source:
  type: guide
  id: fnma-sel-b4-1.3-03
  authority: Fannie Mae Selling Guide B4-1.3-03 — Neighborhood Section of the Appraisal
    Report
  description: Fannie Mae Selling Guide B4-1.3-03 — Neighborhood Section of the Appraisal
    Report.
  coverage_tier: operative
obligations:
- id: fnma-sel-b4-1.3-03-full
  canonical_id: fnma-sel-b4-1.3-03-full
  section: Fannie Mae Selling Guide B4-1.3-03 — Neighborhood Section of the Appraisal
    Report
  type: do
  tags:
  - regulator-direct
  - fnma
  - selling-guide
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: Fannie Mae Selling Guide B4-1.3-03 — Neighborhood Section of the Appraisal
      Report
    source_class: fnma-guide
    source_url: https://singlefamily.fanniemae.com/media/document/pdf/selling-guide
    snapshot_id: 5f7b8b79da595d76
    fetched_at: '2026-05-25T14:09:57Z'
    content_hash: sha256:98cf85a02861bbe84914a0e339b327c8fc131869a8a573882007bbeea60c5701
    paragraph_quote: 'B4-1.3-03, Neighborhood Section of the Appraisal Report (06/04/2025)
      Introduction This topic contains information on reviewing the Neighborhood section
      of the appraisal report form, including: Overview Neighborhood Analysis Degree
      of Development and Growth Rate Trend of Neighborhood Property Values, Demand/Supply,
      and Marketing Time Price Range and Predominant Price Over-Improvements Age Range
      and Predominant Age Present Land Use Uniform Appraisal Dataset (UAD) 3.6 Policy
      Overview Neighborhood characteristics and trends inﬂuence the value of one-
      to four-unit residences and an analysis of the subject property’s neighborhood
      is a key element in the appraisal process. A neighborhood is deﬁned as a congruous
      group of complementary land uses. Neighborhood Analysis Fannie Mae requires
      the appraiser to perform an objective neighborhood analysis by identifying neighborhood
      boundaries, neighborhood characteristics, and the factors that aﬀect the value
      and marketability of properties in the neighborhood. Neighborhood boundaries.
      The appraiser should provide an outline of the neighborhood boundaries, which
      should be clearly delineated using ‘North’, ‘South’, ‘East’, and ‘West’. These
      boundaries may include, but are not limited to streets, legally recognized neighborhood
      boundaries, waterways, or other natural boundaries that deﬁne the separation
      of one neighborhood from another. Appraisers should not reference a map or other
      addendum as the only example of the neighborhood boundaries. Published May 6,
      2026 555 Neighborhood characteristics. These can be addressed by the types of
      structures (detached, attached) and architectural styles in the neighborhood
      (such as row or townhouse, colonial, ranch, or Victorian); current land use
      (such as single-family residential, commercial, or industrial); typical site
      size (such as 10000 sf, or 2.00 ac); or street patterns or design (such as one-way
      street, cul-de-sac, or court). Factors that aﬀect the value and marketability
      of properties in the neighborhood. These can be addressed by such things as
      the proximity of the property to employment and amenities, appeal to the market,
      changes in land use, access to public transportation, and adverse environmental
      inﬂuences. The appraiser must fully consider all of the value-inﬂuencing characteristics
      in the neighborhood and arrive at an appropriate neighborhood description and
      opinion of value for the property, even if this requires more extensive research
      for particular property types or for properties in certain geographic locations.
      An appraiser must perform a neighborhood analysis in order to identify the area
      that is subject to the same inﬂuences as the property being appraised, based
      on the actions of typical buyers. The results of a neighborhood analysis enable
      the appraiser not only to identify the factors that inﬂuence the value of properties
      in the neighborhood, but also to deﬁne the area from which to select the market
      data needed to perform a sales comparison analysis. In performing a neighborhood
      analysis, the appraiser must collect pertinent data, research the neighborhood
      to identify physical characteristics and determine its boundaries, and identify
      land uses and any signs that the land uses are changing. Fannie Mae expects
      the appraiser and the lender’s underwriter to be aware of the varying conditions
      that characterize diﬀerent types of neighborhoods. Conditions that are typical
      in certain neighborhoods may not be present in other neighborhoods. This does
      not mean the existence of certain types of conditions or characteristics are
      unacceptable; rather, it is an indication they must be viewed in context with
      the nature of the neighborhood in which the security property is located. For
      example, some neighborhoods consist of a variety of property types with diﬀerent
      uses. It is common to ﬁnd properties that have mixed-uses, such as residential
      properties that also have child-care facilities, doctor or dental oﬃces, and
      other types of business or commercial uses. The presence of mixed-use properties
      or a variety of property types within a neighborhood should be viewed as a neighborhood
      characteristic that the appraiser considers when performing the neighborhood
      analysis and describing the neighborhood boundaries. The appraiser must consider
      the inﬂuence of market forces, including economic, governmental, and environmental
      factors on property values in the neighborhood. Economic forces that must be
      considered include such things as the existence of vacant or boarded-up properties
      in the neighborhood and the level of essential local support services. Examples
      of governmental forces that should be taken into consideration include the regulations,
      laws, and taxes that are imposed on properties. Environmental forces that must
      be considered include, among other things, the existence of a hazardous waste
      site on or near the property, the proximity of a property to an airport, or
      the Federal Emergency Management Agency (FEMA) designated ﬂood zone in which
      the property is located. Characteristics that are not appraisal factors must
      not be considered in the valuation process either partially or completely. These
      characteristics include a person''s sex, race, color, religion, disability,
      national origin, or familial status. Also, no reference to any protected class
      of either the prospective owners or occupants of the subject property or the
      present owners or occupants of the properties in the vicinity of the subject
      property should be considered or reported. The appraiser must determine, analyze,
      and consider factors in the valuation process based on their identiﬁcation of
      all forces or factors that have the potential to inﬂuence the value of the property.
      The appraiser Published May 6, 2026 556 must report neighborhood conditions
      in factual, speciﬁc terms and be impartial and speciﬁc in describing favorable
      or unfavorable factors in a neighborhood. If an appraiser can demonstrate by
      market evidence that a characteristic eﬀects the value or marketability of the
      properties in the neighborhood, they must consider it in the valuation process.
      The appraiser must not make unsupported assumptions or interject personal opinion
      or perceptions about market forces or other factors that may or may not aﬀect
      the use and value of a property (see B4-1.1-04, Unacceptable Appraisal Practices).
      Degree of Development and Growth Rate The degree of development of a neighborhood,
      which is referred to as “built-up” on the appraisal report forms, is the percentage
      of the available land in the neighborhood that has been improved. The degree
      of development of a neighborhood may indicate whether a particular property
      is residential in nature. When reviewing an appraisal on a property located
      in a rural or relatively undeveloped area, the lender should focus on the characteristics
      of the property, zoning, and the present land use to determine whether the property
      should be considered residential in nature. For example, if the typical one-unit
      building site in a particular area (based on the zoning, the highest and best
      use of the land, and the present land use) is two acres in size, the loan will
      be eligible for purchase or securitization regardless of the percentage of the
      total appraised value of the property that the site represents, as long as the
      appraiser demonstrates through the use of comparable sales that the property
      is a typical residential property for that particular neighborhood. Because
      Fannie Mae does not purchase or securitize loans secured by agricultural-type
      properties, undeveloped land, or land-development-type properties, the lender
      must review the appraisal report for properties that have sites larger than
      those typical for residential properties in the neighborhood. Special attention
      must be given to the appraiser’s description of the neighborhood, zoning, the
      highest and best use determination, and the degree of comparability between
      the subject property and the comparable sales. If the subject property has a
      signiﬁcantly larger site than the comparables used in the appraiser’s analysis,
      the subject property may not be a typical residential property for the neighborhood.
      Trend of Neighborhood Property Values, Demand/Supply, and Marketing Time The
      appraiser must report the primary indicators of market condition for properties
      in the subject neighborhood as of the eﬀective date of the appraisal by noting
      the information in the table below. Trend of Property Values Supply of Properties
      in the Subject Neighborhood Marketing Time for Properties • increasing, • stable,
      or • declining. • shortage, • in-balance, or • over-supply. • under three months,
      • three to six months, or • over six months. The appraiser’s analysis of a property
      must take into consideration all factors that aﬀect value. Because Fannie Mae
      purchases loans in all markets, this is particularly important for neighborhoods
      experiencing signiﬁcant ﬂuctuations in property values including sub-markets
      for particular types of housing within the neighborhood. Therefore, lenders
      must conﬁrm the appraiser analyzes listings and contract sales as well as closed
      or settled Published May 6, 2026 557 sales, and uses the most recent and similar
      sales available as part of the sales comparison approach, with particular attention
      to sales or ﬁnancing concessions in neighborhoods that are experiencing either
      declining property values, an over-supply of properties, or marketing times
      over six months. The appraiser must provide their conclusions for the reasons
      a neighborhood is experiencing declining property values, an over-supply of
      properties, or marketing times over six months. When completing the One-Unit
      Housing Trends portion of the Neighborhood section of the appraisal report,
      the trends must be reﬂective of those properties deemed to be competitive to
      the property being appraised. If the neighborhood contains properties that are
      truly competitive (that is, market participants make no distinction between
      the properties), then all the properties within the neighborhood would be reﬂected
      in the One-Unit Housing Trends section. The appraiser''s analysis of the property
      value housing trend section (increasing, stable, declining) must include 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
      trend indicated in the appraisal report must reﬂect the overall movement of
      the market based on a minimum of 12 months of data. Price Range and Predominant
      Price The appraiser must indicate the price range and predominant price of properties
      in the subject''s neighborhood. The price range must reﬂect high and low prevailing
      prices for one-unit properties, two- to four-unit properties, condo units, or
      co-op units depending on the property type being appraised and the appraisal
      form being used. Isolated high and low extremes should be excluded from the
      range, which means that the predominant price will be that which is the most
      common or most frequently found in the neighborhood. The appraiser must state
      the predominant price as a single ﬁgure using whole numbers. Over-Improvements
      An over-improvement is an improvement that is larger or costlier than what is
      typical for the neighborhood. For example, a 4,000 square foot home located
      in an area of homes where the typical home is 2,000 square feet may be considered
      an over-improvement. Furthermore, a home with an in-ground pool in an area where
      pools are not typical may also be considered an over-improvement. The appraiser
      must comment on over- improvements and indicate their contributory value in
      the Sales Comparison Approach adjustment grid. Improvements can represent an
      over-improvement for the neighborhood, but still be within the neighborhood
      price range, such as a property with an in-ground swimming pool, a large addition,
      or an oversized garage in a market that does not demand these kinds of improvements.
      The fact that the property is an over-improvement does not necessarily make
      the property ineligible. However, lenders must review appraisals on properties
      with over-improvements that may not be acceptable to the typical purchaser to
      ensure that only the contributory value of the over-improvement is reﬂected
      in the appraisal analysis. Age Range and Predominant Age The appraiser must
      indicate the age range and predominant age of properties in the subject''s neighborhood.
      The age range should reﬂect the oldest and newest ages for one-unit properties,
      two- to four-unit properties, condo units, or co-op units depending on the property
      type and the appraisal form being used. However, Published May 6, 2026 558 isolated
      high and low extremes should be excluded from the range. The predominant age
      is the one that is the most common or most frequently found in the neighborhood.
      The appraiser must state the predominant age as a single ﬁgure using whole numbers.
      When the age of the subject property is signiﬁcantly diﬀerent than the predominant
      age range, the appraiser must explain why the age is outside the range and comment
      on the marketability of the property and the adjustments that were made in the
      Sales Comparison Approach adjustment grid to reﬂect that condition. Present
      Land Use Fannie Mae’s appraisal reports provide an area for the appraiser to
      report the relative percentages of the developed land in the neighborhood when
      discussing the present land use, rather than simply referring to the zoning
      classiﬁcations. The appraiser must separately report the percentage of developed
      one-unit sites and two- to four-unit sites. Undeveloped land must be reported
      in the “Other” ﬁeld. In addition, if there is a signiﬁcant amount of undeveloped
      land in the neighborhood, the appraiser must include comments to conﬁrm that
      they adequately described the neighborhood. If the present land use in the neighborhood
      is not one of those listed on the appraisal report form, such as parkland, the
      appraiser also must indicate the type of land use and its related percentage.
      The total of the types of land uses must equal 100%. Typically, dwellings best
      maintain their value when they are situated in neighborhoods that consist of
      other similar dwellings. However, some factors that are typical of a mixed-use
      neighborhood, such as easy access to employment centers and a high level of
      community activity, can actually enhance the market value of the property through
      increased buyer demand. Neighborhoods may frequently reﬂect a blend of residential
      and nonresidential land uses. When diﬀerent land uses and property types are
      present in a neighborhood, that fact should be considered a neighborhood characteristic
      that the appraiser needs to take into consideration when performing the neighborhood
      analysis and deﬁning the neighborhood boundaries. To conﬁrm that any positive
      or negative eﬀects of the mixed land uses are reﬂected in the sales comparison
      analysis, the appraiser should select comparable sales from within the same
      neighborhood whenever possible. If this is not possible, the appraiser may need
      to make neighborhood or location adjustments to the Sales Comparison Approach
      adjustment grid for any sales that do not share the same characteristic(s) or
      externalities. Uniform Appraisal Dataset (UAD) 3.6 Policy Lenders using UAD
      3.6 must follow the requirements in the UAD 3.6 Policy Supplement. Recent Related
      Announcements The table below provides references to recently issued Announcements
      that are related to this topic. Announcements Issue Date Announcement SEL-2025-04
      June 04, 2025 Published May 6, 2026 559 Announcements Issue Date Announcement
      SEL-2024-07 November 06, 2024 Announcement SEL-2024-06 September 04, 2024 Announcement
      SEL-2020-03 June 03, 2020'
  judgment: false
