The Appraiser must accurately report market conditions and determine when housing trends are increasing, stable or declining. The Appraiser must provide a summary comment as to the continuance of the current trend or if the trend appears to be changing, and provide support for all conclusions. If the Appraiser bases the adjustment on a published source, the Appraiser must include a copy of which must be included in the addendum.

The Appraiser must include an absorption rate analysis, and at least two comparable sales that closed within 90 Days prior to the effective date of the appraisal, and a minimum of two active listings or pending sales on the SCA Grid (in addition to at least three settled sales). If the Appraiser cannot comply with these requirements due to the lack of market data, a detailed explanation is required to support the market trend conclusion and include all data and analysis used to identify the current and forecasted market.

For active listings or pending sales, the Appraiser must:

• ensure they are market tested and have reasonable market exposure to avoid the use of overpriced properties as comparable properties;
• use the actual contract purchase price, or, when not available, adjust comparable properties to reflect listing- to-sale price ratios;
• include the original list price, any revised list prices, and calculate the total Days on Market (DOM). The Appraiser must provide an explanation for the DOM that does not approximate periods reported in the “Neighborhood” section of the appraisal reporting form;
• reconcile the Adjusted Values of active listings or pending sales with the Adjusted Values of the settled sales provided; and
• if the Adjusted Values of the settled comparable properties are higher than the Adjusted Values of the active listings or pending sales, determine if a Market Condition Adjustment is appropriate. 

For additional information, see:

• Handbook 4000.1 II.D.4.c.iii(F)(2) at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh
• FHA INFO #21-25 at https://www.hud.gov/program_offices/housing/sfh/FHA_info_messages
• Handbook Waiver at https://www.hud.gov/program_offices/administration/hudclips/waivers/

All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.