Appraisal Requirements for HUD 223(f) Loans

Getting an appraisal is one of the most important steps in the HUD 223f loan process. While a typical real estate appraiser is more concerned with a property’s market value,  FHA appraisers have a slightly broader goal. According to HUD Handbook 4150.2, general guidelines for property appraisal require appraisers to:

• Note deficiencies in the property. This includes making sure the property meets HUD’s minimum health and safety standards.

• Protect HUD's interest in the property by determining market value.

The analysis follows HUD’s General Acceptability Criteria to make sure the property meets the FHA’s minimum property requirements. FHA property appraisers visually inspect the entire property, both the interior and exterior. The appraiser also analyzes the site, including topography and soil. In addition, the appraiser reviews:

• The property’s physical improvements

• The remaining economic life of building improvements

• Code enforcement issues

• General acceptability criteria for FHA multifamily loans

If a HUD-approved appraiser cites certain issues like safety concerns that could threaten residents, those must be corrected before the loan goes forward. Until red-flag issues are resolved, the HUD loan is placed on hold.

Further Reading: 

For additional details, see HUD’s full guide on property analysis.