Selling Guide

Published April 07, 2021

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What is required for postponed improvements on existing properties?

Requirements for Existing Construction

Lenders must review the appraisal to ensure that the property does not have minor conditions or deferred maintenance items that affect the safety, soundness, or structural integrity of the subject property. See B4-1.3-06, Property Condition and Quality of Construction of the Improvements, for information concerning property condition and quality of construction ratings.

The tables below provide requirements related to existing properties that have physical deficiencies, minor conditions, or deferred maintenance items that may or may not affect the safety, soundness, or structural integrity of the property.

Requirements for Existing Construction

When There are Minor Conditions or Deferred Maintenance Items that Do Not Affect the Safety, Soundness, or Structural Integrity of the Property

  If the appraiser reports the existence of minor conditions or deferred maintenance items that do not affect the safety, soundness, or structural integrity of the property, the appraiser may complete the appraisal “as is” and these items must be reflected in the appraiser’s opinion of value. Minor conditions and deferred maintenance items include, but are not limited to, worn floor finishes or carpet, minor plumbing leaks, holes in window screens, or cracked window glass and are typically due to normal wear and tear. The lender is not required to ensure that the borrower has had this work completed prior to delivery of the loan to Fannie Mae.
  If there are minor conditions or deferred maintenance items to be remedied or completed after closing, the lender may escrow for these items at its own discretion and still deliver the loan to Fannie Mae prior to the release of the escrow as long as the lender can ensure that these items do not affect the safety, soundness, or structural integrity of the property.

 

Lenders must ensure the escrow account is a custodial account that satisfies Fannie Mae’s criteria for custodial accounts and depositories as outlines in Servicing Guide topic A4-1-02, Establishing Custodial Bank Accounts.

 

Requirements for Existing Construction

When There are Incomplete Items or Conditions that Do Affect the Safety, Soundness, or Structural Integrity of the Property

  When there are incomplete items or conditions that do affect the safety, soundness, or structural integrity of the property, the property must be appraised subject to completion of the specific alterations or repairs. These items can include a partially completed addition or renovation, or physical deficiencies that could affect the safety, soundness, or structural integrity of the improvements, including but not limited to, cracks or settlement in the foundation, water seepage, active roof leaks, curled or cupped roof shingles, or inadequate electrical service or plumbing fixtures. In such cases, the lender must obtain a certificate of completion from the appraiser before the mortgage is delivered to Fannie Mae. Although the original appraiser should complete any required certification of completion, the lender may use a substitute appraiser.

See B4-1.2-02, Appraisal Age and Use Requirements, for certifications completed by substitute appraisers.

  The certification does not need to include photographs of the property unless those that accompanied the original appraisal report are no longer representative of the completed property.

 

For additional information, see B4-1.2-03, Requirements for Postponed Improvements.

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