A Practical Guide to Reporting Defects in the New UAD 3.6 and URAR

Hi, I'm Daniel Yoder. As a residential appraiser, I know that some of the most critical moments during an inspection involve identifying and documenting property defects. Whether it's a leaky roof, a cracked foundation, or stained carpeting, how we report these issues is fundamental to a credible appraisal. The upcoming shift to the Uniform Appraisal Dataset (UAD) 3.6 and the redesigned Uniform Residential Appraisal Report (URAR) fundamentally changes how we document these findings, moving us away from lengthy narratives buried in an addendum toward a more structured, data-centric approach.

Let's take a practical look at how this works by breaking down the "Apparent Defects" sections, using the GSEs' own Single-Family Scenario (SF1) as our guide. You can explore the full report in more detail in a previous analysis I wrote.

From Narrative to Structured Data: The New "Defects" Section

In the past, we might have described a significant issue in a free-form text block. The new URAR replaces this with a clear, structured table designed for consistency. The SF1 report provides a perfect example with a damaged roof.

On page 4 of the report, under Apparent Defects, Damages, Deficiencies Requiring Action, we see this breakdown:

• Feature: Dwelling Exterior

• Location: Section of Roof

• Description: Damaged roof with missing flashing leaving the roof permeable to water intrusion.

• Affects Soundness or Structural Integrity: Yes

• Recommended Action: Repair

• Estimated Cost to Repair: $1,500

This format leaves little room for ambiguity. Each element of the defect is captured as a discrete data point, making the report easier for lenders, underwriters, and review systems to parse and understand. The "Affects Soundness or Structural Integrity" field, in particular, is a crucial flag that immediately communicates the severity of the issue.

Connecting Defects, Condition, and the Final Value

This new structure for reporting defects is directly tied to the property's condition rating and the final opinion of value. The SF1 scenario illustrates this relationship perfectly:

1. "As Is" Condition: Because of the damaged roof, the property's As Is Overall Condition Rating is C5.

2. "Subject to Repair" Valuation: The appraisal is made "Subject to Repair." This is clarified in the Final Value Condition Statement on the summary page: "This appraisal is made subject to the itemized list of repairs or alterations below on the basis of a hypothetical condition that the repairs or alterations have been completed."

3. Hypothetical Condition: The final opinion of value ($491,000) is based on the hypothetical condition that the roof is repaired. Once repaired, the Overall Condition rating improves to C4.

This workflow provides a transparent and logical path from identifying a problem to concluding a credible, well-supported value. For a deeper dive into these new rating requirements, you might find our post on decoding Quality & Condition ratings helpful.

What About Minor Issues?

Not every defect affects structural integrity or requires a cost to cure. The new URAR accounts for this as well. On page 11 of the SF1 report, we see an interior defect noted:

• Feature: Flooring

• Location: Dining Room

• Description: Carpet is stained in one corner of the Dining Room.

• Affects Soundness or Structural Integrity: No

• Recommended Action: None

This demonstrates the system's flexibility. The appraiser can note a minor cosmetic issue, fulfilling their obligation to report what they observe, without it impacting the cost-to-cure calculations or the "Subject to Repair" condition. The issue is documented for full transparency but is clearly categorized as a non-structural, no-action-needed item.

The Integral Role of Photos

The new report format also tightly integrates photographic evidence. The SF1 example includes dedicated exhibits for "Damaged Flashing" and "Damaged Flooring." This ensures that every noted defect is supported by clear visual evidence, directly linked within the report. This is a far more organized approach than attaching a collage of photos at the end of an addendum.

For appraisers on-site, this means that capturing specific, well-labeled photos of every issue is more important than ever. This is an area where technology can offer significant help. For instance, a tool like Valuemate, which automatically generates a 3D model and organizes photos by room and feature during the property scan, can help ensure this documentation is captured efficiently and accurately, ready to be populated into the new URAR format.

Ultimately, the changes to how we report defects in the redesigned URAR are a significant step toward greater clarity and standardization. By embracing this structured format, we can deliver reports that are not only more defensible but also easier for our clients to understand and act upon.