Minding the Valuation Gap: How Time Adjustments Help Align Appraisals with Changing Markets

Appraisal results that come in below a home’s contract price can turn an otherwise straightforward transaction into a series of unexpected challenges. Lenders may require larger down payments, buyers might need to renegotiate, and in some cases, sales fall apart entirely. One of the reasons this happens more often than people expect is that appraisers rely on recent comparable sales to estimate value. When market conditions change quickly, those comparables can become outdated and understate where values actually stand.

Appraisal guidelines allow for time adjustments, which are changes made to comparable sales to reflect price movement between the sale date of the comparable and the appraisal’s effective date. Time adjustments exist to bring older sales into closer alignment with current conditions, making them more useful benchmarks. Yet a recent analysis from the Federal Housing Finance Agency shows that time adjustments are used far less frequently than market data would suggest, and when they are used, they tend to be smaller than expected based on observed price trends (https://www.fhfa.gov/blog/insights/underutilization-of-appraisal-time-adjustments).

What the FHFA Analysis Shows

In January 2024, the FHFA published an analysis examining how often time adjustments are applied and how large those adjustments tend to be relative to expected price changes. The study reviewed single-family appraisal data from the third quarter of 2018 through the fourth quarter of 2021 using the Uniform Appraisal Dataset (https://www.fhfa.gov/blog/insights/underutilization-of-appraisal-time-adjustments).

During that period, national home prices rose at varying rates, sometimes reaching double-digit annual growth. Comparable sales used in appraisals were often several months old by the time the appraisal was completed. Based on house price index data, expected time adjustments would have averaged roughly two and a half to nine percent of the comparable sale price. Despite that, time adjustments were applied to fewer than ten percent of comparable sales for much of the study period. Even during the fastest appreciation in 2021, fewer than one in four comparable sales received a time adjustment (https://www.fhfa.gov/blog/insights/underutilization-of-appraisal-time-adjustments).

The FHFA also found that when time adjustments were applied, they were usually smaller than what market data suggested. In markets where index data implied a five to ten percent adjustment, the actual adjustments reflected in appraisal reports were often significantly lower (https://nationalmortgageprofessional.com/news/appraisal-time-adjustments-are-underused).

Why Time Adjustments Matter in Practice

Time adjustments help ensure that older comparable sales remain relevant when markets are changing. They are not intended to be arbitrary or mechanical. Their purpose is to reflect how buyers and sellers are behaving at the effective date of the appraisal.

When prices are stable, time adjustments may not be necessary. Older sales can still represent current value reasonably well without modification. When prices are shifting, whether upward or downward, leaving older sales unadjusted can cause appraised values to lag behind current market behavior. That lag is often what creates tension between contract prices and appraisal conclusions.

Why Time Adjustments Are Often Avoided

The FHFA analysis shows that time adjustments are frequently omitted even when market conditions suggest they may be appropriate. One reason is analytical complexity. Supporting a time adjustment requires identifying credible trend data and explaining how it applies to the subject’s market area.

Data availability also plays a role. Reliable local price trend data is not always easy to access, especially in smaller or more specialized markets. Some trend tools require paid subscriptions, and not all appraisers have access to the same data resources (https://www.fhfa.gov/blog/insights/underutilization-of-appraisal-time-adjustments).

There is also professional caution. Time adjustments directly affect value conclusions, and poorly supported adjustments can attract scrutiny. That caution can lead to conservative application or avoidance altogether, even when price movement is evident.

What This Means for Buyers, Sellers, and Transactions

Although time adjustments are technical, their impact shows up in very practical ways. When older sales are used without adjustment during periods of change, appraisal results may fall short of contract prices even when buyer behavior supports those prices.

Understanding how time adjustments work helps explain why an appraisal result might differ from expectations. Appraisals reflect closed sales, not listing prices or pending contracts. Time adjustments are one of the tools that help bridge that timing gap when market conditions are evolving.

How Professional Appraisal Analysis Helps

Appraisers who carefully evaluate market trends, support adjustments with data, and explain their reasoning clearly can reduce surprises in transactions. Time adjustments are not required in every appraisal, but when market conditions warrant them, thoughtful application can improve accuracy and credibility.

Properties affected by changing market conditions often benefit from appraisal analysis that goes beyond surface-level metrics. Gulf Stream Residential Appraisal works with homeowners, buyers, and real estate professionals to provide valuations that reflect current market behavior, supported by data and a clear explanation. If you are navigating a transaction where pricing and timing feel out of sync, professional appraisal guidance can help clarify how market trends were considered.