition rating of C2 or C3. The condition rating is an
“overall” rating of the improvement, not a rating of a portion of the home. So if the same
home had otherwise been harshly treated or had underlying structural issues, its
“overall” condition rating could be a C4, C5 or even C6.
Conversely, a new or nearly new home may be in very good condition and receive a C1
or C2 “overall” rating but still be identified in the appraisal report as having a kitchen
and bath that is “not updated.”
D. Sales Comparison Approach Section
As with page one of the appraisal report, this handout will comment only on the data fields on
page two that are of significance to REALTORS®
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The same reporting requirements apply to both the subject and comparable property
characteristics. In other words, if the UAD calls for given abbreviations to be used to
describe the subject, the same abbreviations apply to the comparable properties. This
precludes the use of terms like “similar,” inferior,” or “superior” to describe
comparables as well as terms like “average” or “typical.”
1. Sales or Financing Concessions
This two-line field is used to report sale type, financing type, and any concessions
involved in each comparable sale.
a. Sale Type
Line 1 is used to indicate the sale type for each comparable. Valid sale types
include:
b. Type of Financing
Line 2 is used to report the type of financing applicable to the comparable and
the amount of concessions, if any.
Valid financing abbreviations include:
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2. Type of Transaction/Date of Sale/Time
For each comparable, the appraiser will first identify the status type or type of
transaction from this list.
a. Active status
Active status is referring to an active listing, which is identified with the entire
word “Active” rather than an abbreviation.
The following abbreviations identify the date status type.
b. Contract, Expired, or Withdrawn status
Properties under contract (pending) and listings that have either expired or
been withdrawn are identified with a single letter on the Date of Sale/Time grid
line as c, e, or w, respectively, followed by the contract, expired, or withdrawn
date (MM/YY format).
c. Settled sale status
“Settled sales” are reported with both the settlement date (closed date) and the
contract date (meeting of the minds).
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3. Location
The location data field in the Sales Comparison Approach Section grid is much like
the View field on Page 1 and requires the use of abbreviations.
a. Step 1 – Location Rating
First, the appraiser will identify one location rating only for the subject and each
comparable from one of the following choices:
b. Step 2 – Location Factor
Second, the appraiser will choose at least one but no more than two entries from
the “list” that best identify the location factor(s) for the subject and each
comparable.
If a location factor not on the list materially affected the sale price of the
comparable or if additional location factors beyond two choices materially
affected the sale price of the comparable, the appraiser must provide a
description of such location factor(s) in the comments or in an addendum. The
subject’s location rating and factor(s) are to be addressed on Page 1 in the
Neighborhood and/or Site Sections and correspond with the rating/factor(s)
identified in the sales comparison grid.
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c. Special note on Location
The Location data field in the sales comparison grid is only to be used to adjust
for differences between properties in the same neighborhood. If an appraiser
uses comparables from different neighborhoods and adjustments are
warranted, the appraiser is to report those adjustments on one of the three
blank lines at the bottom of the grid.
4. Quality
The new Q1–Q6 ratings may be the most challenging issue of the entire Uniform
Appraisal Dataset. Appraisers are required to rate the quality level of the subject
dwelling on a scale with Q1 being the best quality and Q6 the worst quality. The intent
of the GSEs was to establish a meaningful rating system that actually speaks to the
quality of the dwelling. In a sampling of almost 300,000 appraisal reports, the GSEs
found that 44% referred to quality in terms of building materials like “Frame,” “Brick,”
“Aluminum,” etc., and that another 48% were rated as “Average.” Less than one-half of
one percent was rated “Fair” and virtually none were of poor quality.
Note: The quality ratings in the UAD were developed independently and are proprietary
to the GSEs.1
a. Basic obligations in reporting a quality rating
The new quality ratings require the appraiser to select only one quality rating for
the subject property and each comparable property. The quality rating must
represent the overall quality of the property.
Illustration: Is quality relative or absolute?
Question: Does the quality of other neighborhood properties affect how the appraiser
should report the quality of the subject property and each comparable property?
Answer: No. It’s the same as the condition issue. The quality of a structure is based on
facts that are unaffected by the quality of surrounding properties.
1 Fannie Mae & Freddie Mac UAD FAQs, Question 42, dated 4/12/2011.
URL: https://www.efanniemae.com/sf/lqi/umdp/pdf/uadfaqs.pdf
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b. Quality rating definitions: Q1 through Q6
Q1 Rating
Dwellings with this quality rating are usually unique structures that are
individually designed by an architect for a specified user. Such residences
typically are constructed from detailed architectural plans and specifications
and feature an exceptionally high level of workmanship and exceptionally
high-grade materials throughout the interior and exterior of the structure.
The design features exceptionally high-quality exterior refinements and
ornamentation, and exceptionally high-quality interior refinements. The
workmanship, materials, and finishes throughout the dwelling are of
exceptionally high quality. (Bold added for emphasis.)
The key word in the definition is “exceptional.” According to the GSEs, less than one
percent of the residences in the nation qualify for this rating.
Q2 Rating
Dwellings with this quality rating are often custom designed for construction
on an individual property owner’s site. However, dwellings in this quality
grade are also found in high-quality tract developments featuring residences
constructed from individual plans or from highly modified or upgraded plans.
The design features detailed, high-quality exterior ornamentation, high-
quality interior refinements, and detail. The workmanship, materials, and
finishes throughout the dwelling are generally of high or very high-quality.
(Bold added for emphasis.)
The key word in the definition is “high-quality.” This rating often applies to plans
designed by an architect for a home to be built on an individual property owner’s
site or in a housing development specifically for custom-built homes.
Although, a dwelling’s quality is totally a function of its building components,
regardless of its location, the appraisal principle of conformity states that value is
created and sustained when the characteristics of a property conform to the
demands of its market.2 Therefore, it would not be uncommon (but not a
requirement of the definition) to find homes of this quality congregated in a custom-
built housing development.
2 The Dictionary of Real Estate Appraisal, 5
th ed. Chicago: Appraisal Institute, 2010.
Part 4 – 22 HMG, LLC © | The Uniform Appraisal Dataset from Fannie Mae and Freddie Mac
Q3 Rating
Dwellings with this quality rating are residences of higher quality built from
individual or readily available designer plans in above-standard residential
tract developments or on an individual property owner’s site. The design
includes significant exterior ornamentation and interiors that are well
finished. The workmanship exceeds acceptable standards and many
materials and finishes throughout the dwelling have been upgraded from
“stock” standards. (Bold added for emphasis.)
The key words in the definition are “higher quality,” “above-standard,” “exceeds
standards,” and “upgraded.” So it appears that one might describe a Q3
improvement as “better than standard.” The improvement was likely built from
available or modified architectural or designer plans but less likely a custom set of
plans. Again, as with the C3 rating, it would not be uncommon (but not required) to
find homes of this quality congregated in a semi-custom housing development.
Q4 Rating
Dwellings with this quality rating meet or exceed the requirements of
applicable building codes. Standard or modified standard building plans
are utilized and the design includes adequate fenestration and some
exterior ornamentation and interior refinements. Materials, workmanship,
finish, and equipment are of stock or builder grade and may feature some
upgrades. (Bold added for emphasis.)
The key words in this definition are “meet,” “standard,” “adequate,” and “builder
grade.” So it appears that a Q4 improvement might be described as a “builder-plan”
commonly designed by a builder’s draftsperson (and not an architect) consisting of
standard finishes with some design and upgrade features. Unlike the prior ratings, it
would be common (but not required) to find homes of similar quality congregated in
a mass-produced tract housing development.
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Q5 Rating
Dwellings with this quality rating feature economy of construction and basic
functionality as main considerations. Such dwellings feature a plain design
using readily available or basic floor plans featuring minimal fenestration and
basic finishes with minimal exterior ornamentation and limited interior detail.
These dwellings meet minimum building codes and are constructed with
inexpensive, stock materials with limited refinements and upgrades. (Bold
added for emphasis.)
The key words in this definition are “economy,” “minimal,” “inexpensive,” and
“stock.” This rating applies to improvements with a plain exterior design and basic
floor plan with a minimal amount of finish and fit and no or limited upgrades. The
term “minimum code compliance” applies to Q5 dwellings.
Q6 Rating
Dwellings with this quality rating are of basic quality and lower cost; some
may not be suitable for year-round occupancy. Such dwellings are often
built with simple plans or without plans, often utilizing the lowest quality
building materials. Such dwellings are often built or expanded by persons
who are professionally unskilled or possess only minimal construction
skills. Electrical, plumbing, and other mechanical systems and equipment
may be minimal or non-existent. Older dwellings may feature one or more
substandard or non-conforming additions to the original structure. (Bold
added for emphasis.)
The key words in this definition are “basic,” “lower cost,” “simple,” “unskilled,” and
“substandard.” Such improvements might be commonly found in cottages, cabins,
etc., that are used as vacation homes. The descriptor for this rating might read, “One
step above camping!”
Note: A mortgage loan secured by a property with a quality rating of Q1 – Q5 is
eligible to be sold to the GSEs. However, a property with a Q6 rating generally does
not meet the GSE’s property eligibility requirements.
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Quality Rating – Quick reference grid
Ratings Quick Reference Definitions
Q1 Exceptional quality improvements; few will qualify.
Q2 High quality or very high quality but not exceptional quality.
Q3 Above-standard, higher quality finish with noteworthy
ornamentation and/or design.
Q4 Builder-grade dwelling that meets code and may have some
upgrades.
Q5 Economy structure with basic functionality.
Q6 Built of the lowest possible quality, often constructed in a non-
professional manner and substandard in functionality.
5. Basement
The UAD has some very specific requirements for reporting basement
characteristics and features. These same requirements apply to both the subject
and the comparables.
a. Size, Finish, and Access
On Line 1 the appraiser is to report three items and three items only:
1. Total size of the basement area in square feet (sf),
2. Finished area in square feet (sf, not as a percentage), and
3. Type of basement access available, which can be expressed in one of three
standardized ways:
a. Walk-out – abbreviation: wo,
b. Walk-up – abbreviation: wu or,
c. Interior only – abbreviation: in.
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b. Room Count and Type of Rooms
On Line 2 the appraiser is to report:
1. Number of each type of finished room and
2. Identify the room type using the following abbreviations:
a. Recreation Room – abbreviation: rr
b. Bedroom – abbreviation: br
c. Bathroom – abbreviation: ba. Separate a full bath from a half bath
with a period (.)
d. Other Rooms – abbreviation: o
3. Apply the same method used for the subject to determine the standardized
bathroom count:
a. A three-quarter bath is to be counted as a full bath in all cases.
b. Quarter baths (baths that feature only a toilet) are not to be included
in the bathroom count.
c. The number of full and half baths must be entered, separated by a
period. The full bath count is represented to the left of the period.
The half bath count is represented to the right of the period.
4. If there are no rooms in the finished space, the second line will be blank.
Note: If information about the basement is not readily available in the normal
course of business, the appraisal report must include an explanation that each figure
used, such as square feet, percentage finished, or room count, is an “estimate” and
identify the source for that information. If the information is “unknown,” then
describe what due diligence efforts were undertaken but unsuccessful in obtaining
this information.
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One of the last things we want to cover in this handout relates to how to understand
the reporting of the appraiser’s adjustments in the sales comparison grid. Not the
amount of adjustment, but why some lines on the grid have adjustments, some have
zeros and yet others are just left blank by the appraiser.
When reviewing a sales comparison grid, at first, it may seem as if some of the
entries are incorrect, or at least inconsistent. Some of the adjustment fields are
blank, while zeros have been entered in others. Some comparables have the same
description as the subject and are not adjusted, while other comparables have the
same description but are adjusted.
Odd as this may seem, all these entries are accurately disclosed and consistent with
the UAD requirements stated in Appendix D.
If the subject and comparable descriptions differ but no adjustment is warranted the
UAD calls for the appraiser to enter a zero, indicating that even though there is a
physical difference, the appraiser determined no adjustment was warranted. For
example, the descriptions and adjustments on the “View” line identify that the
subject has a beneficial mountain and water view, yet there was no adjustment
between the subject and Comparable 1, which had a beneficial mountain and golf
course view. Why? The appraiser in this case determined that both views were
equally valuable and that no adjustment was warranted. So the appraiser entered a
zero to indicate that he or she had considered the difference.
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CLOSING REMINDER: Earlier in this handout, we provided a link to “Appendix D”, from
the GSEs, which is your “go-to” guide for understanding reports written in the
“language” of the UAD. The URL for Appendix D also appears, along with several others,
on the following page. At the end of Appendix D, is an Exhibit Section. It contains the
condition and quality definitions as well as a list of the UAD abbreviations created by
the GSEs that can be and are encouraged to be used by the appraiser when completing a
UAD report. Appraisers sometimes refer to this list as the “decoder ring” for the UAD.
We encourage you to have this list handy when you are reading an appraisal report
that’s been prepared in compliance with the UAD.
Part 4 – 28 HMG, LLC © | The Uniform Appraisal Dataset from Fannie Mae and Freddie Mac
UMDP, UAD, UCDP, AND MISMO-XML URL LINKS
Topic Fannie Mae Link (Freddie Mac distributed the same information; only the
Fannie Mae URL is provided)
Uniform
Mortgage
Data Program
https://www.efanniemae.com/sf/lqi/umdp/
https://www.efanniemae.com/sf/lqi/umdp/pdf/umdpupdate121610.pdf
Uniform
Appraisal
Dataset
Overview
https://www.efanniemae.com/is/appraisers/index.jsp?from=hp
https://www.efanniemae.com/sf/lqi/umdp/uad/index.jsp
https://www.efanniemae.com/sf/lqi/umdp/pdf/uadoverview.pdf
Uniform
Collateral
Data Portal
https://www.efanniemae.com/sf/technology/commitloandel/ucdp/index.jsp
https://www.efanniemae.com/sf/technology/commitloandel/ucdp/pdf/ucdpover
view.pdf
MISMO http://www.mismo.org/
UAD Field
Specifications:
Appendix D
https://www.efanniemae.com/sf/lqi/umdp/pdf/uadappendixdfieldreqs.pdf
Uniform Loan
Delivery
Dataset
https://www.efanniemae.com/sf/lqi/umdp/pdf/ulddoverview.pdf
https://www.efanniemae.com/sf/lqi/umdp/pdf/ulddfaqs.pdf
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