FHA is updating the appraisal requirements for declining markets.  A declining market is considered to be any neighborhood, market area, or region that demonstrates a decline in prices or deterioration in other market conditions as evidenced by an oversupply of existing inventory or extended market conditions.

Here is a short list of the future changes.

1. Include an absorption rate analysis
2. Adjust pending sales to reflect contract sales price whenever possible or adjust pending sales to reflect list to sale price ratios
3. Adjust active listings to reflect the list to sales price ratios for the market
4. Need at least 2 comparable sales within 90 days of the appraisal date
5. Include original list price, any revised list price, and total days on the market
6. Provide an explanation for days on the market that do not approximate time frames
7. Provide know or reported sales concession on active and pending sales
8. Need a minimum of 2 active listings or pending sales in addition to the 3 closed comps
9. Need bracketed listings using both dwelling size and sales price when possible
10. Reconcile adjusted values of active listings or pending sales with the adjusted values of the settled sales provided
11. Insure that active listings and pending sales are market tested and have reasonable market exposure to avoid the use of over priced properties as comparables

These changes go into effect on April 1st 2009.

If you have any additional FHA, VA, or First time home buyer questions...please ask!  I can be reached at Tino.Muratore@gmail.com

Thank you.