The appraiser must report on the primary indicators of market condition for properties in the subject neighborhood by noting the trend of property values (“increasing,” “stable,” or “declining”), the supply of properties in the subject neighborhood (“shortage,” “in-balance,” or “over-supply”), and the marketing time for properties (“under three months,” “three to six months,” or “over six months”) as of the effective date of the appraisal. We also expect the appraiser to describe the reasons when the trend of property values is declining, supply is an over-supply, or marketing time is over six months.
The appraiser’s analysis of a property must take into consideration all factors that affect value. Because we purchase mortgages in all markets, this is particularly important for market areas that are experiencing significant fluctuations in property values (including sub-markets for particular types of housing within the market area). Therefore, lenders must take appropriate steps to ensure that the appraisers they use analyze listings and contract sales as well as closed or settled sales, and use the most recent and similar sales available as part of the sales comparison approach, with particular attention to sales or financing concessions in markets that are experiencing either declining property values, an over-supply of properties, or marketing times over six months. (Also see Section 406, Sales Comparison Approach to Value.)
