Arizona, Nevada, California, and Florida are currently classified as Extreme Declining Markets by Fannie Mae and Freddie Mac. As a result of this new classification, FNMA and FHLMC will require the following on all appraisals (this only applies to declining market areas):
1. The most recent and similar comparable sales available as part of the sales comparison approach must be used. Any change in market conditions from the date the contract of sale was signed and date of the appraisal must be considered.
2. Verification of comparable sales with a reliable party that is not associated with the subject property or the subject property’s development, and at least two comparables must be verifiable through the Multiple Listing Service (MLS) as Arms-Length transactions.
3. Two of the comparable sales must have closed within the last 90 days.
4. At least one current listing or pending sale must be provided.
5. Comparable sales must be mapped in the appraisal.
6. Days-on-market for subject and comparable sales must be provided, if applicable. The average days-on-market for the comparable sales must not exceed the “Marketing Time” box marked by the appraiser.
7. If the appraiser is unable to meet any of the above requirements, the appraiser must provide a detailed explanation as to why the requirements were not met, and if it resulted in making an adjustment to the property value.
Recommended Practice
If the subject property is an REO, or if the subject is located in an area where there are a substantial number of REO properties, the appraiser must identify this fact and discuss its impact on the subject’s property value. In addition, REO comparables should be considered if the appraiser believes that such comparables are legitimate competing properties.
Additional Requirements for New Projects and Developments (more…)
