Third-Party Reports and HUD 223(f) Financing
Developers who wish to obtain a HUD 223(f) loan for acquiring or refinancing a multifamily property will need to have several third-party reports fully completed before submitting your application to HUD. The most common third-party reports for HUD multifamily financing include:
Full Property Appraisal: An appraisal will examine all aspects of a property in order to estimate its market value. It focuses on the property’s general condition, size, the neighborhood in which it's located, and the quality of its construction, design, and amenities. The Appraisal will also look for any issues that could negatively affect the project's current or future profitability.
Environmental Assessment: A Phase I Environmental Assessment, which is always required, will examine the property for any hazardous materials, chemical waste, radioactive substances, or other issues that could pose a threat to current or future residents or the local environment. In the case that contamination is found in Phase I, a Phase II Environmental Assessment may be required, which will involve collecting samples to more accurately determine the potential risk.
Market Study: A Market Study will take a close look at all the economic aspects of a property. In particular, it looks at the market need, local supply and demand, and whether the property's earning capacity is likely to increase or decline over time.
Project Capital Needs Assessment (PCNA): A Project Capital Needs Assessment, or PCNA, is a report that estimates how much it will cost to maintain a property over time, by estimating the lifetimes and repair needs of various building systems, such as plumbing, electrical, and insulation.
HUD Seismic Report: HUD Seismic Reports are only required in Seismic Zones 3 and 4 (California, large parts of Alaska and Hawaii, certain parts of Washington, Oregon, and Nevada, and small portions of Arkansas. Tennessee, Illinois, and Kentucky). The Seismic Report, or Seismic Assessment, will examine all structures to make sure they're in compliance with ASCE (American Society of Civil Engineers) regulations.