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:
- 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.
- 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.