New Fannie Mae and Freddie Mac Guidelines on Market-Level Analyes: What Appraisers Need to Know
The real estate appraisal industry is facing a significant shift with the latest updates to Fannie Mae and Freddie Mac’s selling and servicing guidelines. These changes, which went into effect earlier this month, aim to create greater consistency and standardization in how appraisers analyze market areas.
What’s Changing?
Both Fannie Mae and Freddie Mac have introduced new requirements designed to improve the clarity and reliability of market area analyses in appraisals. These updates include:
- Standardized Market Analysis – Appraisers must now follow specific guidelines when analyzing market areas, ensuring that their reports contain consistent data and methodology.
- 12-Month Market Trends – Appraisers are required to use at least a 12-month timeframe when assessing market conditions, distinguishing long-term trends from individual property adjustments.
- Clearer Comparable Selection and Adjustments – The new guidelines specify how appraisers should select and adjust comparable sales, ensuring that market conditions are properly factored into the valuation.
- More Detailed Methodology – Appraisers must provide well-documented justifications for their market condition adjustments, offering lenders and stakeholders more transparency in their reports.
How Will Appraisers Be Affected?
While these changes are intended to enhance appraisal accuracy and reliability, there are mixed reviews on how well-prepared appraisers are to implement them. On one hand, appraisers have responded that they have already been doing the type of market analysis that is now required in the appraisal reports, so this is not a big deviation from what they’ve always done. On the other side, appraisers in more rural markets have stated that often there is too small of a sample size to reliably identify market trends and draw meaningful conclusions based on the limited sales data available. In addition, the increased documentation requirements could present an additional burden for appraisers, requiring more time and effort to comply with the stricter standards.
Why Now? Market Variations and Housing Trends
These changes come at a time when housing markets across the country are experiencing varied trends. Data from the AEI Housing Center indicates that markets in the Midwest and Northeast are still appreciating or holding steady, while home prices in states like Florida and Texas are beginning to decline. This shift is largely due to changes in demand, with previously hot markets now cooling as pandemic-driven migration slows.
The updated guidelines reflect a need for appraisers to be more precise in their valuations, especially as local market conditions continue to diverge. This variation makes it even more crucial for appraisers to differentiate between broader market conditions and individual property factors when making adjustments.
With these new guidelines now in effect, appraisers will need to quickly adapt to the updated expectations for market analysis and documentation. While it remains to be seen whether these changes will create additional workload challenges, the ultimate goal is to improve the quality and consistency of real estate valuations.
As the industry adjusts, CSS remains dedicated to keeping appraisers informed and equipped with the knowledge they need to meet these evolving expectations while maintaining the quality and consistency of their valuations.
Ashley is the CEO of CSS and oversees all aspects of the company’s strategy and operations.
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