What is a Uniform Residential Appraisal Report?

A Uniform Residential Appraisal Report (URAR) is a standardized form used by real estate appraisers to document their findings and conclusions when valuing a residential property. The URAR form is commonly used for single-family homes, condominiums, and multi-unit residential properties, and is required by many lenders and government-sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac for mortgage financing purposes. The report includes information about the property's location, physical characteristics, condition, comparable sales data, and the appraiser's opinion of its market value based on a thorough analysis of relevant market data and appraisal techniques.

A Uniform Residential Appraisal Report (URAR), commonly referred to as Form 1004, is a comprehensive document used by appraisers to provide a detailed analysis of a property's value. This form is standardized by Fannie Mae and Freddie Mac and is widely used in residential real estate transactions, particularly for mortgage lending purposes. Here’s an overview of the information included in a URAR and how it is used.

Information Included in a Uniform Residential Appraisal Report

Subject Property Information

1. Property Address: The complete address of the property being appraised, including street, city, state, and zip code.
2. Borrower Information: The name of the borrower or prospective buyer.
3. Owner of Public Record: The name of the property owner as recorded in public records.
4. Legal Description: The legal description of the property, including lot number, subdivision, and any other pertinent legal identifiers.
5. Assessor's Parcel Number: The property’s unique identification number as assigned by the local tax assessor.

Contract Details

1. Contract Price: The agreed-upon purchase price of the property, if applicable.
2. Contract Date: The date the purchase agreement was signed.
3. Sales Concessions: Any financial concessions or incentives provided by the seller, such as closing cost assistance or rebates.

Neighborhood Analysis

1. Neighborhood Boundaries: Geographic boundaries defining the neighborhood where the property is located.
2. Neighborhood Characteristics: Information on the neighborhood’s market trends, including property values, demand/supply, and marketing time.
3. Market Conditions: Analysis of current market conditions, such as increasing, stable, or declining property values, and factors influencing these trends.

Site Information

1. Site Area: The size of the property’s lot, usually expressed in square feet or acres.
2. Zoning Classification: The zoning designation and its compliance with current use.
3. Utilities: Availability and type of utilities, such as water, sewer, gas, and electricity.
4. Site Improvements: Description of any site improvements, such as driveways, fences, or landscaping.

Property Description

1. Property Type: The type of property (e.g., single-family, condo, townhouse).
2. Year Built: The year the property was constructed.
3. Number of Units: For multi-unit properties, the number of units in the building.
4. Living Area: The gross living area in square feet.
5. Room Count: The total number of rooms, including bedrooms and bathrooms.
6. Condition and Quality: An assessment of the property’s condition and construction quality.

Improvements and Additions

1. Interior and Exterior Features: Detailed descriptions of interior and exterior features, including materials and finishes (e.g., type of flooring, countertops, roof materials).
2. Recent Renovations: Information on any recent renovations or additions to the property.
3. Functional Utility: Evaluation of the property’s functional utility, such as room layout and design efficiency.

Sales Comparison Approach

1. Comparable Sales: Selection of at least three comparable properties (comps) that have recently sold in the same or similar neighborhoods.
2. Adjustment Grid: Adjustments made to the sale prices of the comparable properties to account for differences with the subject property (e.g., size, age, condition).
3. Indicated Value: The final adjusted sale prices of the comparable properties are used to estimate the subject property's market value.

Cost Approach (if applicable)

1. Replacement Cost: Estimation of the cost to replace the property with a similar new property, including labor and materials.
2. Depreciation: Accounting for depreciation due to age, wear and tear, and functional obsolescence.
3. Site Value: The value of the land on which the property is located.
4. Cost Approach Value: The total value calculated using the cost approach.

Income Approach (if applicable)

1. Income Analysis: For rental properties, an analysis of potential rental income.
2. Capitalization Rate: The rate used to convert income into value.
3. Income Approach Value: The total value calculated using the income approach.

Final Reconciliation

1. Reconciliation of Values: A summary that reconciles the values derived from the sales comparison, cost, and income approaches (if applicable) to arrive at a final estimate of the property’s market value.
2. Final Value Estimate: The appraiser’s final opinion of the property’s market value, usually reported as a single value or a range.

How the Uniform Residential Appraisal Report is Used

Mortgage Lending

• Loan Approval: Lenders use the URAR to assess the collateral value of the property for mortgage approval. The appraised value helps determine the loan amount and terms.
• Risk Management: The detailed analysis in the URAR helps lenders manage risk by ensuring the property is worth the amount being financed.

Buying and Selling

• Purchase Decisions: Buyers and sellers use the appraisal report to make informed decisions about the property’s value. It provides an objective assessment to guide negotiations and pricing.
• Sales Agreements: The report is often a contingency in sales agreements, requiring that the property appraise at or above the purchase price.

Insurance

• Insurance Underwriting: Insurers may use the appraisal to determine appropriate coverage amounts for the property, ensuring it is adequately insured.

Legal and Financial Planning

• Estate Planning: The URAR can be used for estate planning and settlement purposes to value real estate holdings.
• Tax Assessments: Property tax assessments may be challenged or supported using a professional appraisal report.

Conclusion

The Uniform Residential Appraisal Report is a vital tool in real estate transactions, providing a comprehensive and standardized evaluation of a property's market value. It includes detailed information about the property, neighborhood, and market conditions, and uses various approaches to estimate value. This report is crucial for mortgage lending, buying and selling, insurance, and legal and financial planning, helping all parties involved make informed decisions based on an objective assessment of the property’s worth.