Requirements 12-2 1. Minimum Property Requirement Procedures, continued a. MPRs, continued Topic Topic Name See Page 26 Roof Covering 12-33 27 Attics 12-34 28 Crawl Space 12-35 29 Basements 12-36 30 Swimming Pools 12-37 31 Burglar Bars 12-38 32 Lead-Based Paint 12-39 33 Wood Destroying Insects/Fungus/Dry Rot 12-40 34 Radon Gas 12-42 35 Potential Environmental Problem 12-43 36 Stationary Storage Tanks 12-44 37 Mineral, Oil and Gas Reservations or Leases 12-45 38 High Voltage Electric Transmission Lines 12-46 39 High Pressure Gas and Liquid Petroleum Pipelines 12-47 40 Properties Near Airports 12-48 41 Manufactured Home Classified as Real Estate 12-49 42 Modular Homes 12-50 43 Energy Conservation and Sustainability 12-51 44 Requests for Waiver of MPR Repairs 12-52

VA Pamphlet 26-7, Revised Table of Contents v Table of Contents, Continued Chapter 11-Appraiser Requirements Overview ....................................................................................................................... 11-1 11.01 Using This Information ...................................................................................... 11-2 11.02 VA Reasonable Value ........................................................................................ 11-3 11.03 VA Appraisal Requirements .............................................................................. 11-4 11.04 Appraisal Report Contents ................................................................................. 11-6 11.05 Submission of Appraisal Reports....................................................................... 11-8 11.06 Approaches to Value .......................................................................................... 11-9 11.07 Selection and Analysis of Comparable Sales ..................................................... 11-10 11.08 Other Market Analysis Considerations .............................................................. 11-12 11.09 Minimum Property Requirements and Repairs .................................................. 11-15 11.10 Remaining Economic Life of Improvements ..................................................... 11-16 11.11 Proposed Construction ....................................................................................... 11-17 11.12 Other Property Types and Situations ................................................................. 11-19 11.13 Liquidation Appraisals ....................................................................................... 11-24 Figure 1: Liquidation Appraisal Addendum Example ................................................. 11-27 Chapter 12-Minimum Property Requirements Overview ....................................................................................................................... 13-1 12.01 MPR Variations and Exemptions....................................................................... 12-3 12.02 Proposed Construction MPRs ............................................................................ 12-4 12.03 Basic MPRs ........................................................................................................ 12-6 12.04 Shared Facilities and Utilities ............................................................................ 12-9 12.05 Access-Related Issues ........................................................................................ 12-10 12.06 Hazards and Defective Conditions ..................................................................... 12-11 12.07 Fuel Pipelines and High Voltage Electric Lines ................................................ 12-13 12.08 Individual Water Supply/Sewage Disposal Requirements ................................ 12-14 12.09 Community Water Supply/Sewage Disposal Requirements.............................. 12-16 12.10 Manufactured Homes Classified as Real Estate ................................................ 12-20 Continued on next page

-13 7. Selection and Analysis of Comparable Sales, Continued e. Location Comparable sales should be located as close to the subject as practical. Their proximity to the subject (such as three blocks north) must be described. Generally, blocks should be used in cities and miles in rural areas to locate properties. The appraiser must adequately explain any reliance on sales located either: • further from the subject than similar recent comparable sales readily available in the subject neighborhood, or • outside of the subject’s market area. Note: In some rural areas, comparable sales may be 5, 10, or 20 miles away from the subject property and still be within the subject’s immediate market area. f. Value Adjustments To be in a condition acceptable to VA, properties must meet VA’s Minimum Property Requirements (MPR) (see chapter 12). Since MPR repairs identified in the appraisal report must be completed as a condition of the report, value adjustments to the comparables are to be made as if the repairs to the subject have been accomplished. Generally, good comparables require minimal adjustment for individual feature differences and a minimal total net adjustment. The appraiser must adequately explain large adjustments. Adjustments based on some factor other than market reaction, such as builder costs for materials, project development, etc., are not generally acceptable.

Requirements 12-3 1. Minimum Property Requirement Procedures Change Date October 18, 2019 • This chapter has been revised in its entirety. a. MPRs VA has established Minimum Property Requirements (MPRs) to protect the interests of Veterans, lenders, servicers, and VA. Properties must meet these requirements prior to guaranty of the loan by VA. b. Appraisal is Not a Home Inspection While VA-assigned fee appraisers must note any readily apparent repairs that are needed, it is important to distinguish the differences between a real estate appraisal and a home inspection report. The fee appraiser will not perform operational checks of mechanical systems or appliances. The fee appraiser estimates the value of the property to ensure that it is sufficient for the amount of the proposed loan. c. Safe, Sound, Sanitary MPRs help ensure that the property is safe, structurally sound, and sanitary. The scope of MPRs also includes issues related to the property’s location and legal considerations. d. Appraisal Subject to Repairs to meet MPRs The appraiser will prepare origination appraisals “subject to” the completion of any MPR repairs that appear to be needed and include the contributory value of the completed repairs in the estimated market value. Liquidation appraisals are prepared “as-is” (see Chapter 11, Topic 20 of this Handbook). e. Recommend Repairs, Not Inspections Appraisers must not prepare appraisals subject to inspections. The appraiser must recommend repairs, not inspections, for any conditions that do not appear to meet MPRs. f. Cosmetic Items The appraiser should not recommend repairs of cosmetic items, items involving minor deferred maintenance or normal wear and tear, or items that are inconsequential in relation to the overall condition of the property. While minor repairs should not be recommended, the appraiser should consider these items in the overall condition rating when estimating the market value of the property. Continued on next page

-17 9. Minimum Property Requirements and Repairs Change Date October 1, 2008, Change 8 This section has been updated for minor grammatical edits. a. Existing Construction Fee appraisers are experienced observers who must view both the interior and exterior of the subject property to: • determine its overall condition, and • recommend any readily observable repairs necessary to make it meet VA Minimum Property Requirements (MPRs) stated in chapter 12. On the Uniform Residential Appraisal Report (URAR), the fee appraiser must select the appropriate box in the “Reconciliation” section following, “This appraisal is made” • “As is”, if the property meets MPRs with no repairs required, or • “Subject to the following repairs...”, if repairs are required for the property to meet MPRs. The appraiser must also provide an itemized list of observed repairs, customer preference items to be installed on new construction cases, or other action necessary to ensure the property meets MPRs. When there is an indication of a potential environment problem (e.g., abandoned underground fuel storage tank), the appraisal report must contain a requirement for correction of the problem in accordance with any local, state or federal requirements. Appraisers must not recommend electrical, plumbing, heating, roofing or other inspections only as a measure of liability protection. Improvements or site conditions that do not appear to meet MPR’s should, in most instances, be required to be corrected, repaired or replaced, rather than inspected. An inspection should be recommended only if there is an indication of a complex problem requiring a professional opinion, such as, pests, site drainage, structural defects, safety concerns, code violations, etc. Note: Fee appraisers are required to view, but not enter, any accessible crawl space and/or attic areas of the home and report any significant defective conditions observed. b. Proposed Construction See chapter 12.