A comparable recorded price is $568,000 with seller concessions costing $18,000. Verified market analysis attributes only $11,000 of the recorded price increase to them. What price results after removing the verified concession price effect only?
Correct Answer
B) $557,000
568000-11000=557000. Common errors: adding the concession effect instead of subtracting it gives $579,000; deducting the seller’s cost instead of the verified price effect gives $550,000; not adjusting the recorded price gives $568,000.
Why This Is the Correct Answer
Option B is correct because the verified market analysis attributes $11,000 of the recorded price to the concessions, so that amount is removed: 568,000 − 11,000 = $557,000. The adjustment reflects how the market reacted to the concessions, not what they cost the seller. Concession adjustments reduce the comparable's price; positive adjustments for concessions are not acceptable under Fannie Mae guidance.
Why the Other Options Are Wrong
Option A: $550,000
Option A, $550,000, is wrong because it deducts the seller's $18,000 cost instead of the verified $11,000 price effect: 568,000 − 18,000 = 550,000. The correct calculation is 568,000 − 11,000 = $557,000.
Option C: $568,000
Option C, $568,000, is wrong because it leaves the recorded price unadjusted. The verified $11,000 concession effect must be removed, giving $557,000.
Option D: $579,000
Option D, $579,000, is wrong because it adds the concession effect instead of subtracting it: 568,000 + 11,000 = 579,000. The concessions inflated the price, so the correct result is 568,000 − 11,000 = $557,000.
Remove the effect, not cost
Concession adjustments take out what the market paid extra because of the concession, which may be less than what the seller spent.
How to use: Use this when a question gives both a concession cost and a verified price effect.
Exam Tip
When a question gives two figures for a concession, choose the one described as the verified market price effect.
Common Mistakes to Avoid
- -Deducting the full dollar cost of concessions when the market effect is smaller
- -Making a positive adjustment for concessions
- -Leaving a concession-inflated price unadjusted
Concept Deep Dive
Analysis
This question tests the difference between the cost of a seller concession and its effect on price. Market analysis shows only $11,000 of the price was due to the concessions, even though they cost the seller $18,000. The adjustment removes the verified price effect, not the seller's cost.
Background Knowledge
Seller concessions can raise a recorded price above what the property would bring on cash-equivalent terms. The adjustment should reflect the market reaction to the concession, which may differ from its dollar cost. Fannie Mae does not accept positive adjustments for sales or financing concessions.
Real-World Application
A comparable closed with the seller paying $18,000 toward the buyer's costs. The appraiser's paired analysis shows similar homes without concessions sold about $11,000 lower. The appraiser applies an $11,000 downward adjustment and explains the support.
More Sales Comparison Questions
Supported adjustments are: non-market financing $10,000, GLA $36/sf, garage $3,500 per car, pool/spa $12,500. A comparable identical to the 2,800 sf subject sold for $267,000 with non-market financing. What is its adjusted price?
Using GLA $36/sf and non-market financing $10,000: a 3,100 sf comparable sold for $277,000 with non-market financing; the subject has 2,800 sf. Bath count differences are not adjusted. What is the adjusted price?
Using garage $3,500 per car and pool/spa $12,500: a comparable with a 2-car garage and a pool/spa sold for $268,000. The subject has a 3-car garage and no pool. What is the adjusted price?
Using GLA $36/sf, garage $3,500 per car and pool/spa $12,500: a 2,600 sf comparable with a 2-car garage and a pool/spa sold for $264,000. The subject is 2,800 sf with a 3-car garage and no pool. What is the adjusted price?
In a neighborhood with declining values and marketing times over six months, what must Fannie Mae lenders confirm about the sales comparison analysis?
A house is a 4,000 square foot home in an area of 2,000 square foot homes. How must the appraiser treat this over-improvement in the sales comparison grid?
According to the Interagency Appraisal and Evaluation Guidelines, which items should an appraisal’s market conditions discussion include?
A comparable listed at $420,000 and sold for $399,000. What sale-to-list price ratio (sale price ÷ list price) does this indicate?
An appraiser wants to describe the neighborhood boundaries in a Fannie Mae report. Which approach is acceptable?
Which of these is listed by Fannie Mae as a sales or financing concession?
People Also Study
Real Estate Market
13.6% of exam
Property Description
11.8% of exam
Land or Site Valuation
4.5% of exam
Cost Approach
13.6% of exam
Income Approach
8.2% of exam
Previous Question
Under Fannie Mae's Selling Guide, an appraiser is valuing a colonial in a subdivision where prices have risen about 0.5% a month for the past year. Three closed sales, each time-adjusted to the effective date, indicate $402,000, $409,000 and $416,000. Two similar colonials are under contract at $419,000 and $423,000, verified with the listing agents, and a third has been listed at $435,000 for 40 days. Over the same year, condominium prices in the city fell 3%. How should the contracts and the listing be used in reconciling the sales comparison approach?
Next Question
A comparable sold subject to a lease at rent above current market, and the subject is appraised as fee simple. How is the comparable’s price adjusted?