Third Party Reports

Third Party Reports for the Freddie Mac SBL Program

In order to apply for financing through the Freddie Mac Optigo SBL program, borrowers must include several third-party reports. These must be arranged for and paid for by the borrower, though lenders may often be heavily involved in the process. Required third-party reports for Freddie Mac Small Balance Loans include:

• Freddie Mac Multifamily Appraisal: An appraisal will examine all aspects of the property in order to estimate its current market value. Freddie Mac requires that appraisals be conducted by an appraiser currently licensed in the state where the subject property is located. Generally, an appraisal will need to be conducted after the Environmental Assessment and Property Condition Report, as the appraiser will need to use them to fully estimate the value of the property.
• Phase I Environmental Assessment (ESA): A Phase I ESA will look at a property to ensure that it does not pose any significant environmental hazards to current residents, future residents, or the surrounding community. A Phase II ESA will be needed if something significant shows on the Phase I report.
• Property Condition Report: A property condition report, sometimes referred to as a physical needs assessment, gauges the condition of every aspect of a property to determine the useful life of each property component. This ranges from roofs and flooring to appliances, laundry machines, and recreational equipment.
• Zoning Report: Zoning reports examine local zoning regulations to ensure that a property is not in violation of them. In regards to the Optigo Small Balance Loan program, Freddie Mac only requires Zoning Reports for loans above $6 million, and only in situations where potential zoning issues have been mentioned in the property appraisal or other third-party reports.
• Property Survey Report: A property survey report examines a property’s exact boundaries and ensures that it is the same as the property described in the legal documents. It may also examine easements and certain title issues, though it is not a title search. Like zoning reports, Freddie Mac generally only requires property surveys for certain loans above $6 million.
• Seismic Risk Assessments: For certain properties, particularly those located in Seismic Zones 3 and 4 (which includes much of California, Washington, Oregon, Idaho, and Nevada, among other areas), SBL borrowers may be required to get a seismic assessment. Among other things, the seismic assessment will calculate Maximum Probable Loss, which is defined as the maximum amount which an insurer or guarantor could reasonably stand to lose on a property in the case of a serious earthquake.