source:
  type: guide
  id: fhlmc-5605.2
  authority: Freddie Mac Single-Family Seller/Servicer Guide Section 5605.2 — Definition
    of market value
  description: Freddie Mac Single-Family Seller/Servicer Guide Section 5605.2 — Definition
    of market value.
  coverage_tier: operative
obligations:
- id: fhlmc-5605.2-full
  canonical_id: fhlmc-5605.2-full
  section: Freddie Mac Single-Family Seller/Servicer Guide Section 5605.2 — Definition
    of market value
  type: do
  tags:
  - regulator-direct
  - fhlmc
  - freddie-guide
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: Freddie Mac Single-Family Seller/Servicer Guide Section 5605.2 — Definition
      of market value
    source_class: fhlmc-guide
    source_url: https://guide.freddiemac.com/ci-guide
    snapshot_id: 5869ee9e606cd4ae
    fetched_at: '2026-05-23T00:27:40Z'
    content_hash: sha256:9a1b23e5024bb369e7a59d36b3702383c11ace68b5d209fdef791bc8f955c637
    paragraph_quote: '5605.2: Definition of market value (06/04/25) An appraisal must
      be based on the following definition of market value: The most probable price
      which a property should bring in a competitive and open market under all conditions
      requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably
      and assuming the price is not affected by undue stimulus. Implicit in this definition
      is the consummation of a sale as of a specified date and the passing of title
      from seller to buyer under conditions whereby: 1. Buyer and seller are typically
      motivated Freddie Mac Single-Family Seller/Servicer Guide Chapter 5605 As of
      02/04/26 Page 5605-2 2. Both parties are well informed or well advised, and
      each is acting in what he or she considers his or her own best interest 3. A
      reasonable time is allowed for exposure in the open market 4. Payment is made
      in terms of cash in U.S. dollars or in terms of financial arrangements comparable
      thereto, and 5. The price represents the normal consideration for the property
      sold unaffected by special or creative financing or sales concessions* granted
      by anyone associated with the sale *Adjustments to the comparables must be made
      for special or creative financing or sales concessions. No adjustments are necessary
      for those costs which are normally paid by sellers as a result of tradition
      or law in a Market Area; these costs are readily identifiable since the seller
      pays these costs in virtually all sales transactions. Special or creative financing
      adjustments can be made to the comparable property by comparisons to financing
      terms offered by a third-party institutional lender that is not already involved
      in the property or transaction. Any adjustment should not be calculated on a
      mechanical dollar-for-dollar cost of the financing or concession, but the dollar
      amount of any adjustment should approximate the market’s reaction to the financing
      or concessions based on the appraiser’s judgment. The market value estimate
      of the subject property must not include value assigned to furniture or any
      other personal property. 5605.3: Subject property, contract and Neighborhood
      description (01/26/26) 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. This section
      contains requirements related to: ■ Identifying the subject property address,
      legal description, occupancy status, property rights, listing information and
      lender/client ■ Contract analysis ■ Neighborhood description and analysis Freddie
      Mac Single-Family Seller/Servicer Guide Chapter 5605 As of 02/04/26 Page 5605-3
      (a) Identifying the subject property address, legal description, occupancy status,
      property rights, listing information and lender/client (i) Subject property
      address and owner of record The “Subject” section of the appraisal report must
      identify the subject property by providing a complete property address and legal
      description and by identifying the owner of public record for the property.
      For appraisal reports that are required to be completed using the Uniform Appraisal
      Dataset (UAD), the format of the property address must conform to the United
      States Postal Service (USPS) Address Standards in Publication 28. (Refer to
      Section 5606.1.) (ii) Legal description For each Mortgage delivered to Freddie
      Mac with an appraisal report, the appraisal report must include the legal description
      of the subject property. If the legal description is lengthy, the appraiser
      may attach it as an addendum to the appraisal report. The legal description
      used in the Security Instrument, title insurance policy or other evidence of
      title must be in one of the forms listed below. (A) Metes and bounds If the
      appraisal report contains a metes and bounds legal description, it should comply
      with the following standards: ■ The beginning point should be established by
      a monument located at the beginning point or by reference to a nearby monument
      ■ Each boundary of the Mortgaged Premises must be described by its distances
      and bearings. Note: In place of bearings, the interior angle method is acceptable
      if the beginning point is on a dedicated public street line or a fixed line
      on other property or if the course of the first side can be otherwise properly
      fixed. ■ The distances, bearings and angles should be taken from a recent instrument
      survey or a recently recertified instrument survey by a licensed civil engineer
      or registered surveyor ■ Curved courses should be described by data including
      the length of arc, the radius of circle for the arc and the chord distance and
      bearing. Note: When a survey course is part of a dedicated public street or
      road line, the course may be described by indicating the distance and direction
      the course takes Freddie Mac Single-Family Seller/Servicer Guide Chapter 5605
      As of 02/04/26 Page 5605-4 along the street line from the end of the previous
      course, if commonly accepted by private institutional Mortgage investors in
      the Market Area where the Mortgaged Premises is located. ■ The legal description
      should be a single perimeter description of the entire plot ■ The subject property
      must not be divided into parcels unless serving a special purpose of the Mortgage;
      however: ❑ The subject property must be divided if the parcel is located on
      two sides of a public way ❑ It is customary in many areas to describe an easement
      appurtenant to a fee simple parcel by using a separate parcel description (B)
      Lot and block A description composed of lots and/or blocks, including a reference
      to a recorded map or plat that shows the lots or blocks, is usually adequate.
      When all lots or blocks in the description do not appear on the same recorded
      map or plat, a reference to the location of the apparently identical sides of
      lots or blocks in different recorded maps or plats, fixed in both maps or both
      plats by the same monuments (a rare situation), is usually adequate. (C) Additional
      acceptable forms If a parcel is bounded on all sides by dedicated streets or
      alleys, it is acceptable for the legal description to refer only to the bounding
      lines of the streets or alleys. A description of registered property is acceptable
      if it is in the form required by the local Torrens Act. (D) Consistency of legal
      description The Mortgage, title insurance policy (or substitute evidence of
      title), survey, lease, mortgage insurance policy, property insurance policies
      and all other documents pertaining to the Mortgage or the Mortgaged Premises
      must each have a legal description consistent with that in the other documents.
      (iii) Occupancy status, property rights and listing information The occupancy
      status of the property must be identified as either owner, tenant or vacant
      as of the effective date of the appraisal report. Freddie Mac Single-Family
      Seller/Servicer Guide Chapter 5605 As of 02/04/26 Page 5605-5 The property rights
      appraised must be reported as either fee simple or leasehold, and the appraisal
      report must indicate whether the property is currently offered for sale or was
      offered for sale within the 12 months prior to the effective date of the appraisal
      report. The appraisal report must state the data source(s) used, offering price(s),
      date(s) and days on market for the subject property. (iv) Lender/client identification
      The appraisal report must include the name of the lender on the lender/client
      line. Any applicable appraisal management company must be reported in the appraiser’s
      certification section of the appraisal report form. (b) Contract analysis The
      contract for sale 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 The Seller must ensure the complete
      contract for sale for the subject property is provided to the appraiser with
      the appraisal request, regardless of whether the appraisal is ordered by the
      Seller or another lender. The “Contract” section of the appraisal report must
      include: ■ The results of the appraiser’s analysis of the contract for sale
      ■ Contract price ■ Date of contract, and ■ Acknowledgement as to whether the
      property seller is the owner of public record, and the data source(s) used The
      appraiser must have the necessary and appropriate data sources for the Market
      Area in which the subject property is located. 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. Freddie Mac Single-Family Seller/Servicer
      Guide Chapter 5605 As of 02/04/26 Page 5605-6 For appraisal reports that are
      required to be completed using the UAD, the “Contract” section of the appraisal
      report must indicate the type of sale for the underlying transaction. Valid
      UAD sale types include REO sale, short sale, court-ordered sale, estate sale,
      relocation sale, non-arm’s length sale and arm’s length sale. (Refer to Section
      5606.1.) (c) Neighborhood description and analysis The “Neighborhood” section
      of the appraisal report requires the appraiser to: ■ Identify the Neighborhood
      boundaries and describe the Neighborhood characteristics as either “Urban,”
      “Suburban” or “Rural” ■ Describe the percent built-up as either “Over 75%,”
      “25-75%” or “Under 25%” ■ Describe the growth rate as either “Rapid,” “Stable”
      or “Slow” ■ Report on market conditions, one-unit housing trends, price and
      age ranges and present land uses for the properties in the Neighborhood (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 property. 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. (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 different 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 Freddie Mac Single-Family Seller/Servicer Guide Chapter
      5605 As of 02/04/26 Page 5605-7 ■ 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. 5605.3: Subject property
      (Future effective date 11/02/26) This section contains requirements related
      to: ■ Subject property ■ Legal description ■ Ownership rights (a) Subject property
      The “Subject Property” section of the appraisal report must identify the subject
      property by providing a complete physical property address and legal description.
      The format of the property address must conform to the United States Postal
      Service (USPS) Address Standards in Publication 28. This section also requires
      the identification of certain property characteristics (e.g., Planned Unit Development
      (PUD), Condominium, Cooperative, new construction), number of dwellings, attachment
      type, existence of an ADU, ownership rights and special assessments. (b) Legal
      description For each Mortgage delivered to Freddie Mac with an appraisal report,
      the appraisal report must include the legal description of the subject property.
      If the legal description is lengthy, Freddie Mac Single-Family Seller/Servicer
      Guide Chapter 5605 As of 02/04/26 Page 5605-8 the appraiser may upload an image
      file of the legal description in the “Subject Property Exhibits” of the appraisal
      report. The legal description used in the Security Instrument, title insurance
      policy or other evidence of title, survey, lease, mortgage insurance policy,
      property insurance policies and all other documents pertaining to the Mortgage
      or the Mortgaged Premises must describe the subject property. Although encountered
      in only a few cases, a description of a parcel bounded on all sides by dedicated
      streets or alleys can acceptably refer only to the bounding lines of the streets
      or alleys. A description of registered property is acceptable if it is in the
      form required by the local Torrens Act. (i) Metes and bounds If the appraisal
      report contains a metes and bounds legal description, it should comply with
      the following standards: ■ The beginning point should be established by a monument
      located at the beginning point or by reference to a nearby monument ■ Each boundary
      of the Mortgaged Premises must be described by its distances and bearings. Note:
      In place of bearings, the interior angle method is acceptable if the beginning
      point is on a dedicated public street line or a fixed line on other property
      or if the course of the first side can be otherwise properly fixed. ■ The distances,
      bearings and angles should be taken from a recent instrument survey or a recently
      recertified instrument survey by a licensed civil engineer or registered surveyor
      ■ Curved courses should be described by data including the length of arc, the
      radius of circle for the arc and the chord distance and bearing. Note: When
      a survey course is part of a dedicated public street or road line, the course
      may be described by indicating the distance and direction the course takes along
      the street line from the end of the previous course, if commonly accepted by
      private institutional Mortgage investors in the Market Area where the Mortgaged
      Premises is located. ■ The legal description should be a single perimeter description
      of the entire plot Freddie Mac Single-Family Seller/Servicer Guide Chapter 5605
      As of 02/04/26 Page 5605-9 ■ The subject property must not be divided into parcels
      unless serving a special purpose of the Mortgage; however: ❑ The subject property
      must be divided if the parcel is located on two sides of a public way ❑ It is
      customary in many areas to describe an easement appurtenant to a fee simple
      parcel by using a separate parcel description (ii) Lot and block A description
      composed of lots and/or blocks, including a reference to a recorded map or plat
      that shows the lots or blocks, is usually adequate. When all lots or blocks
      in the description do not appear on the same recorded map or plat, a reference
      to the location of the apparently identical sides of lots or blocks in different
      recorded maps or plats, fixed in both maps or both plats by the same monuments
      (a rare situation), is usually adequate. (c) Ownership rights The “Ownership
      Rights” section of the appraisal report describes the ownership and property
      rights appraised for the subject property and must be reported as either fee
      simple or leasehold. The appraisal report must identify any property rights
      excluded from the valuation of the subject property (e.g., mineral rights, water
      rights).'
  judgment: false
