Understanding Fannie Mae’s New Market Conditions Adjustments Policy

, ,

Last spring, Fannie Mae introduced a policy update that had appraisers and lenders talking. But this change was really just a reminder of what’s already standard practice: analyzing and adjusting for market conditions in every appraisal. The new guidance comes with a stronger push for appraisers to document time adjustments when the market demands it (and for the lenders who review their work to expect it).

If you’re not familiar with the term, time adjustments (aka market condition adjustments) account for how a property’s value changes over time—specifically, between the date a comparable property went under contract and the effective date of the appraisal. In a volatile market, those changes can be significant, even over the course of a few weeks.

What Spurred the New Guidance?

We saw real estate prices go crazy during the pandemic. At the time, Fannie Mae flagged a lot of appraisals for not including time adjustments, even when data supported them. When asked why, appraisers often gave the same answer: “When I make a time adjustment, the lender pushes back. It’s a headache I’d rather avoid.”

The problem wasn’t just with appraisers. Lenders, underwriters, and reviewers often saw time adjustments as problematic and unnecessary, so a lot of appraisal reports went out without acknowledging the very real market changes that had occurred.

The new policy is meant to change that mindset. By explicitly stating that market-derived adjustments (including time adjustments) are a necessary appraisal practice, Fannie Mae is sending a clear message to lenders: expect to see them. And to appraisers: you must do the analysis, every time.

What’s in the Updated Selling Guide?

Fannie Mae’s Selling Guide now includes two key additions related to market condition adjustments:

  1. Failure to make market-derived adjustments, including time adjustments, is unacceptable. If the data supports it, it should be in the report. This applies whether the market is rising, falling, or flat.
  2. Comparable sales must be analyzed for changes in market conditions. There’s no exception to this. Appraisers must analyze the data first, then decide if an adjustment is warranted based on that analysis—not the other way around.

The guide also clarifies what constitutes acceptable evidence for a time adjustment: home price indices (HPIs), statistical analyses, paired sales, modeling, or other commonly accepted methods. Bottom line: almost any credible evidence is better than none. Fannie Mae understands that appraisers in high-data urban markets may have sophisticated MLS tools, while appraisers focused on rural or unique-properties may need out-of-the-box approaches.

So, How Do I Support My Adjustments?

A big part of the update focuses on reporting. It’s not enough to simply list “+1%” or “+$70 per square foot” in your grid. Fannie Mae wants to see the math—how you arrived at that figure, what data you used, and why it applies.

The Selling Guide even includes an educational chart for lenders showing how adjustments vary depending on when each comparable went under contract. One comp might require a +2% adjustment, another +1%, and another a -1%—all in the same report—because each was tied to a different point in the market cycle. That’s normal. That’s the job: to analyze resales of the same property over time, isolating value changes that track market fluctuations. If a property sold for $200,000 two years ago and resold for $210,000 without any renovations, the $10,000 increase likely reflects market appreciation. By analyzing several of those resales, appraisers can reconcile a credible percentage adjustment.

Fannie Mae’s position? Yes, that’s an acceptable method. Again, almost any documented, reasoned analysis is better than no analysis.

Can I Use Older Sales?

The question often comes up: can you use a comparable sale older than 12 months? Absolutely. In fact, sometimes an older sale is the best sale, especially for unique properties.

Take the example of a two-story brick farmhouse built in the 1880s. In rural areas, there may be only one truly comparable home within miles, and maybe it last sold five years ago. If its physical and locational characteristics are nearly identical to the subject, that’s a better comp than a newer or dissimilar home. You’d just have to make a market condition adjustment for the five years of change, supported by data.

Another example: imagine two identical houses next door to each other, one of which sold 13 months ago. Common sense says you’d use it, making a time adjustment if necessary, rather than substituting a less comparable property just because of an arbitrary 12-month cutoff.

The Importance of Market Segmentation

Another point to ponder: not all properties in a market move in the same direction on the same schedule. A city’s overall market trend might be flat or declining, but certain segments, like starter homes, could still be in high demand and appreciating rapidly.

During the last housing crisis, large custom homes in some markets declined sharply, while smaller, more affordable homes gained value as buyers downsized. The appraiser’s job is to understand and document what’s happening in the competitive set of properties for the subject, not just in the broad market.

This means the one-unit housing trends box on the 1004 form should reflect the segment that competes directly with the subject, not an average of unrelated property types across the neighborhood. Be specific. Zoom in and see the details.

Don’t Overcomplicate Things

While the policy change stresses that you’ve got to do the analysis every time, Fannie Mae isn’t asking for a PhD dissertation in every report. Basic, common-sense market analysis—clearly summarized and supported—is often enough.

In many cases, choosing strong comps will make the market conditions adjustment much less complicated. If you have three recent, similar sales in the immediate area, the time adjustment may be obvious—or nonexistent. But you still need to document your analysis, even if it leads to a “0%” adjustment. The goal isn’t perfection; it’s credible, supported numbers.

Ultimately, this policy update is about shifting expectations. Fannie Mae wants time adjustments to be seen as normal and expected, not anomalies or headaches. Appraisers are still the local experts. It’s up to them to determine the correct rate of adjustment. Fannie Mae won’t nitpick the exact percentage as long as it’s supported by reasonable evidence.

Conclusion

The bottom line:

  • Do the analysis every time.
  • Document your reasoning.
  • Support your numbers with credible evidence.
  • Don’t ignore a relevant comparable just because it’s more than 12 months old.

And remember: it’s entirely possible to have a positive, a negative, and a zero market condition adjustment in the same report, if that’s what the data supports.

The new Fannie Mae guidance on market condition adjustments is less about changing appraisal methodology and more about reinforcing sound practice. It’s about making analysis and transparency the default, not the exception. For appraisers, this means more than just filling in a percentage. It’s about showing the work, explaining the reasoning, and making sure the report tells the full story of the market the subject property is in.

When the market is moving, buyers, sellers, lenders, and the public deserve appraisals that reflect reality. This policy is a step toward making sure they get them.

This article is adapted from this Appraisal Update Podcast episode from April, 2025.

 

/by

The New URAR: Finally, Uniform

, , ,

Since I started in this profession, we’ve been filling out something called the “Uniform Residential Appraisal Report.” URAR. A tidy acronym, an orderly idea. The problem, of course, is that it wasn’t uniform. Not by a long shot.

There was a form for a single-family house. Another for a condo. Another for a two- to four-unit property. Yet another for a manufactured home. You could practically fill a filing cabinet with the different “uniform” forms. Each one with its own quirks, limitations, and yes, checkboxes. Lots of checkboxes.

The first URAR came into the world in 1986, when Fannie Mae and Freddie Mac decided it might be nice if appraisers stopped sending in reports written on the backs of napkins or, worse, dictated into a tape recorder and transcribed by the typist down the hall.

By the mid-1990s, the form had become the backbone of mortgage lending. Every residential loan needed one. The problem was that “residential” meant a lot of things. It meant one house on one lot, sure. But it also meant a condo in Miami Beach, a duplex in Des Moines, or a manufactured home sitting proudly on a quarter-acre halfway between Humboldt and Gadsden.

Each property type came with its own form. Each form came with its own rules. Each rule came with its own set of misunderstandings.

So, what was “uniform” about it? Not much. If you were appraising only single-family homes in subdivisions, you might get away with only using the URAR. But step outside the tidy framework of cookie-cutter houses, and you’d need another form, an addendum, or some cobbled-together franken-design mess to tell the story. I have passed on condo appraisals in the past just to avoid dealing with the condo form.

The new URAR adapts to our needs. If the property has two units, the report expands. If it’s a condo, different sections appear. If it’s a manufactured home, the right data fields show up automatically. You no longer have to select from a menu of forms; the report builds itself around the property you’re analyzing.

It’s flexible, but structured. It’s detailed, but readable.

For the first time, lenders, regulators, and appraisers are all looking at the same thing. Not a PDF that tells a story one way for the reader and another for the database, but a unified, structured document that preserves the narrative and the data in one place.

For too long, we’ve treated appraisal as a stack of paperwork. The new URAR reframes it as a flow of data and analysis. The appraiser’s job is not to fill in blanks; it’s to interpret reality and record it in a way that others can trust, read, and reuse.

For too long, we’ve treated appraisal as a stack of paperwork. The new URAR reframes it as a flow of data and analysis. The appraiser’s job is not to fill in blanks; it’s to interpret reality and record it in a way that others can trust, read, and reuse.

Because a single-family home in Denver and a fourplex in Detroit don’t look alike, but they share the same fundamentals: location, condition, quality, and market forces. The new framework recognizes that and organizes it accordingly.

The story is still ours to tell, but the structure lets that story travel farther.

If, like me, you’ve been doing this a while, you might be tired of hearing about “big changes.” Every few years, someone promises revolution and delivers another PDF.

This one’s different.

The URAR redesign isn’t about forms, it’s about how we communicate. The goal isn’t to make the job harder; it’s to make the work more meaningful. The new report gives us room to explain, to narrate, to analyze. The structured data captures what’s measurable. The commentary captures what’s human. It’s a marriage of logic and judgment, of code and craft. Lenders get cleaner data. Regulators get consistency. Reviewers get clarity. Borrowers get transparency.

But the real winners might be the appraisers who adapt early. Because this isn’t just a technical update. It’s the new language and grammar of valuation. And those who learn to speak it fluently will find themselves more valuable than ever.

When you strip away the noise, the new URAR is about credibility. It says: here’s what the property is, here’s how I know, and here’s the data to back it up.

That’s what investors want. That’s what lenders need. And that’s what we’ve always tried to deliver, but with a mishmash of forms and addenda, and a mind-numbing complexity in presentation.

So yes, the new URAR finally earns its name. After all these years, “uniform” means something.

One report. One language. One process for every residential property type.

It’s the same notion we started with in 1986, but this time, we’ve got the technology and the discipline to make it work.

And maybe, if we get it right, the next generation of appraisers won’t have to explain what “uniform” was supposed to mean in the first place.

 

/by

The Appraisal Summit: Get UAD 3.6 Intel, and Stay in Touch

, ,

The Appraisal Summit | September 27 – 30 | Planet Hollywood Resort & Casino | Las Vegas, NV

There’s a LOT going on in the world of appraisal these days. The stakes are pretty high. And you’ve got questions.

The Appraisal Summit is your chance to get some answers and find out what can’t be known (yet) about the UAD 3.6 rollout, AI and appraisals, and more. Come to the place where everyone gathers: reps from the GSEs, software companies, insurance providers, and folks like you, the working appraiser. (See the schedule here.)

At the Summit, you’ll get tons of CE, face-to-face time with colleagues and industry bigwigs, and discussions about the huge issues that are lurking menacingly on your professional horizon. Grab the mic and ask those questions that are on your mind: Are software companies and lenders ready for UAD 3.6? Am I ready? How is AI going to change how I do my job? (Does anyone even know the answer to that one?)

Be courteous and curious. Keep an open mind. And just maybe, by the end of the conference, those issues won’t seem quite so menacing.

Here’s a possible itinerary:

  • Saturday 9/27: Get bonus CE on litigation support in the morning and on the cost approach in the afternoon. Have relaxed, civilized French bistro fare at Mon Ami Gabi, a short walk away at the Paris casino.
  • Sunday, 9/28: Get fully briefed (+ 7h bonus CE) on the new URAR with Bryan Reynolds. Then celebrate your deep learnings at the opening reception.
  • Monday, 9/29: Hear all about UAD 3.6 from the GSEs and the software companies. Reconnect at the NAA membership meeting, then sip a beverage with old friends at the Caramella Hidden Lounge.
  • Tuesday, 9/30: Dive into appraisal-related laws and regulations, AI, and the future of appraisal in the general sessions. Snag a Gordon Ramsay burger with a new connection and absorb all this new info together.
  • Wednesday, 10/1: Fly home rejuvenated by collegial connections and armed with accurate intel about what’s up in our industry.

There couldn’t be a more crucial time to be in the room with key players and colleagues facing the same questions you are. Not to mention that getting together with colleagues is a great way to break the isolation of day-to-day appraisal work. See old friends, celebrate and commiserate, and make memories! Click here to register.

The Appraisal Summit | September 27 – 30 | Planet Hollywood Resort & Casino | Las Vegas, NV | Co-hosted by the NAA & AeL (us!)

 

/by

The New Appraisal Report: How One Company Is Rethinking Appraisal Software

, , ,

How are appraisal software providers retooling their products for UAD 3.6? One provider, Jeff Bradford, shares his thinking.

In the Appraisal Update podcast, I’m always talking about the “train of change” coming to the appraisal world. If you’re an appraiser, you probably rolled your eyes. We’ve heard this before, right? For years, people have said “change is coming,” but then… nothing. Same forms, same software, same grind.

But it’s real this time. The train is pulling into the station. 

I want to talk about a video from late last year that’s gotten a lot of attention, even from the GSEs. I think it struck a chord. So let’s talk about what it is, who created it, and why.

A couple of years ago, when the GSEs first announced the new UAD rollout, they effectively hit the reset button for everyone in appraisal tech. Software companies had been in the business of form-filling: They helped appraisers build reports by filling in forms, attaching images, adding addendums, and producing a PDF. 

Starting late this summer, the GSEs are going to ask us for something very different. They now want a dynamic report, not a static form. What that actually means is that instead of the old, static, one-size-fits-none forms, your data inputs will trigger a fluid logic tree of prompts, which will change depending on property type and other variables. (Some sections,  like summaries and reconciliations, will remain standard.)

Suddenly, the software companies are staring down a whole new paradigm.

From Form-Filling to Decision-Making

Jeff Bradford, founder and CEO of Bradford Technologies, says he’s in the publishing business. His software suite helps appraisers through the whole process of inspection, comp selection, and analysis, and pulls it all together to help them “publish” solid reports. 

Now he’s facing a radical ROV: a reconsideration of the value of his entire product line. In my interview with Bradford late last year, he walked me through how his strategy changed after the GSEs’ announcement. “We said, ‘Do we want to continue being in the form-filling business?’” he told me. “Why not rethink what appraisal software can be?” 

Instead of doubling down on smarter forms, Bradford’s company decided to walk away from the form-filling business entirely. They’re shifting their focus to the parts of the job that actually require an appraiser’s judgment—analysis, comparison, trend evaluation, market insight, etc. 

Bradford built software that does the heavy lifting. It gathers data. Lots of it. It slices and dices it for you, shows you the trends, and then helps you make quick, confident decisions. Then, instead of making you input all that stuff again into a form, it extracts your conclusions and automatically generates the data outputs needed for the report.

Sure, there’s still a bit of input required, but they’ve essentially flipped the model. You’re not filling out a form—you’re analyzing data. The form builds itself around what you decide.

To help explain this shift, Bradford created a short video (about 10 minutes long) that walks you  through it. You can watch that video here.

Rethinking the Appraisal Workflow

We live in an “on-demand” world. You can get groceries and furniture delivered same-day. Why can’t we deliver an appraisal in a similar timeframe? That became Bradford Technologies’ north star: speed. We already have accuracy. We appraisers are great at what we do. This software just helps us do it faster.

Their new approach had to hit three marks:

  1. Speed – Faster than current workflows.
  2. Actionable insights – Real tools for real decisions.
  3. Enjoyable experience – Yes, actually fun.

The software now includes things like scanning floor plans in real-time, extracting metadata from property photos using computer vision, and auto-populating sections based on existing data, all while keeping the appraiser in the driver’s seat. You decide what goes in. The software helps you get there faster.

Bottom line? The form-filling days are over. Appraisers aren’t form fillers. They’re analysts. They’re decision-makers. Tech providers are just there to help us do that job better.

One of the most intriguing technological advancements showcased in Bradford’s new system is computer vision. This tech can scan a property live, instantly gathering detailed data. This live data capture eliminates the tedious task of manually retyping information, because the system automatically gathers analysis results and creates the necessary XML files—specifically the UAD-compliant data—before building the final report.

Jeff Bradford refers to this as the “bridge to the future.” Bradford’s new software, called NightHawk, integrates property inspections, data gathering, and analysis all in one place, eliminating the need to jump between spreadsheets or multiple systems. It pulls public records, MLS data, satellite imagery, and other relevant sources, providing appraisers with a comprehensive data set within seconds. The result? Faster decision-making based on richer, more immediate information.

How to Be Prepared

The new UAD is fast approaching, with a full mandate expected by November 2026. Appraisers will soon be required to adopt these new standards, marking a definitive end to the old ways of doing things. To help you keep pace, I’d recommend resources like training courses, continuing education, etc. Fannie Mae has released some training on the new reports, which I find incredibly useful, even for non-appraisers. And at AeL, we’re teaching Fannie Mae’s course on the new URAR every month or so for the foreseeable future. (Find a session that works for you in our course catalog.) It’s also useful to attend industry events like Valuation Expo or the Appraisal Summit, both happening in Las Vegas later this summer, where you can talk to software providers and GSE reps in person and ask all your burning questions. 

As you contemplate UAD 3.6, you can well imagine the benefits of having solid software in your toolbox. I’m not trying to sell you on any specific product. There are lots of software providers, and you may have a favorite. But I wanted to talk to Jeff, because I think it’s useful to hear how a smart software guy like him is retooling his product to integrate with UAD 3.6. Every provider is going to have to do just that. And you can just imagine how features like in-report reconciliation, qualitative analysis for rentals, and the ability to embed photos directly where needed can help you get the job done faster and better.

The “train of change” is not just coming. It’s here. There’s going to be a learning curve. But if you’re an early adopter, you can leave your competition in the dust. You don’t have to go it alone. From CE providers, to software companies, to Fannie Mae, there’s plenty of information out there for appraisers wanting to learn more. What matters most is being prepared. Are you ready for the new appraisal report? If not, we’ll help you get there. —Bryan Reynolds

 

Watch the interview:

/by

Appraising During Covid – What You Need to Know | Webinar Overview

, , , , ,
Read more
/by

The Client Accommodation Trap

, , , ,

Appraisers try to accommodate their client’s interests. There is nothing wrong with this per se.  Appraisers commonly write, “at the client’s instruction…” or “per the client’s request…”, then the appraiser describes what the client instructed or what the client requested, as well as what the appraiser did to comply with the instruction or request.

This language, however, implies the appraiser is trying to do the appraisal, or write the appraisal report, in a manner that pleases the client, a potential USPAP violation. By definition, a real estate appraiser must be independent, impartial, and objective. Such accommodating language not only calls into question whether the appraiser has complied with these three qualifications but also smacks of advocacy.

Omit the offending language.  For example, appraisers commonly omit the analyses of the Cost approach. However, certain clients may request the inclusion of these analyses as part of the appraiser’s value conclusion. Instead of saying, “at the client’s request, the appraiser has included the protocols of the cost approach…”, please consider saying, “the appraiser included the protocols of the cost approach as both applicable and necessary to the formation of a credible value conclusion”, never mentioning the client’s request.

/by

USPAP Compliance and Desktop Appraisals

, ,

Many appraisers are worried that a so-called desktop appraisal will not be USPAP compliant if a third party to inspects and/or photographs the subject property.

USPAP does not make an issue of who inspects the property, nor who photographs it. USPAP does not require the appraiser to inspect the subject property. Nor does USPAP require the appraiser to photograph the subject property or the comparables. USPAP requires the appraiser to disclose the extent of the inspection of the subject property, which includes no inspection at all. Further, USPAP makes no mention of the need to include photographs of the subject as part of the formation of a credible value opinion. Both these requirements are a function of lender requirements, not USPAP.

Fannie Mae requires the appraiser to inspect the subject property, as well as to inspect the comparable property from at least the road in front of the it (assuming that’s possible). However, Fannie Mae has no requirements the appraiser take these photographs. In other words, a contractor the appraiser hires to take photographs could do this and the report would still be fully Fannie Mae, as well as USPAP, compliant.

An individual lender may require the appraiser to take the subject and comparable photographs him- or herself. If the appraiser agrees to this condition, then the appraiser has no choice but to do so. However, the key point here is that the appraiser personally taking the photographs of the subject and/or the comparables is a lender requirement, not a requirement of USPAP, and not necessarily a requirement of Fannie Mae.

Therefore, under certain conditions, an appraiser doing a desktop appraisal is perfectly USPAP compliant.  Providing photos is not significant appraisal assistance. The appraiser is under no ethical obligation to disclose the photographer’s name, nor the extent of his/her assistance.

/3 Comments/by

Lies, Damn Lies and Inadequate Sample Size

Benjamin Disraeli was the Victorian era Prime Minister of the United Kingdom.  He famously said “there are three kinds of lies: lies, damned lies and statistics”.  He died in 1881.  This was after Sir Francis Galton coined the term standard deviation, but before he popularized concepts like of correlation and the Central Limit Theorem with his publication of Nature in 1889.

Perhaps Disraeli was witness to how misleading statistics could be without an understanding of sample size requirements.  Most people wander about in the same fog that engulfed Disraeli.

The Central Limit Theorem states that a sample size equal to or greater than 30 is required to make credible assertions about a population.  “In practice, the Central Limit Theorem allows us to make inferences about population means relying on the normal distribution when a) the population is normal or b) when n ≥ 30. As a practical matter, the sampling distribution of the mean will be approximately normal when n ≥ 15 and the population is symmetrically distributed. However, appraisers usually know very little about the shape of population distributions of price, property attributes, financing arrangements, and the like. Therefore, the n ≥ 30 criterion generally applies to real property valuation work.”[1]

In general, if the mean and the median of a population differ, the distribution is not normal and you need a sample size of 30 or greater.

[1] Marvin L. Wolverton, PhD, MAI, An Introduction to Statistics for Appraisers (Chicago, The Appraisal Institute)

/3 Comments/by