Planned Unit Development (PUD) - Appraiser vs Underwriter

Appraiser Asks: Can you help me explain that just because Homeowner Association (HOA) dues are paid doesn't mean the appraised property is in a Planned Unit Development (PUD)? The Loan Underwriter rejected my appraisal because HOA dues of $300 per year are paid for maintenance of a drain water lagoon. The Underwriter says: "Either remove the HOA dues from the report or indicate subject is located in a PUD. We can't have one without the other." Thanks Bill

Bill, I think this may be a case where the Underwriter has a valid point! FNMA/FHLMC indicate that if the following are true for the property, the subject is located within a PUD by FNMA/FHLMC definition.

• There is common property for the units;
• there is an automatic and non-severable membership in the Homeowner’s Association;
• there are MANDATORY dues;
• and the property is NOT a Condominium unit.

If the above are true, the subject would be deemed to be a PUD unit by FNMA/FHLMC. Zoning is not the key to determining whether a unit is located within a PUD for purposes of addressing this section of the report.

However, if the subject is zoned “PUD”, it would-be appropriate to add commentary in the appraisal report addressing whether the subject meets the above definition for a PUD unit or not and if not, why not. The PUD section of the URAR appraisal is only to be completed if the following condition is met:

“the developer/builder is in control of the HOA and the property is an attached dwelling unit.” This is according to the FNMA/FHLMC. However, there may be instances where the reporting of the information would be required under USPAP, despite the requirements of FNMA/FHLMC. If the information would be required in order to be compliant with USPAP, the information would be required in the report. For units within an established PUD project, the comparable sale selection should be from sales within the subject project. If sufficient sales are not available from the subject project, commentary addressing this and why it was necessary to utilize sales from a differing project will need to be included in the appraisal report. For units in a new or newly converted PUD project, the comparable sale selection should include both sales from within the project and outside the project. At least one sale from within the project should be utilized and at least one outside sale should be utilized. Any other sales included in the appraisal report may come from either the subject project or outside the project. If a sale from the subject complex cannot be provided, commentary addressing this would need to be included in the report. (Note: In this commentary “outside sale” should be construed to mean “outside the control of the seller of the subject property.” In other words, it is most acceptable and appropriate to utilize sales from the subject project that were re-sales or transactions not involving the developer or builder of the subject property, however, if the sale is new and by a different builder/seller, commentary should be included stating it is by a different builder/seller and identify the name of builder/seller in the report.)