FHA 203k Appraisal Guidelines:
An appraisal conducted by a licensed and approved FHA appraiser is needed for underwriting a 203k loan. All residential home loan programs including VA, FHA and conventional (Fannie Mae, Freddie Mac) require the performance of comprehensive appraisal report.
The type of appraisal required for the financing of rehab property is specified under the 203(K) appraisal requirements and guidelines.
The primary objective of an appraisal report is to establish the value of a subject property based on its existing condition and local market conditions. A lender evaluates other factors only after the suitable property value has been determined.
The loan amount allowed by the 203(K) rehab loan program is determined based on the market value established by the FHA approved appraiser.
Reference Link: http://fha203kloan.org/203k-eligible/