Freddie Mac Single-Family Seller/Servicer Guide §5605.6 — Sales comparison approach (01/26/26)
Freddie Mac Guide §5605.6 (Sales comparison approach). Gap-fill (verbatim, ID-diff).
Verbatim regulatory text
Verbatim provisions from Freddie Mac Single-Family Seller/Servicer Guide §5605.6 — Sales comparison approach (01/26/26) — each quote is a verified substring of the regulator-published source snapshot, not retyped. Quoted for reference; this is not legal advice. The operational layer (P&P updates, prompts) lives in the regulation update kits.
Freddie Mac Guide 5605.6
Refer to Bulletin 2025-7, which announced the policy requirements for Uniform Appraisal Dataset (UAD) 3.6. Sellers may submit to the Uniform Collateral Data Portal® appraisal reports that use UAD 3.6 before the mandatory effective November 2, 2026 version of this section and Section 5605.7. Freddie Mac requires that all appraisal reports include a sales comparison approach. This section contains requirements related to: ■ Adjustments ■ Sales and financing concessions ■ Market Area analysis and market condition adjustments ■ Location ■ View ■ Condition and quality ■ Selection of comparable sales and analysis ■ Sale and listing history For special appraisal requirements for HeritageOne® Mortgages, see Section 4504.9.
Freddie Mac Guide 5605.6
605-32 (a) Adjustments Each comparable sale must be analyzed for similarities and differences between it and the subject property. When the appraiser’s analysis concludes an adjustment is necessary, the appraisal report must include adjustments for differences and indicate the dollar amount of the adjustment to reflect the value of the differences to the market. The appraisal report must contain an explanation of the basis and rationale for all adjustments (or, if necessary, lack of adjustments). Comparable sales must be adjusted to the subject property except for sales and financing concessions that must be adjusted based on their effect on the sales price of the comparable sale. Large adjustments typically occur in rural markets, and with unique properties, due to limited market activity. Freddie Mac does not have limitations on gross or net adjustment percentages. See subsection (c) below for market condition adjustment requirements. (b) Sales and financing concessions The appraisal report must identify how the sales were verified and whether concessions were granted. Sales or financing concessions may be offered by interested parties to the transaction (e.g., the builder, developer, property seller or real estate agent). Adjustments to the comparable sales must be made for special or creative financing or sales concessions. No adjustments are necessary for costs that are normally paid by property sellers as a result of tradition or law in a Market Area; these costs are readily identifiable since the property seller pays these costs in virtually all sales transactions. Adjustments to a comparable sale with a concession(s) must reflect the actual effect on the sales price of that comparable sale; that effect may be equal to, lower than or higher than the actual amount (or value) of the concession. Note: For Seller treatment of concessions, see Section 5501.6. (c) Market Area analysis and market condition adjustments The market trend (increasing, stable or declining) must be based on factual data from information sources, such as, but not limited to, market data, home price indices, multiple listing services, public records and/or models. The market trend identified in the appraisal report must reflect the overall movement of the market based on a minimum of 12 months of data. A specific market condition adjustment to a comparable sale may differ from the identified market trend since the determination of whether to make an adjustment to a comparable sale
Freddie Mac Guide 5605.6
605-33 is based on market changes between the contract date of the comparable sale and the effective date of the appraisal. Example: The 12-month trend indicates a positive overall trend, although the market was stable (or declining) between the contract date of the comparable sale and the effective date of the appraisal report. (See Exhibit 44, Market Condition Adjustments.) Comparable sales with a contract date that is recent in relation to the effective date of the appraisal report may not have a market condition adjustment, given the inability to identify a change in the market. The appraisal report must contain the market analysis that supports the market trend and any adjustments made for market conditions. (d) Location For appraisal report forms that are required to be completed using the UAD, the appraisal report form must include a rating of the location of the subject property and each comparable sale by providing a rating of either “Neutral,” “Beneficial” or “Adverse.” The location rating (which will be abbreviated as N, B, or A in the appraisal report form) describes the overall effect of the location of the subject property within the Market Area on the value and marketability of the subject property and is not a rating of the overall Market Area. See Appendix D – Field Specific Standardization Requirements of the Uniform Appraisal Dataset Specification (“UAD Specification”) for additional requirements regarding location. Rural locations often have less real estate sales activity than more populated areas. Property sales in rural locations often involve a variety of property types and may have relatively large parcels compared to other locations. Given the potential challenges with appraising properties in rural Market Areas, the appraiser must be knowledgeable about the varying conditions that characterize properties in a particular geographic area. When appraising properties in rural Market Areas, the appraisal report may contain older comparable sales, comparable sales that are a considerable distance from the subject property or comparable sales that are not ideally similar to the subject property. The appraisal report must include justification and support in the appraisal report for the use of any such comparable sales and make appropriate adjustments to account for the differences between the comparable sales and the subject property. Example: If the subject property is a ranch-style home on a large parcel of land (e.g., 44 acres), the most relevant comparable sales may be two-story homes on smaller parcels (e.g., 6–12 acres) that are some distance from the subject property (e.g., 8–18 miles away).
Freddie Mac Guide 5605.6
605-34 (e) View For appraisal report forms that are required to be completed using the UAD, the overall view associated with the subject property and each comparable sale must be rated as either “Neutral,” “Beneficial” or “Adverse.” The UAD view rating (which will be abbreviated as N, B or A in the appraisal) describes the overall effect of the view associated with the subject property on the value and marketability of the subject property. See Appendix D – Field Specific Standardization Requirements of the UAD Specification for additional requirements regarding view. Refer to Section 5606.1 for additional information related to UAD requirements. (f) Condition and quality Adjustments must be made for differences in condition and quality between the subject property and each comparable sale The appraisal report may contain an adjustment for differences in quality and condition between the subject property and a comparable property, even though the properties have the same UAD quality or condition rating. In this case, an explanation must be provided in the appraisal report. Refer to Section 5605.5 for information related to property condition and quality of construction, Section 5606.1 for information related to UAD requirements and Exhibit 36, Condition and Quality Ratings and Level of Updating Definitions. (g) Selection of comparable sales and analysis The appraisal report must contain a minimum of three comparable sales as part of the sales comparison approach. The appraisal report may include more than three comparable sales, including contract sales (pending sales) and/or current listings, to support the opinion of market value. The appraisal report should include comparable sales that closed within 12 months; however, older comparable sales may be used. The appraisal report must provide commentary on the reasons for using any comparable sales that are more than six months old. The proper selection of comparable properties minimizes both the need for, and the size of, any adjustments. This typically includes characteristics such as: ■ Finished area ■ Room count ■ Quality ■ Site
Freddie Mac Guide 5605.6
605-35 When choosing comparable sales, it’s important to identify the Neighborhood in which the subject property is located and determine whether the Neighborhood represents the Market Area or the Market Area is larger than the Neighborhood. The appraiser may need to use comparable sales from outside the subject property’s Market Area, and, in such cases, location adjustments may be necessary. When comparable sales are located outside the Market Area, the appraisal report must contain commentary explaining the rationale for the selected comparable sales. There may be no similar comparable sales for a subject property because of the uniqueness of the subject property or other conditions. Comparable sales may be taken from a competing Market Area if they are better than the comparable sales in the subject’s Market Area. (i) Comparable sale requirements for properties in established subdivisions, established Planned Unit Developments (PUDs) and Established Condominium Projects For properties in established subdivisions, units in established PUDs or units in Established Condominium Projects, the appraisal report should contain comparable sales from within the subject subdivision or project when they are the best indicators of value for the subject property. See Section 5705.8 for specific requirements regarding selection of comparable sales for units in a Cooperative Project. (ii) Comparable sale requirements for properties in new subdivisions, new PUDs and recently converted or New Condominium Projects To demonstrate the marketability and develop an opinion of market value for properties in new subdivisions, units in new PUDs or units in recently converted or New Condominium Projects, the appraisal report must contain: 1. At least one comparable sale from inside the subject subdivision, PUD or project, when available. Additionally: ■ The comparable sale from inside the subject subdivision, PUD or project can be a sale by the builder or developer of the subject property ■ If there are no closed comparable sales from inside the subject subdivision, PUD or project, contract sales from inside the subject subdivision, PUD or project may be used to satisfy this requirement. The use of contract sales must be in addition to the three actual closed sales from outside the subject subdivision, PUD or project.
Freddie Mac Guide 5605.6
605-36 ■ If the subject subdivision, PUD or project is so new that a closed sale or a contract sale is not available, comparable sales from outside the subject subdivision, PUD or project may be used. In this case, the appraisal report must contain commentary on the marketability of the new subdivision, PUD or project and justification supporting the use of the comparable sales from outside the new subdivision, PUD or project. 2. At least one comparable sale from outside the subject subdivision, PUD or project Resales from inside the subject subdivision or project are preferable as comparable sales and should be given significant consideration, as they provide a reliable indicator of the market value of units within the subdivision, PUD or project. At least two comparable sales must be sales in which the builder or developer of the subject property was not involved in the sale transaction. See Section 5705.8 for specific requirements regarding selection of comparable sales for units in a Cooperative Project. (h) Sale and listing history The appraisal report must demonstrate the appraiser researched, verified and analyzed: ■ Any current agreement for sale for the subject property ■ Any offering for sale of the subject property in the 12 months before the effective date of the appraisal ■ Any sales or transfers of the subject property in the three years before the effective date of the appraisal ■ Any sales or transfers of each comparable sale in the year before the date of sale of the comparable sale The Seller’s determination of the acceptability of each appraisal should include an analysis of the sale and listing history. The Seller must confirm the sale price trend relative to the appraiser’s opinion of market value is reasonable and representative of the market. For purchase transactions, the Seller should analyze the appraisal report and the current contract for sale for the subject property. For both purchase and refinance transactions, the Seller’s underwriting analysis of the appraisal report should include any current listing or offering for sale for the subject property, the sales history of the subject property and comparable sales and the current ownership of the subject property.
Freddie Mac Guide 5605.6
605-37 To reduce the Seller’s risk of liability resulting from fraudulent or inaccurate appraisals, the Seller should analyze the subject property and comparable sales and evaluate the time elapsed between the date(s) the property was acquired and the date(s) resold, or the date of the current resale contract, if applicable. If the sales history of the subject property or comparable sales indicates current or prior sale prices may be excessive, and resale dates occurred shortly after the property seller’s acquisition of the property, the appraisal report should provide evidence to justify and support a rapidly appreciating real estate market, significant improvements that resulted in a corresponding increase in the property value or a previous sale that was below market value due to a distress or tax sale.
Freddie Mac Guide 5605.6
Market Area, sales contract, sale and listing history (Future effective date 11/02/26) This section contains requirements related to: ■ Market Area description and analysis ■ Sales contract analysis ■ Sale and listing history (a) Market Area description and analysis The “Market” section of the appraisal report requires the appraiser to: ■ Define the Market Area ■ Identify properties in the Market Area that directly compete with the subject property (listings, pending sales, closed sales) and the housing trends (demand, supply and marketing time) in the Market Area (i) Market Area analysis Mortgages secured by residential properties in urban, suburban or rural Market Areas are eligible for delivery to Freddie Mac if the Mortgaged Premises is adequate collateral for the transaction, based on the value, condition and marketability of the Mortgaged Premises. Market conditions and Neighborhood or Market Area characteristics vary based on property location. The appraisal report must include the appraiser’s explanation of their conclusions.
Freddie Mac Guide 5605.6
605-38 (ii) Neighborhood or Market Area characteristics Neighborhood or Market Area characteristics that are typical in certain locations may not exist in other locations; therefore, Neighborhood or Market Area characteristics must be viewed in the context of the location of the subject property. Example: Urban locations often consist of a variety of different property types that have different uses. It is not unusual in urban Neighborhoods to find properties with mixed uses, such as residential properties that also have a commercial use. Rural locations may have agricultural zoning and/or consist of a variety of property types and land uses, such as large sites with outbuildings, farms, ranches and undeveloped land. When performing the Neighborhood or Market Area analysis, the appraiser must consider the existence of any of the following in the Neighborhood or Market Area: ■ Mixed-use property ■ Non-residential property ■ Non-residential land uses, such as agricultural property, undeveloped land or land under development The existence of mixed-use properties, non-residential properties or non-residential land uses in the Neighborhood or Market Area does not make the residential properties in those locations ineligible as security for Mortgages delivered to Freddie Mac. Example: A subject property in a rural area where agricultural activities are prevalent may be eligible as security for a Mortgage delivered to Freddie Mac if the appraiser determines the subject property is residential, based on the subject property’s characteristics and land use. (b) Sales contract analysis The sales contract for the subject property must include: ■ Sale or contract price ■ Date of contract ■ Any loan charges to be paid by the property seller, and ■ Any financing or sales concessions to be paid by the property seller or any other interested party to the transaction
Freddie Mac Guide 5605.6
605-39 The Seller must review the sales contract for the subject property and ensure the complete sales contract is provided to the appraiser. The “Sales Contract” section of the appraisal report must include: ■ The results of the appraiser’s analysis of the sales contract ■ Contract price ■ Date of contract, and ■ Whether the transaction appears to be arm’s length, the transfer terms, and whether personal property is being conveyed The appraisal report must include the total dollar amount and a description of any financial assistance (e.g., loan charges, sales concessions, gift or Down Payment assistance) to be paid by any party on behalf of the Borrower. (c) Sale and listing history The appraisal report must demonstrate that the appraiser researched, verified, and analyzed: ■ Any current agreement for sale of the subject property ■ Any offering for sale of the subject property in the 12 months before the effective date of the appraisal report ■ Any sales or transfers of the subject property during the three years before the effective date of the appraisal report ■ Any sales or transfers of each comparable sale during the year before the date of sale of the comparable sale The Seller’s determination of the acceptability of each appraisal should include an analysis of the sale and listing history. The Seller must confirm that the sale price trend relative to the appraiser’s opinion of market value is reasonable and representative of the market. For both purchase and refinance transactions, the Seller’s underwriting analysis of the appraisal report should include any current listing or offering for sale for the subject property, the sales history of the subject property and comparable sales, and the current ownership of the subject property. To reduce the Seller’s risk of liability resulting from fraudulent or inaccurate appraisals, the Seller should analyze the subject property and comparable sales and evaluate the time