FNMA and FHLMC have published new guidance around market analysis in an effort to increase consistency and clarity. FHLMC's goes into effect for reports dated on or after February 4, 2025, and FNMA's goes into effect for reports dated on or after March 1, 2025.
Definitions Updates
Two terms now have standardized definitions:
Market Condition Adjustments
The GSEs are emphasizing the importance of analyzing comparable sales for any changes in market conditions between the contract date of the comparable sale and the effective date of the appraisal report, pointing out that a market condition adjustment for a particular comp may differ from the overall market trend.
For example, your market may have fluctuated up and down over the past 12 months, and averaged a 3% increase overall. However, a comp that sold six months ago may have been at a market peak and a comp that sold three months ago may have been at a market trough, so a 3% adjustment may not be supportable for either of them.
The GSEs expect supportable time adjustments, backed by evidence provided by commonly acceptable practices such as paired sales, statistical analysis, home price indices, or modeling. Appraisal reports should include an explanation for the reasoning behind any adjustments (or lack thereof). There is no specific requirement for particular charts or graphs, but graphical figures may help illustrate your support.
What do I do?
If you are already including explanations and support for your adjustments, you are already addressing the GSEs' concerns.
If you haven't been making supportable market conditions adjustments, or aren't sure your support is adequate, we have some resources to help you. We can't make any one-size-fits-all recommendations, or tell you exactly what you need to do -- every market is different, and only you can determine what works best for you -- but we can offer some general advice and suggestions.
If you could use a refresher on performing market analysis and deriving supportable adjustments, continuing education courses are available online from providers like McKissock and Appraiser eLearning. Other resources for self-education are also available online: for example, George Dell, SRA, MAI, ASA, CRE has published relevant webinars on his Valuemetrics Appraiser Education YouTube channel, and Jim Amorin, CAE, MAI, SRA, AI-GRS, ASA, CDEI has published an in-depth article on supporting market conditions adjustments on his LinkedIn account.
Our Market Analysis Service can help you identify trends in your market via MLS data. If you need further help calculating market adjustments and supporting your conclusions, there are many third-party tools available that specialize in this area. Aloft, Spark, DataMaster, and Appraiser Genie integrate with Appraise-It Pro to transfer data into your report for you. Others, like Synapse and GandySoft, don’t integrate directly with Appraise-It Pro, but you can insert their output into your report addenda manually.
Once you know what your adjustment(s) should be, slash commands offer a quick and easy way to insert individual adjustments throughout your comparison grids, and Appraise-It Pro v.3.3 introduces a new date of sale/time adjustment calculator panel – go to Support and select Check for Updates to ensure you're up to date.
Once your adjustments are entered, our Adjustments Sensitivity Analysis tool is included with Appraise-It Pro and can help demonstrate your adjustments are appropriate.
For more information about the GSEs' guidelines and guidance, see:
