Everything you need to know about third-party reports for HUD 232 loans.
Third-Party Reports for HUD 232 Loans
Full Appraisal: An Appraisal will look at a project’s value, income-generating potential, and potential profitability. It will also examine the quality of the facilities, and any amenities that they offer.
Market Study: HUD-approved Market Studies look both at the competitive advantages of a property in a specific market and the health of the market as a whole. By doing so, they can help determine the suitability of providing financing to a particular project. HUD now requests that Market Studies and Appraisals be combined into one report, an Appraisal and Market Study.
Environmental Assessment: Environmental Assessments have the stated goal of examining a property for any chemicals or materials that could be hazardous to current or future residents, or to the environment as a whole. Typically, only a Phase I Environmental Assessment is required, but sometimes, if contamination is found, a Phase II Environmental Assessment may also be required. Phase I Assessments usually take around 1 month to complete.
Project Capital Needs Assessment: Also known as a PCNA, a project capital needs assessment is designed to estimate how much it will cost to maintain a project over a specific period of time. For HUD 232 loans, a new PCNA is required every 10 years to ensure that a project remains in good condition, and that the borrower is contributing sufficient funds to their replacement reserves.
Engineering Report: Engineering reports examine the structural integrity of a building or a building plan. These are typically only required for new HUD 232 construction projects.
Seismic Assessment: Seismic Assessments are designed to determine the earthquake risks for a structure, to ensure that it can provide a reasonable degree of safety for building occupants. Seismic Assessments are only required in Seismic Zones 3 and 4, which comprise of parts of the western U.S., as well as certain areas in the south.