the appraiser must not expand the neighborhood boundaries just to encompass the comparables selected. The appraiser must indicate the comparables are from a competing neighborhood and address any differences that exist. The appraiser must also provide an explanation as to why they used the specific comparable sales in the appraisal report and include a discussion of how a competing neighborhood is comparable to the subject's neighborhood. If a property is located in an area in which there is a shortage of truly comparable sales, either because of the nature of the property improvements or the relatively low number of sales transactions in the neighborhood, the appraiser might need to use properties that are not truly comparable to the subject property. In some situations, properties that are not truly comparable may simply be the best available and the most appropriate for the appraiser’s analysis. The use of such sales is acceptable if the appraiser adequately documents the analysis and explains why they were used. (For additional information, see B4-1.3-03, Neighborhood Section of the Appraisal Report. When describing the proximity of the comparable sale to the subject property, the appraiser must be specific with respect to the distance in terms of miles and include the applicable directional indicator (for example, “1.75 miles NW”). The distance between the subject property and each comparable property is to be measured using a straight line between the properties. Minimum Number of Comparable Sales A minimum of three closed comparables must be reported in the sales comparison approach. Additional comparable sales may be reported to support the opinion of market value provided by the appraiser. The subject property can be used as a fourth comparable sale or as supporting data if it was previously closed. Contract offerings and current listings can be used as supporting data, if appropriate. See Additional Requirements for New (or Recently Converted) Condos, Subdivisions, or PUDs below for exceptions to this policy. In no instance may the appraiser create comparable sales by combining vacant land sales with the contract purchase price of a home (improvements only). While these transactions cannot be used to meet the required minimum three closed comparables, these transactions, which are often completed as part of a construction-to- permanent loan transaction, may be included as additional support with appropriate commentary. Age of the Comparable Sales Comparable sales that have closed within the last 12 months should be used in the

If the appraisal indicates evidence of infestation (such as, wood-boring insects), dampness, or abnormal settlement, the appraisal must comment on the effect on the value and marketability of the subject property. The lender must either provide satisfactory evidence that the condition was corrected or submit a professionally prepared report indicating, based on an inspection of the property, that the condition does not pose any threat of structural damage to the improvements. The appraisal should be made "subject to" repairs or alternations, or "subject to" an inspection by a qualified professional. 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 Announcement SEL-2023-02 March 01, 2023 B4-1.3-07, Sales Comparison Approach Section of the Appraisal Report (06/04/2025) Introduction This topic contains information on reviewing the Sales Comparison Approach section of the appraisal report form, including: Overview Data and Verification Sources of Comparable Sales Prior Sales History of the Subject and Comparable Sales Uniform Appraisal Dataset (UAD) 3.6 Policy Overview The sales comparison approach to value is an analysis of comparable sales, contract sales, and listings of properties that are the most comparable to the subject property.