Why won't appraisers use a 14-month-old sale, and should they?

The 12-month habit is a comfort zone, not a wall

Fannie Mae's Selling Guide says comparable sales that closed within the last 12 months should be used. It also says an older sale may be more appropriate when market conditions have affected the supply of recent sales, and that in rural areas the appraiser may use older sales if the report explains why.

So why does a 14-month-old sale almost never make the grid? Mostly because it is work. An older sale needs a longer time adjustment, a longer explanation, and a ready answer when the underwriter asks about it. Many lenders and review desks also prefer recent sales, and an appraiser who wants a clean file learns to give them what they like.

There is one excuse I don't buy: "It needs too many adjustments." Fannie Mae says it has no specific limits on net or gross adjustments, and that the number or size of adjustments alone does not make a comp unacceptable. What matters is whether each adjustment is supported. A long list of measured adjustments beats a short list of guesses.

What an older sale still knows

Picture the twin of your house. Same builder, same floor plan, same street, sold 14 months ago. Since then, the only recent sales are a bigger two-story across the busy road and a smaller house with a different lot.

That old twin knows things the recent sales don't. It knows what buyers paid for this floor plan, this street and this lot. What it doesn't know is today. The market has moved for 14 months since that buyer signed.

That is a solvable problem. My position is simple: an older sale can be normalized to the subject and indexed forward to the effective date. That gives you an "as if it sold today" indication. It doesn't replace recent closed sales, but it can sit beside them and either confirm what they say or flag that something is off.

Think of it like an old photo of your best friend. The haircut is dated, but you can still tell exactly who it is.

Two steps: make it the same house, then make it today

Step one: normalize it to the subject. Adjust the old sale for the ways it differs from the house being appraised, such as size, condition, bathrooms or garage. Each adjustment should come from measured market evidence, like paired sales, which compare similar homes that differ mainly in one feature.

Step two: index it forward. Carry that adjusted price from the date the sale went under contract up to the effective date of the appraisal. Fannie Mae says market change must be analyzed over exactly that window, and that time adjustments, or the lack of them, must be supported by evidence such as home price indices, paired sales or statistical analysis.

Here is a made-up example. These numbers are for illustration only.

Look at the trend row. A single annual average would blur that dip and recovery into one number. Fannie Mae itself warns that a positive 12-month trend can hide a market that was flat or falling over the stretch that matters.

Measure the trend in short steps, all the way to today

The time adjustment is where an older sale wins or loses. Fourteen months is a long stretch, and markets rarely move in a straight line for that long.

I measure the trend in the shortest windows the data supports, 30 or 45 days where there are enough sales, and work outward only when the sales get too thin. If a short window won't hold up, I show why rather than just saying so. Then I carry the trend all the way to the effective date. I don't stop at the last closed sale. Pending sales are the market talking right now, and they help confirm whether the trend at the tail end is still going.

Done this way, the old sale gets the market it actually lived through, month by month. Done lazily, it gets a single number that was true on average and wrong for this sale.

A practical note: the same two steps work on a retrospective appraisal, such as a date-of-death value. There, "today" means the effective date in the past, and the trend stops on that date.

What to do when the best comp is an old one

• Get the contract date. The closing date is not enough, because the time adjustment starts when the price was agreed.
• Check what happened to the house since. The sale describes the house as it was then. If it was remodeled after closing, today's photos will mislead you.
• Bring the trend evidence. Newer closed sales, pending contracts and price changes on similar listings. A time adjustment needs proof, in either direction.
• Say why it is more similar. One or two sentences comparing it to the recent sales that were used.
• Don't ask it to carry the whole value. On a lender report it usually supports the recent closed sales. Fannie Mae still requires at least three closed comps.
• Ask for the as-if-today math. Original price, each adjustment, the trend and the result, in plain view.

If your market has run out of good recent sales, my free guide When the Comps Run Out walks through this method and others. Facts over feelings works on old sales too. It just takes one more step.