Importance of Compliance with New GSE Time/Market Adjustment Reporting
Fannie Mae and Freddie Mac have recently updated their Selling Guides to enhance the accuracy and transparency of appraisals, particularly concerning the reporting of market conditions. Key changes include:
Extended Data Analysis Period: Appraisers are now required to analyze market trends using a minimum of 12 months of data. This approach provides a more comprehensive view of market movements, ensuring that appraisals reflect long-term trends rather than short-term fluctuations.
Objective and Fact-Based Reporting: The updated guidelines emphasize that appraisal comments must be “fact-based and objective.” This shift underscores the importance of supporting appraisal opinions with concrete data and logical analysis, moving away from unsupported assumptions or subjective judgments.
Clear Definitions of Key Terms: To improve clarity in appraisal reports, the Selling Guide now provides specific definitions for terms such as “neighborhood” and “market area.” This standardization aims to ensure consistency in how appraisers assess and describe the areas surrounding a property.
Enhanced Comparable Sales Selection: Appraisers must now illustrate the methodology used to determine specific adjustments for changes in market conditions. This requirement increases transparency in the adjustment process and ensures that all adjustments are supported with robust data.
These updates necessitate a more in-depth, standardized approach to market analysis. Appraisers are encouraged to adopt these practices promptly, even though they become mandatory in February 2025. By doing so, appraisers can ensure that their reports meet the heightened expectations for accuracy and transparency in the evoving real estate market.
