The Multi-Family Appraisal Rule: Full Interior Unit Inspections

Rule

For any multi-family property (2-4 units), the appraiser is required to perform a physical interior and exterior inspection of every individual unit. "Sample" inspections of only one unit are not acceptable.

Lendency Insight

When underwriting a 2-4 unit property, the underwriter must verify that every unit is in a habitable, rentable condition. If unit #1 is beautiful but unit #2 has a kitchen fire that the landlord is hiding, the property's value and DSCR ratio would be compromised. The "Full Inspection" rule is a safeguard for both the lender and the investor. To keep your loan moving, it is vital to coordinate with your tenants early. An appraiser who cannot gain access to a single unit will have to mark the report as "Incomplete," which can stall your closing for days while you reschedule.

Common Scenarios & FAQs

• What if a tenant refuses access? As the landlord, you generally have the right to enter for inspections with proper notice (usually 24-48 hours). If access is denied, the loan cannot be cleared to close.

• Does this apply to the basement/attic? Yes. Any "common areas" or mechanical rooms (furnace/water heater) must also be accessible to the appraiser.

• Can I provide photos instead? No. Institutional guidelines require the appraiser to personally witness the interior of each unit.

Key Definitions

• 2-4 Unit Property: A residential property containing two, three, or four separate living units (Duplex, Triplex, Fourplex).

• UAD (Uniform Appraisal Dataset): A set of standardized data elements and definitions used in appraisal reports to ensure consistency.