source:
  type: guide
  id: fnma-sel-b4-1.4-06
  authority: Fannie Mae Selling Guide B4-1.4-06 — Community Land Trust Appraisal Requirements
  description: Fannie Mae Selling Guide B4-1.4-06 — Community Land Trust Appraisal
    Requirements.
  coverage_tier: operative
obligations:
- id: fnma-sel-b4-1.4-06-full
  canonical_id: fnma-sel-b4-1.4-06-full
  section: Fannie Mae Selling Guide B4-1.4-06 — Community Land Trust Appraisal Requirements
  type: do
  tags:
  - regulator-direct
  - fnma
  - selling-guide
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: Fannie Mae Selling Guide B4-1.4-06 — Community Land Trust Appraisal
      Requirements
    source_class: fnma-guide
    source_url: https://singlefamily.fanniemae.com/media/document/pdf/selling-guide
    snapshot_id: 5f7b8b79da595d76
    fetched_at: '2026-05-25T14:09:57Z'
    content_hash: sha256:98cf85a02861bbe84914a0e339b327c8fc131869a8a573882007bbeea60c5701
    paragraph_quote: 'B4-1.4-06, Community Land Trust Appraisal Requirements (06/04/2025)
      Introduction This topic contains information on special appraisal considerations
      for properties subject to a community land trust, including: Appraiser Qualiﬁcations
      for Appraising Properties Located in a Community Land Trust Appraisal Requirements
      for Community Land Trust Appraisals Comparable Selection Requirements for Determining
      Fee Simple Value Determining the Capitalization Rate Determining the Leasehold
      Value Addendum to the Appraisal Report Uniform Appraisal Dataset (UAD) 3.6 Policy
      Appraiser Qualiﬁcations for Appraising Properties Located in a Community Land
      Trust The lender must ensure that the appraiser is knowledgeable and experienced
      in the appraisal techniques, namely the direct capitalization and the market
      derivation of capitalization rates that are necessary to appraise a property
      subject to a leasehold estate held by a community land trust. Lenders must establish
      policies and procedures to ensure that qualiﬁed individuals are being selected
      in accordance with Fannie Mae requirements including the Appraiser Independence
      Requirements. Published May 6, 2026 606 Appraisal Requirements for Community
      Land Trust Appraisals The appraisal requirements for community land trust properties
      are as follows: The appraiser must analyze the property subject to the ground
      lease when a leasehold interest is held by a community land trust. Because the
      community land trust typically subsidizes the sales price to the borrower, that
      price may be signiﬁcantly less than the market value of the leasehold interest
      in the property. The appraised value of the leasehold interest in the property
      must be well supported and correctly developed by the appraiser because the
      resale restrictions, as well as other restrictions that may be included in the
      ground lease, can also aﬀect the value of the property. Fannie Mae requires
      the Community Land Trust Ground Lease Rider, that the lender and the borrower
      must execute, to remove such restrictions from the community land trust’s ground
      lease. The land records for the subject property must include adoption of the
      terms and conditions that are incorporated in that ground lease rider. The appraiser
      must develop the opinion of value for the leasehold interest under the hypothetical
      condition that the property rights being appraised are the leasehold interest
      without the resale and other restrictions that the ground lease rider removes
      when Fannie Mae has to dispose of a property acquired through foreclosure. (For
      additional information, see Section B5-5.3, Shared Equity Transactions, for
      legal considerations.) The appraiser must use a three-step process to develop
      an opinion of value. Step The appraiser must determine 1 the fee simple value
      of the property by using the sales comparison analysis approach to value, 2
      the applicable capitalization rate and convert the income from the ground lease
      into a leased fee value by using the market-derived capitalization rate, and
      3 the leasehold value by reducing the fee simple value by the lease fee value.
      (For detailed information related to this process, see below.) Note: When this
      appraisal technique is used, there is no need to document the actual land value
      of the security property. On the actual appraisal report form, the appraiser
      must indicate “leasehold” as the property rights appraised, provide the applicable
      ground rent paid to the community land trust, show the estimated fee simple
      value for the property in the Sales Comparison Approach adjustment grid, report
      the “leasehold value” as the indicated value conclusion, and check the box “as
      is” and include in the addendum the development of the capitalization rate and
      an expanded discussion of the comparable sales used and considered. Comparable
      Selection Requirements for Determining Fee Simple Value Published May 6, 2026
      607 In determining the fee simple value of the subject property, the appraiser
      must use comparable sales of similar properties that are owned as fee simple
      estates. If this is not possible, the appraiser may use sales of properties
      that are subject to other types of leasehold estates as long as they make appropriate
      adjustments, based on the terms of their leases, to reﬂect a fee simple interest.
      When the community or neighborhood has sales activity for other leasehold estates
      held by a community land trust, the appraiser must discuss them in the appraisal
      report, but must not use them as comparable sales because, in all likelihood,
      the sales prices will have been limited by restrictions in the ground lease.
      Therefore, these sales transactions would not be comparable to the hypothetical
      condition that the property rights being appraised are the leasehold interest
      without the resale and other restrictions on which Fannie Mae requires the appraisal
      of the subject property to be based. See B4-1.3-08, Comparable Sales, for general
      requirements regarding comparable selection. Determining the Capitalization
      Rate When the community has an active real estate market that includes sales
      of properties owned as fee simple estates and sales of properties subject to
      leasehold estates other than those held by community land trusts, the appraiser
      can use the most direct method for determining the capitalization rate, extracting
      it from the market activity. To extract the capitalization rate, the appraiser
      must divide the annual ground rent for the properties subject to leasehold estates
      by the diﬀerence in the sales prices for the comparable sales of properties
      owned as fee simple estates and the comparable sales of properties subject to
      leasehold estates. If there are no available comparable sales of properties
      subject to leasehold estates other than those held by a community land trust,
      the appraiser must develop a capitalization rate by comparing alternative low-risk
      investment rates, such as the rates for long-term bonds, and selecting a rate
      that best reﬂects a “riskless” (safe) rate. Determining the Leasehold Value
      To determine the leasehold value of the subject property, the appraiser must
      ﬁrst convert the annual income from the community land trust’s ground lease
      into a leased fee value by dividing the income by the market- derived capitalization
      rate. The appraiser must then reduce the estimated fee simple value of the subject
      property by this leased fee value to arrive at their opinion of the leasehold
      value of the subject property. For example, assume that the annual ground rent
      from the community land trust’s ground lease is $300, the market-derived capitalization
      rate is 5.75%, and the estimated fee simple value of the subject property is
      $100,000: $300 annual rent/5.75% capitalization rate = $5,217.39 (rounded to
      $5,200) $100,000 fee simple value – $5,200 leased fee value = $94,800 (leasehold
      value) Addendum to the Appraisal Report Because Fannie Mae’s appraisal report
      forms do not include space to provide all of the details required for appraising
      a property subject to a leasehold held by a community land trust, the appraiser
      must attach an addendum to the appraisal report to provide any information that
      cannot otherwise be presented on the appraisal report form. As previously mentioned,
      the appraiser must check the box “as is” and include in the Published May 6,
      2026 608 addendum the development of the capitalization rate and an expanded
      discussion of the comparable sales used and considered. The addendum must also
      include the following statement: “This appraisal is made on the basis of the
      hypothetical condition that the property rights being appraised are the leasehold
      interest without resale and other restrictions that are removed by the Community
      Land Trust Ground Lease Rider.” Uniform Appraisal Dataset (UAD) 3.6 Policy Lenders
      using UAD 3.6 must follow the requirements in the UAD 3.6 Policy Supplement
      . Recent Related Announcements The table below provides references to recently
      issued Announcements that are related to this topic. Announcements Issue Date
      Announcement SEL-2025-04 June 04, 2025 Announcement SEL-2025-01 February 05,
      2025'
  judgment: false
