Tom D
Elite Member
- Joined
- May 22, 2015
- Professional Status
- Certified Residential Appraiser
- State
- Pennsylvania
from Fannie march newsletter:
Market Condition (Time) Adjustments
In a recent internal analysis of appraisals with aged comparables performed during times of rapid home price appreciation (suggesting the need for time adjustments), we found that most comparables were not adjusted
for time. When we asked appraisers why not, a common response is that their lender clients discourage time adjustments.
With that in mind, in December 2024 we added two provisions to the Selling Guide in relation to time adjustments.
First, we specified that “Failure to make market-derived adjustments including time adjustments when they are clearly indicated” is an unacceptable appraisal practice (Selling Guide section B4-1.1-04 Unacceptable
Appraisal Practices). Our aim is to convey to lenders that they should expect and encourage time adjustments. This also gives appraisers a succinct, tangible policy statement that may help them defend the decision to
make a time adjustment.
Market condition is always the norm and that analysis may require an adjustment. The next question is how to determine the rate of adjustment. There are many acceptable professional appraisal methodologies. We
added this statement to illustrate the wide range of techniques available to appraisers:
“Time adjustments, or the lack thereof, must be supported by evidence. Use of home price indices (HPIs) to support time adjustments is consistent with our policy. The adjustment rates can also be determined through
statistical analysis, modeling, paired sales, or other commonly accepted methods. The appraisal report must, at a minimum, summarize the supporting evidence and include a description of the data sources, tool(s), and
technique(s) used.” (Selling Guide B4-1.3-09, Adjustment to Comparable Sales.)
Market Condition (Time) Adjustments
In a recent internal analysis of appraisals with aged comparables performed during times of rapid home price appreciation (suggesting the need for time adjustments), we found that most comparables were not adjusted
for time. When we asked appraisers why not, a common response is that their lender clients discourage time adjustments.
With that in mind, in December 2024 we added two provisions to the Selling Guide in relation to time adjustments.
First, we specified that “Failure to make market-derived adjustments including time adjustments when they are clearly indicated” is an unacceptable appraisal practice (Selling Guide section B4-1.1-04 Unacceptable
Appraisal Practices). Our aim is to convey to lenders that they should expect and encourage time adjustments. This also gives appraisers a succinct, tangible policy statement that may help them defend the decision to
make a time adjustment.
Market condition is always the norm and that analysis may require an adjustment. The next question is how to determine the rate of adjustment. There are many acceptable professional appraisal methodologies. We
added this statement to illustrate the wide range of techniques available to appraisers:
“Time adjustments, or the lack thereof, must be supported by evidence. Use of home price indices (HPIs) to support time adjustments is consistent with our policy. The adjustment rates can also be determined through
statistical analysis, modeling, paired sales, or other commonly accepted methods. The appraisal report must, at a minimum, summarize the supporting evidence and include a description of the data sources, tool(s), and
technique(s) used.” (Selling Guide B4-1.3-09, Adjustment to Comparable Sales.)