What This Guideline Covers
When you apply for a mortgage, the appraiser doesn't just look at your house. They must document specific details about the property, your purchase contract, and the surrounding neighborhood. Fannie Mae requires this information to ensure the property serves as adequate collateral for your loan.
The appraiser starts by identifying your property with a complete address that follows postal service standards. They also need the legal description — the precise boundary information that appears on your deed. This isn't your street address. It's the technical description that might reference lot numbers, survey markers, or detailed measurements.
Say you're buying a house at 123 Main Street in a subdivision. The legal description might read "Lot 15, Block 3, Maple Grove Subdivision, according to the plat recorded in Book 45, Page 67." The appraiser must include this exact language in their report.
Contract Analysis Requirements
Your purchase contract becomes a key part of the appraisal process. The appraiser must analyze the contract price, date, and any financial assistance the seller provides. This includes seller-paid closing costs, repairs, or other concessions.
The lender must provide the complete contract to the appraiser, not just a summary. The appraiser then compares your contract price to recent sales of similar properties. If you're paying $300,000 but similar homes sold for $275,000, the appraiser needs to explain this difference.
Financial assistance from the seller gets special attention. If the seller agrees to pay $5,000 toward your closing costs, the appraiser must note this amount and describe it. This information helps the underwriter determine if the sale price reflects the true market value.
Legal Description Standards
The legal description in your appraisal must match the description in your deed, title insurance, and mortgage documents exactly. Fannie Mae accepts several formats, but each has specific requirements.
Metes and bounds descriptions use precise measurements and compass directions. These start from a fixed point like a survey monument and describe each boundary line with distances and bearings. If your property has curved boundaries, the description must include arc length and radius measurements.
Lot and block descriptions reference recorded subdivision plats. These are simpler but must cite the correct plat book and page number. The appraiser can't just write "Lot 5" — they need the complete reference to the recorded map.
For properties on dedicated streets, the legal description can reference the street boundaries. Registered properties under Torrens systems follow their own format requirements.
Neighborhood Analysis Components
The appraiser must describe your neighborhood's characteristics using specific categories. They classify it as urban, suburban, or rural, then describe how built-up it is and whether it's experiencing rapid, stable, or slow growth.
Market conditions analysis looks at recent sales trends, typical price ranges, and property age ranges in your area. The appraiser explains whether home values are rising, falling, or stable.
Mixed-use areas don't disqualify your property. A residential property in a neighborhood with some commercial buildings or agricultural land can still qualify for Fannie Mae financing. The appraiser just needs to explain how these different uses affect the residential market.
Required Documentation
Your lender must provide the complete purchase contract to the appraiser. This includes all addenda, amendments, and disclosure forms. The appraiser can't complete their analysis with just a purchase agreement summary.
The legal description comes from your preliminary title report or deed. The appraiser may attach lengthy legal descriptions as an addendum to keep the main report readable.
For properties currently listed or recently listed for sale, the appraiser needs the listing price, marketing dates, and days on market. They'll verify this information through multiple listing services or other reliable sources.
Why These Requirements Matter
Fannie Mae needs precise property identification to ensure they can foreclose and sell the property if necessary. Inconsistent legal descriptions between documents can create title problems that make foreclosure difficult or impossible.
Contract analysis helps detect inflated sale prices. If sellers provide excessive concessions or the sale price seems high compared to recent sales, this might indicate the property won't hold its value.
Neighborhood analysis helps predict future marketability. A property in a declining area with slow sales might be harder to sell if foreclosure becomes necessary. The appraiser's analysis helps Fannie Mae understand these risks.
Common Problems and Complications
Legal description mismatches cause frequent delays. Your deed might describe the property one way while the survey uses slightly different language. All documents must align before closing.
Missing contract information can stall the appraisal. If your contract includes verbal agreements or side deals not documented in writing, the appraiser can't consider them. Everything must be in the written contract.
Neighborhood boundaries can be subjective. The appraiser might define your neighborhood differently than you expect. They use factors like school districts, major roads, and similar housing types to draw boundaries.
Properties with unusual characteristics need extra documentation. If your home sits on agricultural land or includes commercial space, the appraiser must explain how this affects value and marketability.
Recent listing history requires verification. If your property was listed at a much higher price six months ago, the appraiser must research and explain the price reduction. This could indicate market softness or initial overpricing.
References
For the official guidelines, see 5605.3: Subject property, contract and Neighborhood description in the Fannie Mae Selling Guide.
Mortgage guidelines change. Stay current.
Fannie Mae and Freddie Mac update their rules several times a year. Get notified when changes affect your mortgage eligibility, required documents, or loan terms.
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Original Freddie Mac Guideline Text
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
(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
.)
(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 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.
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:
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
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.
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
.)
(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:
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.
