Physical Deficiencies That Affect Safety, Soundness, or Structural Integrity of the Subject Property

The appraisal report must identify and describe physical deficiencies that could affect a property’s safety, soundness, or structural integrity. If the appraiser has identified any of these deficiencies, the property must be appraised "subject to" completion of the specific repairs or alterations. In these instances, the property condition and quality ratings must reflect the condition and quality of the property based on the hypothetical condition that the repairs or alterations have been completed.

If the appraiser is not qualified to evaluate the alterations or repairs, the appraisal must note the deficiencies and be completed "subject to" a satisfactory inspection by a qualified professional. The underwriter must decide if the inspection(s) is required and whether the property meets eligibility requirements. If the property does not meet eligibility requirements, the underwriter must provide satisfactory evidence that the condition has been corrected or repaired prior to loan closing. In this case, the appraiser is required to review the professionally prepared report, re-inspect the property, and provide a Form 1004D.