A comparable sold for $520,000. A seller concession cost $15,000, but verified market evidence attributes only $8,000 of the price to it. What cash-equivalent price results?
Correct Answer
B) $512,000
520000 − 8000 = 512000; the verified price effect is used, not the 15000 seller cost. Common errors: adding the concession effect instead of subtracting it gives $528,000; deducting the seller’s cost instead of the verified price effect gives $505,000; not adjusting the recorded price gives $520,000.
Why This Is the Correct Answer
Option B is correct because the verified market evidence attributes $8,000 of the price to the concession, so the cash-equivalent price is $520,000 − $8,000 = $512,000. The $15,000 seller cost is not the measure; the market's price response is.
Why the Other Options Are Wrong
Option A: $505,000
Option A, $505,000, deducts the seller's full cost instead of the verified price effect ($520,000 − $15,000 = $505,000). The market evidence supports only $8,000, so the price is $520,000 − $8,000 = $512,000.
Option C: $520,000
Option C, $520,000, leaves the recorded price unadjusted. Because $8,000 of the price is attributed to the concession, it must be removed: $520,000 − $8,000 = $512,000.
Option D: $528,000
Option D, $528,000, adds the concession effect instead of subtracting it ($520,000 + $8,000 = $528,000). Positive adjustments for concessions are not acceptable; the correct figure is $520,000 − $8,000 = $512,000.
Market effect, not face amount
Subtract what the market says the concession added to the price, not what the seller paid.
How to use: Use this whenever a concession's cost and its price effect differ in a question.
Exam Tip
When a question gives both a concession cost and a verified price effect, use the price effect and adjust downward.
Common Mistakes to Avoid
- -Deducting the full concession cost instead of its price effect
- -Adding the concession to the sale price
- -Leaving the recorded price unadjusted
Concept Deep Dive
Analysis
This question tests the adjustment for a seller concession. The adjustment reflects the concession's verified effect on the sale price, not the seller's cost. Concession adjustments are downward, since Fannie Mae does not accept positive adjustments for sales or financing concessions.
Background Knowledge
Sales concessions such as seller-paid costs can inflate a recorded price above what the property would bring in a cash-equivalent sale. The adjustment should equal the concession's effect on price as shown by market evidence, which may differ from its dollar cost.
Real-World Application
A comparable sold for $520,000 with $15,000 in seller-paid closing costs. Paired sales show buyers paid about $8,000 more for such concessions, so the appraiser adjusts the comparable to $512,000.
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?
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