source:
  type: guide
  id: fhlmc-5605.5
  authority: Freddie Mac Single-Family Seller/Servicer Guide Section 5605.5 — Improvements
    analysis
  description: Freddie Mac Single-Family Seller/Servicer Guide Section 5605.5 — Improvements
    analysis.
  coverage_tier: operative
obligations:
- id: fhlmc-5605.5-full
  canonical_id: fhlmc-5605.5-full
  section: Freddie Mac Single-Family Seller/Servicer Guide Section 5605.5 — Improvements
    analysis
  type: do
  tags:
  - regulator-direct
  - fhlmc
  - freddie-guide
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: Freddie Mac Single-Family Seller/Servicer Guide Section 5605.5 — Improvements
      analysis
    source_class: fhlmc-guide
    source_url: https://guide.freddiemac.com/ci-guide
    snapshot_id: 5869ee9e606cd4ae
    fetched_at: '2026-05-23T00:27:40Z'
    content_hash: sha256:9a1b23e5024bb369e7a59d36b3702383c11ace68b5d209fdef791bc8f955c637
    paragraph_quote: '5605.5: Improvements analysis (01/26/26) Refer to Bulletin 2025-7,
      which announced the policy requirements for Uniform Appraisal Dataset (UAD)
      3.6. Sellers may submit to the Uniform Collateral Data Portal® appraisal reports
      that use UAD 3.6 before the mandatory effective November 2, 2026 version of
      this section. This section contains requirements related to: ■ Property condition
      and quality of construction ■ Required permits ■ Unusual floor plans ■ Rehabilitated
      or renovated property ■ Non-conformity to the Neighborhood and non-traditional
      or unique property types ■ Outbuildings on a property (a) Property condition
      and quality of construction The appraisal report must contain an accurate description
      of the improvements and describe any factors that may affect the market value
      or marketability of the subject property. The appraiser is responsible for reporting
      the condition and quality that best describe the overall condition and quality
      of the subject property. Freddie Mac Single-Family Seller/Servicer Guide Chapter
      5605 As of 02/04/26 Page 5605-19 For appraisal reports that are required to
      be completed using the Uniform Appraisal Dataset (UAD), the appraiser must use
      the condition and quality ratings and the level of updating definitions identified
      in Exhibit 36, Condition and Quality Ratings and Level of Updating Definitions.
      For appraisal reports that are not required to be completed using the UAD, the
      UAD specifications may be used to the extent they are applicable to the particular
      appraisal report form. The condition and quality ratings must be based on a
      holistic view of the property and any improvements. When selecting the condition
      and quality ratings, the appraiser must: ■ Consider all improvements to determine
      overall condition and quality ratings and select the ratings that best reflect
      a holistic view of the property ❑ If any portion of the improvements has a quality
      of construction consistent with the Q6 quality rating, the property must be
      identified with a Q6 quality rating ❑ If any portion of the improvements is
      impacted by one or more deficiencies that are consistent with a C5 or C6 condition
      rating, the property must be identified with a C5 or C6 condition rating ■ Describe
      the subject property on an absolute basis as of the effective date of the appraisal
      report, meaning the property must be rated on its own merits. Ratings should
      not be selected on a relative basis, meaning a rating is not selected based
      on how the property relates or compares to other properties. The condition and
      quality ratings for comparable properties must be made on an absolute basis
      and reflect the condition and quality of the comparable property as of the date
      of sale of the comparable property. ■ As necessary, provide additional commentary,
      descriptions and explanations to enable the intended users of the appraisal
      report to understand the property condition and quality (i) Properties consistent
      with a Q6 quality rating A Mortgaged Premises consistent with a Q6 rating is
      not acceptable collateral to secure a Mortgage sold to Freddie Mac unless all
      issues that caused the property to be rated with a Q6 quality rating are cured
      before delivery of the Mortgage to Freddie Mac. In such cases, when an appraisal
      report is delivered with the Mortgage, the appraisal report must be completed
      “subject to” and the reported quality rating must reflect the hypothetical condition
      that would exist if the repairs or alterations were completed. Note: See Section
      5605.8 for information related to appraisal reports completed “subject to” repairs
      or alterations and PDRs with required repairs. Examples that are consistent
      with a Q6 quality rating include, but are not limited to: Freddie Mac Single-Family
      Seller/Servicer Guide Chapter 5605 As of 02/04/26 Page 5605-20 ■ Quality such
      that the property is not habitable as a year-round residence ■ Minimal or non-existent
      electrical, plumbing and/or other mechanical systems ■ Substandard additions
      to the original structure ■ Other quality related deficiencies that make the
      property unacceptable to typical purchasers in the Market Area Exceptions: Issues
      that caused the property to have a Q6 quality rating may be cured after the
      Settlement Date if: ■ The Mortgage is a CHOICERenovation® Mortgage delivered
      pursuant to Section 4607.1(b) or a CHOICEReno eXPress® Mortgage delivered pursuant
      to Section 4607.1(c), and the: ❑ Issues are cured as part of the completion
      of the renovations ❑ Renovations are eligible renovations under Section 4607.6
      ■ The Mortgage is secured by a property with incomplete improvements and delivered
      pursuant to Section 5601.3 (ii) Properties with deficiencies consistent with
      a C5 or C6 condition rating A Mortgaged Premises with deficiencies consistent
      with a C5 or C6 condition rating is not acceptable collateral to secure a Mortgage
      sold to Freddie Mac unless all issues that caused the property to be rated with
      a C5 or C6 condition rating are cured before delivery of the Mortgage to Freddie
      Mac. In such cases, when an appraisal report is delivered with the Mortgage,
      the appraisal report must be completed “subject to” and the reported condition
      rating must reflect the hypothetical condition that would exist if the repairs
      or alterations were completed. Note: See Section 5605.8 for information related
      to appraisal reports completed “subject to” repairs or alterations and PDRs
      with required repairs. Examples of deficiencies that are consistent with C5
      or C6 rating include, but are not limited to: ■ Active roof leak(s) ■ Incomplete
      construction or remodel (including missing or severely damaged cabinets or countertops,
      missing plumbing fixtures in the kitchen or bathroom(s), etc.) Freddie Mac Single-Family
      Seller/Servicer Guide Chapter 5605 As of 02/04/26 Page 5605-21 ■ Missing or
      damaged exterior components that would allow water or other elements to enter
      the dwelling ■ Missing or severely damaged interior drywall or plaster such
      that the wall framing is exposed (excluding basements) ■ Standing water in the
      property, water seepage/intrusion or significant plumbing leaks ■ Uncapped wiring
      ■ Curled, cupped or missing roof shingles ■ Missing or severely damaged floor
      coverings in the majority of the living area (excluding basements) ■ Damaged
      or failing foundations ■ A mechanical system that is non-functional, or ■ A
      sanitary system with evidence of failure Exceptions: Deficiencies that caused
      the property to have a C5 or C6 condition rating may be cured after the Settlement
      Date if: ■ The Mortgage is a CHOICERenovation Mortgage delivered pursuant to
      Section 4607.1(b) or a CHOICEReno eXPress Mortgage delivered pursuant to Section
      4607.1(c), and the: ❑ Deficiencies are cured as part of the completion of the
      renovations ❑ Renovations are eligible renovations under Section 4607.6 ■ The
      Mortgage is secured by a property with incomplete improvements and delivered
      pursuant to Section 5601.3 (iii) Appraisal reports completed “subject to” an
      inspection If there are property conditions that require further investigation,
      the appraisal report must be completed “subject to” an inspection by an appropriately
      licensed professional or another person trained in the particular field of concern.
      Examples of conditions that may require an inspection include, but are not limited
      to, observations of: ■ Severe cracks in foundations or walls Freddie Mac Single-Family
      Seller/Servicer Guide Chapter 5605 As of 02/04/26 Page 5605-22 ■ Evidence of
      infestation, or ■ Potentially contaminated water source The Seller must include
      in the Mortgage file evidence of the repair or an inspection report that indicates
      the condition does not require repair. See Section 5605.8 for additional information
      related to appraisal reports completed “subject to” an inspection. (iv) Existing
      properties with minor needed repairs or deficiencies or deferred maintenance
      Freddie Mac allows an appraisal report to be completed “as is” for an existing
      property when there are minor needed repairs, deficiencies or deferred maintenance.
      The appraisal report must reflect adjustments for these conditions in the appraisal
      report, when necessary. Examples of acceptable minor needed repairs, deficiencies
      and deferred maintenance items include, but are not limited to: ■ Worn floor
      finishes or coverings ■ Minor cracks in windows ■ Minor damage to interior walls
      ■ Damaged or missing interior doors ■ Damaged or missing window screens or cabinetry
      doors ■ Missing handrails ■ Damaged or deteriorating countertops ■ Missing hardware
      (such as handles) ■ Missing light fixtures, electrical panel/breaker box covers,
      electrical switches or faceplates ■ Damaged or missing trim ■ Minor plumbing
      leaks that do not cause damage (such as dripping faucets) ■ Deteriorated sidewalks
      Freddie Mac Single-Family Seller/Servicer Guide Chapter 5605 As of 02/04/26
      Page 5605-23 (b) Required permits If there are additions or alterations that
      were made without required permits, the appraisal report should contain comments
      on the quality and appearance of the work. (c) Unusual floor plans An unusual
      floor plan, such as a home with tandem bedrooms or a bathroom off the kitchen,
      does not make a property ineligible as security for a Mortgage delivered to
      Freddie Mac. The appraisal report should include commentary that addresses whether
      an unusual floor plan or similar obsolescence is found in other properties in
      the Market Area. To the extent possible, comparable properties should have similar
      obsolescence to demonstrate marketability and support value of the subject property.
      (d) Rehabilitated or renovated property For properties that have recently undergone
      rehabilitation or renovation, the appraisal report must identify the changes
      made and contain photographs of the rehabilitation or renovation. The photographs
      must meet the requirements in Section 5604.2(a). (e) Non-conformity to the Neighborhood
      and non-traditional or unique property types When the subject property does
      not conform to its Neighborhood in terms of type, design, age, materials or
      techniques used in its construction, the appraisal report must reflect the effect
      of the nonconformance on the property’s value and marketability. Mortgages secured
      by non-traditional types of properties are eligible for delivery to Freddie
      Mac. Examples of non-traditional or unique property types include, but are not
      limited to: ■ “Barndominiums” (barn conversions or barn-style buildings) ■ “Shouses”
      (living-space and work/storage combinations) ■ Berm homes ■ Log homes ■ Geodesic
      dome dwellings The appraisal report must include comparable sales that demonstrate
      the subject property’s dwelling type or style is marketable. Additional analysis
      may be required to determine whether the design or style represents a mixed-use
      configuration. (See Section 5601.5 for mixed-use requirements.) The appraisal
      report may contain traditional homes as comparable sales for non-traditional
      or unique properties if the appraiser identifies any differences between the
      subject and Freddie Mac Single-Family Seller/Servicer Guide Chapter 5605 As
      of 02/04/26 Page 5605-24 comparable sales and adjusts for any differences between
      the subject property and the comparable sales and can justify and support the
      use of the comparable sales in the appraisal report. (f) Outbuildings on a property
      The Seller must consider outbuildings on a subject property, such as barns or
      stables, in the underwriting process to determine whether the subject property
      is primarily residential or non-residential. A subject property with a small
      barn or stable may be acceptable if the contributory value of the outbuilding
      is minimal in relation to the total appraised value of the subject property.
      The appraisal report must demonstrate (e.g., through the use of comparable sales,
      pending sales, listings) that these characteristics are typical for residential
      properties in the Market Area. Note: When a subject property has a large outbuilding,
      such as a large barn or silo, or multiple outbuildings or facilities for farm
      animals, the subject property may be agricultural or non-residential and ineligible
      as security for a Freddie Mac Mortgage, regardless of whether the appraiser
      assigns value to these improvements. 5605.5: Improvements analysis (Future effective
      date 11/02/26) This section contains requirements related to: ■ Property condition
      and quality of construction ■ Highest and best use ■ Disaster mitigation ■ Required
      permits ■ Unusual floor plans ■ Rehabilitated or renovated property ■ Non-conformity
      to the Neighborhood and non-traditional or unique property types ■ Outbuildings
      on a property (a) Property condition and quality of construction The appraisal
      report must contain an accurate description of the improvements and describe
      any factors that may affect the market value or marketability of the subject
      property. For Freddie Mac Single-Family Seller/Servicer Guide Chapter 5605 As
      of 02/04/26 Page 5605-25 appraisal reports that are required to be completed
      using the Uniform Appraisal Dataset (UAD), the appraisal report must include:
      ■ A description of all defects, damages, or deficiencies that impact the subject
      property. Defects, damages and deficiencies are items that: ❑ Rise to the level
      of recommending repair, replacement, or inspection by an individual with expertise
      in the industry, ❑ Negatively affect the integrity or composition of the site
      itself, ❑ Negatively affect the soundness or structural integrity of the improvements,
      ❑ Measurably impact the marketability or value of the subject property, or ❑
      Are incomplete ■ Condition and quality ratings consistent with the definitions
      in Exhibit 36, Condition and Quality Ratings ■ The overall, interior, and exterior
      condition and quality rating for the Mortgaged Premises, including a reconciliation
      of the overall quality and condition ratings The overall quality and condition
      ratings must reflect the quality and condition of the Mortgaged Premises as
      though any required repairs, inspections, or completions have been satisfactorily
      completed ■ The “as is” overall condition rating, excluding all required repairs,
      alterations or inspections. If any portion of the improvements is impacted by
      one or more deficiencies that are consistent with a C5 or C6 condition rating,
      the “as is” overall condition rating of the property must be C5 or C6. ■ The
      condition status of each interior and exterior feature and a description of
      both the condition status and the update status for certain components of the
      property (e.g., kitchen, bathroom, flooring) The overall condition and quality
      ratings must describe the subject property as of the effective date of the appraisal
      report on an absolute basis, not on a relative basis (i.e., the property must
      be rated on its own merits rather than on how it relates or compares to other
      properties). The quality and condition ratings for comparable properties must
      also be made on an absolute basis and reflect the quality and condition of the
      comparable property as of the date of sale. Freddie Mac Single-Family Seller/Servicer
      Guide Chapter 5605 As of 02/04/26 Page 5605-26 For appraisal reports that are
      not required to be completed using the UAD, the UAD specifications may be used
      to the extent they are applicable to the following appraisal report forms: ■
      Form 1032, One-Unit Residential Appraisal Field Review Report ■ Form 1033, One-Unit
      Residential Appraisal Desk Review Report ■ Form 1072, Two- to Four-Unit Residential
      Appraisal Field Review Report (i) Properties consistent with a Q6 quality rating
      A Mortgaged Premises consistent with a Q6 rating is not acceptable collateral
      to secure a Mortgage sold to Freddie Mac unless all issues that caused the subject
      property to be rated with a Q6 quality rating are cured before delivery of the
      Mortgage to Freddie Mac. In such cases, when an appraisal report is delivered
      with the Mortgage, the appraisal report must be completed “subject to” and the
      reported quality rating must reflect the hypothetical condition that would exist
      if the repairs or alterations were completed. Note: See Section 5605.9 for information
      related to appraisal reports completed “subject to” repairs or alterations and
      PDR requirements for verifying completion. Examples of defects, damages or deficiencies
      that are consistent with a Q6 quality rating include, but are not limited to:
      ■ A lack of basic architectural designs and may not meet local building code
      ■ Materials and amenities are low quality, alternate, or non-customary ■ Construction
      or installation reflects unskilled workmanship and may not be adequately equipped
      to support year-round occupancy, or ■ Other quality related deficiencies that
      make the subject property unacceptable to typical purchasers in the Market Area
      Exceptions: Issues that caused the property to have a Q6 quality rating may
      be cured after the Settlement Date if: ■ The Mortgage is a CHOICERenovation®
      Mortgage delivered pursuant to Section 4607.1(b) or a CHOICEReno eXPress® Mortgage
      delivered pursuant to Section 4607.1(c), and the: ❑ Issues are cured as part
      of the completion of the renovations ❑ Renovations are eligible renovations
      under Section 4607.6 Freddie Mac Single-Family Seller/Servicer Guide Chapter
      5605 As of 02/04/26 Page 5605-27 ■ The Mortgage is secured by a property with
      incomplete improvements and delivered pursuant to Section 5601.3 (ii) Properties
      with deficiencies consistent with an “as is” C5 or C6 condition rating A Mortgaged
      Premises with deficiencies consistent with an “as is” condition rating of C5
      or C6 is not acceptable collateral to secure a Mortgage sold to Freddie Mac
      unless all issues that caused the subject property to be rated with a C5 or
      C6 condition “as is” rating are cured before delivery of the Mortgage to Freddie
      Mac. In such cases, when an appraisal report is delivered with the Mortgage,
      the appraisal report must be completed “subject to” and the reported condition
      rating must reflect the hypothetical condition that would exist if the repairs
      or alterations were completed. Note: See Section 5605.9 for information related
      to appraisal reports completed “subject to” repairs or alterations and PDR requirements
      for verifying completion. Examples of defects, damages or deficiencies that
      are consistent with a C5 or C6 condition rating include, but are not limited
      to: ■ Active roof leak(s) ■ Incomplete construction or remodel (including missing
      or severely damaged cabinets or countertops, missing plumbing fixtures in the
      kitchen or bathroom(s), etc.) ■ Missing or damaged exterior components that
      would allow water or other elements to enter the dwelling ■ Missing or severely
      damaged interior drywall or plaster such that the wall framing is exposed (excluding
      basements) ■ Standing water in the property, water seepage/intrusion or significant
      plumbing leaks ■ Uncapped wiring ■ Roofing that is significantly worn, cupped,
      curled or missing shingles ■ Missing or severely damaged floor coverings in
      the majority of the living area (excluding basements) ■ Damaged or failing foundations
      ■ A mechanical system that is non-functional, or ■ A sanitary system with evidence
      of failure Freddie Mac Single-Family Seller/Servicer Guide Chapter 5605 As of
      02/04/26 Page 5605-28 ■ No functional kitchen or bathroom or the kitchen or
      all bathrooms in disrepair Exceptions: Deficiencies that caused the property
      to have a C5 or C6 condition rating may be cured after the Settlement Date if:
      ■ The Mortgage is a CHOICERenovation Mortgage delivered pursuant to Section
      4607.1(b) or a CHOICEReno eXPress Mortgage delivered pursuant to Section 4607.1(c),
      and the: ❑ Deficiencies are cured as part of the completion of the renovations
      ❑ Renovations are eligible renovations under Section 4607.6 ■ The Mortgage is
      secured by a property with incomplete improvements and delivered pursuant to
      Section 5601.3 (iii) Appraisal reports completed “subject to” an inspection
      If there are property conditions that require further investigation, the appraisal
      report must be completed “subject to” an inspection by an appropriately licensed
      professional or another person trained in the particular field of concern. Examples
      of conditions that may require an inspection include, but are not limited to,
      observations of: ■ Severe cracks in foundations or walls ■ Evidence of infestation,
      or ■ Potentially contaminated water source The Seller must include in the Mortgage
      file evidence of the repair or an inspection report that indicates the condition
      does not require repair. See Section 5605.8 for additional information related
      to appraisal reports completed “subject to” an inspection. (iv) Existing properties
      with minor defects, damages or deficiencies Freddie Mac allows an appraisal
      report to be completed “as is” for an existing property when there are minor
      defects, damages or deficiencies. The appraisal report must reflect adjustments
      for these conditions in the appraisal report, when necessary. Examples of acceptable
      minor defects, damages or deficiencies and deferred maintenance items include,
      but are not limited to: ■ Worn floor finishes or coverings Freddie Mac Single-Family
      Seller/Servicer Guide Chapter 5605 As of 02/04/26 Page 5605-29 ■ Minor cracks
      in windows ■ Minor damage to interior walls ■ Damaged or missing interior doors
      ■ Damaged or missing window screens or cabinetry doors ■ Missing handrails ■
      Damaged or deteriorating countertops ■ Missing hardware (such as handles) ■
      Missing light fixtures, electrical panel/breaker box covers, electrical switches
      or faceplates ■ Damaged or missing trim ■ Minor plumbing leaks that do not cause
      damage (such as dripping faucets) ■ Deteriorated sidewalks (b) Highest and best
      use For a Mortgage to be eligible for sale to Freddie Mac, the present land
      use of the subject property must also be the highest and best use of the subject
      property as improved (or as proposed per plans and specifications). (c) Disaster
      mitigation If the subject property or a comparable sale has disaster mitigation
      features designed to prevent or reduce the impact of natural disasters on the
      property, the appraisal report must identify those features. Examples of disaster
      mitigation features include, but are not limited to, fire resistant decking
      or exterior walls, flood vents, fortified roof, impact resistant shingles and
      storm shutters. (d) Required permits If additions or alterations were made without
      required permits, the appraisal report should contain comments on the quality
      and appearance of the work. Freddie Mac Single-Family Seller/Servicer Guide
      Chapter 5605 As of 02/04/26 Page 5605-30 (e) Unusual floor plans An unusual
      floor plan, such as a home with tandem bedrooms or a bathroom off the kitchen,
      does not make a property ineligible as security for a Mortgage delivered to
      Freddie Mac. The appraisal report should include commentary that addresses whether
      an unusual floor plan or similar obsolescence is found in other properties in
      the Market Area. To the extent possible, comparable properties should have similar
      obsolescence to demonstrate marketability and support value of the subject property.
      (f) Rehabilitated or renovated property For properties that have recently undergone
      rehabilitation or renovation, the appraisal report must identify the changes
      made and contain photographs of the rehabilitation or renovation. (g) Non-conformity
      to the Neighborhood and non-traditional or unique property types When the subject
      property does not conform to its Neighborhood in terms of type, design, age,
      materials or techniques used in its construction, the appraisal report must
      reflect the effect of the nonconformance on the property’s value and marketability.
      Mortgages secured by non-traditional types of properties are eligible for delivery
      to Freddie Mac. Examples of non-traditional or unique property types include,
      but are not limited to: ■ “Barndominiums” (barn conversions or barn-style buildings)
      ■ “Shouses” (living-space and work/storage combinations) ■ Berm homes ■ Log
      homes ■ Geodesic dome dwellings ■ Container homes The appraisal report must
      include comparable sales that demonstrate the subject property’s dwelling type
      or style is marketable. Additional analysis may be required to determine whether
      the design or style represents a mixed-use configuration. (See Section 5601.5
      for mixed-use requirements.) The appraisal report may contain traditional homes
      as comparable sales for non-traditional or unique properties if the appraiser
      identifies any differences between the subject and comparable sales and adjusts
      for any differences between the subject property and the comparable sales and
      can justify and support the use of the comparable sales in the appraisal report.
      Freddie Mac Single-Family Seller/Servicer Guide Chapter 5605 As of 02/04/26
      Page 5605-31 (h) Outbuildings on a property The Seller must consider outbuildings
      on a subject property, such as barns or stables, in the underwriting process
      to determine whether the subject property is primarily residential or non-residential.
      A subject property with a small barn or stable may be acceptable if the contributory
      value of the outbuilding is minimal in relation to the total appraised value
      of the subject property. The appraisal report must demonstrate (e.g., through
      the use of comparable sales, pending sales, listings) that these characteristics
      are typical for residential properties in the Market Area. Note: When a subject
      property has a large outbuilding, such as a large barn or silo, or multiple
      outbuildings or facilities for farm animals, the subject property may be agricultural
      or non-residential and ineligible as security for a Freddie Mac Mortgage, regardless
      of whether the appraiser assigns value to these improvements.'
  judgment: false
