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The New UAD Quality Equation: Interior + Exterior = Overall Rating
by Jo Traut, McKissock Learning
For many appraisers, the mention of new reporting requirements can trigger a collective groan. I’ve experienced this sentiment myself. The upcoming new URAR and UAD 3.6 changes to quality and condition ratings might initially appear to add complexity to our already detailed work. For those of us who have completed relocation appraisals, this level of detailed observation feels remarkably familiar. Relocation work has long required appraisers to document interior finishes, exterior materials, overall quality characteristics, and property condition. The new URAR framework essentially brings this level of thoroughness to mortgage lending appraisals.
The key change lies not in requiring us to observe new elements, but rather in how we document and reconcile our observations. With the new URAR, we’ll now evaluate interior and exterior quality and condition separately before reaching our final conclusions. This structured approach provides better support for our overall quality and condition rating. While the new URAR introduces important changes to both quality and condition ratings, this article will focus specifically on understanding the quality rating framework.
The 6 Distinct Levels of UAD Quality Assessments
The UAD quality rating system provides six distinct levels from Q1 to Q6, with specific criteria for interior and exterior components.
Interior Quality: The interior quality assessment begins with examining specific components including room sizes, ceiling treatments, trim work, flooring materials, kitchen features, and bathroom characteristics.
• Q1 Interiors: At the highest level, Q1 interiors feature spacious rooms with high ceilings, and extensive ceiling treatments such as coved, barrel, or coffered designs. The flooring often incorporates rare or imported materials with custom inlay work, while kitchens feature top-grade materials with extensive cabinetry and countertop surface area, and state-of-the-art or commercial-grade appliances. Luxury bathrooms in Q1 properties are typically oversized and feature exceptional quality materials with multiple ornate fixtures. The key is that these interiors are truly custom.
• Q2 Interiors: Moving to Q2 interiors, we find high-quality features that, while not as unique as Q1, still demonstrate custom design work. These properties typically offer spacious rooms with custom ceiling elements, high-grade durable flooring, built-ins, and large kitchens with high-end appliances, extensive cabinetry, and fixtures. Also, the criteria notes “large bathrooms specifically dedicated to certain bedrooms as well as at least one common bathroom.” The bathrooms should contain high-end materials and plumbing fixtures.
• Q2 vs Q1 Interiors: The key distinction between Q1 and Q2interiors lies in the level of customization and material selection. While Q2 interiors feature high-quality materials and excellent workmanship throughout, they typically utilize commercially available high-end products rather than the one-of-a-kind or imported materials found in Q1 homes. The design elements, while custom, are more likely to be adaptations of existing plans rather than completely unique architectural features.
• Q3 Interiors: Q3 interiors represent above-standard quality, featuring large general living areas or main bedroom, possibly some vaulted ceilings, built-ins, upgraded flooring, and moderately sized kitchens with upgraded appliances, cabinetry, and countertops or a mix. Multiple bathrooms with some specifically dedicated to certain bedrooms as well as at least one common bathroom, featuring a mixture of upgraded and high-end elements.
• Q3 vs Q2 Interiors: The distinction between Q2 and Q3 primarily comes down to the consistent use of high-end materials in Q2 versus the selective use of upgraded materials in Q3. Q2 represents a higher grade of materials and finishes throughout, while Q3 offers above-standard quality with upgrades from stock standards.
• Q4 Interiors: Q4 interiors reflect standard quality with sufficiently sized rooms, typically flat ceilings and some vaulted ceilings, some trim, standard floor coverings exceeding economy-grade, and moderately sized kitchens with standard components. Bathrooms of moderate size and standard components with some upgraded elements.
• Q5 Interiors: Q5 interiors demonstrate basic quality through small rooms with flat ceilings, economy-grade flooring, and limited kitchen and bathroom spaces with mostly basic fixtures and standard-grade elements.
• Q6 Interiors: The Q6 quality rating reflects construction that may not meet basic building standards. The living spaces are notably constrained, with small rooms often featuring low ceiling heights, minimal storage space, and limited or undersized closets. The interior trim work is either extremely basic or non-existent and finishes throughout are minimal. The kitchen space demonstrates only the most basic functionality and bathrooms are both limited in size and number, providing only the minimum requirements for basic function, often with low-grade fixtures.
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Exterior Quality: Just as with interior elements, exterior quality is rated based on specific components and materials, focusing on elements like fenestration, architectural details, roof design, and wall construction.
• Q1 Exterior: Q1 exteriors demonstrate exceptional quality through custom fenestration using multiple windows, featuring decorative adornments, top-grade materials, premium roof materials, roofs with multiple ridges, hips and valleys, and exterior walls constructed with high-end materials and featuring multiple corners and unique angles.
• Q2 Exterior: Q2 exteriors maintain high quality with features like multiple windows and doorways constructed with high-end materials, featuring custom design at the front and rear, high-end roof materials, ornamental overhangs, steep roof pitches, and multiple ridges, hips, valleys, and gables.
• Q2 vs Q1 Exteriors: Q1 exteriors feature exceptional, often unique materials and truly custom architectural elements throughout, while Q2 exteriors incorporate high-end, commercially available materials with custom applications. Think of Q1 as individually engineered and designed versus Q2’s advanced adaptation of high-end commercial products. The key distinction lies in the grade of materials and level of customization.
• Q3 Exterior: Q3 exteriors showcase upgraded materials throughout, with decorative elements adorning at least the front of the home and roof designs that may incorporate multiple ridges with hips and valleys. Upgraded exterior materials and multiple corners with some angled walls or unique shapes.
• Q3 vs Q2 Exteriors: Q3 homes feature upgraded windows and doorways with decorative design elements, though these are typically concentrated on the front elevation rather than continuing throughout all facades. The roof design demonstrates architectural interest though not reaching the complexity found in Q2 homes. The Q3 exterior walls show some architectural interest through multiple corners and occasional angled walls, but they maintain a more straightforward design approach than the sophisticated angles and unique shapes found in Q2 homes.
• Q4 Exteriors: Q4 exteriors represent standard quality construction that meets or exceeds building codes. These Q4 homes feature windows and doorways constructed of standard-grade materials without special architectural details or enhancements. The roof design is straightforward, using standard-grade materials with moderate pitch, and while it may incorporate more than one ridge line, any decorative elements are simple. The exterior walls are constructed using standard-grade materials, and while they may have multiple corners, the overall footprint remains basically rectangular.
• Q5 Exteriors: Q5 exteriors demonstrate basic construction. These homes feature limited window and door openings, all constructed with economy-grade materials and simple designs with only basic trim and finish work. The roof design is fundamental, typically featuring a low pitch with a single roofline, using economy or standard-grade roofing materials. The exterior walls follow a basic rectangular shape, constructed using economy or standard-grade materials. This level of exterior quality reflects construction focused on efficiency and basic functionality rather than architectural interest or upgraded materials.
• Q5 vs Q4 Exteriors: While Q4 exteriors incorporate standard-grade materials throughout and may include some basic architectural interest, Q5 exteriors consistently use economy-grade materials with minimal design elements. The overall impression of a Q4 exterior is one that meets or exceeds building codes with standard materials, while a Q5 exterior reflects basic construction.
• Q6 Exteriors: Q6 features minimal window and door openings constructed with lower-grade materials, often lacking finished details. The roof design is basic, typically with a low pitch and single roofline, though there may be inconsistent rooflines where additions have been made. The roofing materials are low-grade or may include alternate materials not typically used in residential construction. The exterior walls follow a basic rectangular shape, constructed using economy or low-grade materials.
The Art of Reconciliation
Perhaps the most significant aspect of the new quality rating system is the requirement for appraisers to reconcile their separate interior and exterior ratings into an overall quality rating. This process requires careful consideration of how different elements contribute to the property’s overall quality level. It is important to note that properties need not meet every criterion within a quality level; instead, they must meet the majority of criteria for that rating.
The process of determining the overall quality rating requires analysis of both interior and exterior components.
Here’s a systematic approach:
1. Document which criteria are met for both interior and exterior
2. Determine if most criteria are met at a particular quality level
3. Analyze whether any superior elements in one category offset inferior elements in another (e.g. the sophisticated roof design offsets minimal decorative adornments)
4. Select the overall quality rating that best represents the property’s total quality level
Conclusion
Remember that the quality ratings are absolute, not relative. Don’t fall into the trap of rating a property’s quality based on how it compares to other properties. By evaluating interior and exterior components independently before reaching an overall conclusion, you are providing support for your quality determinations. The result? More reliable quality ratings mean the same thing whether you’re appraising in Manhattan or rural Kansas.
About the Author
Jo Traut is a certified residential appraiser with more than 27 years of experience, licensed in Illinois and Wisconsin. Jo specializes in appraising luxury homes, valuations for lending purposes, relocation appraisals, appraisal review, and appraisal compliance. Jo previously served as SVP, Residential Chief Appraiser for the fifth-largest bank in the United States. She currently serves as Director of Appraiser Training at McKissock Learning. Jo holds a CDEI designation from IDECC and is an AQB Certified USPAP Instructor, combining her extensive professional knowledge with a commitment to appraisal education.
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