For Fannie Mae market-condition analysis, a comparable’s $275,000 price was contracted seven months before the effective date and closed three months before it. Relevant evidence supports a simple, non-compounded 0.4% monthly increase over the contract-to-effective interval. What signed dollar time adjustment results?
Correct Answer
C) $7,700
275000 × 0.004 × 7 = 7700; the contract-to-effective interval is seven months. Common errors: measuring from the closing date instead of the contract date gives $3,300; using the contract-to-closing interval gives $4,400; reporting the adjusted price instead of the adjustment gives $282,700.
Why This Is the Correct Answer
Option C is correct because $275,000 × 0.004 × 7 = $7,700. The contract date is when buyer and seller agreed on price, so the market change is measured from the contract date, seven months before the effective date. The question asks for the adjustment itself, a positive $7,700.
Why the Other Options Are Wrong
Option A: $3,300
Option A, $3,300, measures from the closing date instead of the contract date: $275,000 × 0.004 × 3 = $3,300. The supported interval runs from contract to effective date, seven months, giving $7,700.
Option B: $4,400
Option B, $4,400, uses the contract-to-closing interval: $275,000 × 0.004 × 4 = $4,400. That interval ends three months before the effective date, so it misses part of the market change; the correct figure is $275,000 × 0.004 × 7 = $7,700.
Option D: $282,700
Option D, $282,700, is the adjusted price, $275,000 × (1 + 0.004 × 7) = $282,700, not the adjustment. The signed dollar adjustment is $7,700.
Price set at contract
The price was agreed at contract, so count the months from the contract date to the effective date.
How to use: Use this when a question gives both a contract date and a closing date for a comparable.
Exam Tip
Note whether the question asks for the adjustment or the adjusted price, and count months from the date the stem says the evidence covers.
Common Mistakes to Avoid
- -Counting months from the closing date instead of the contract date
- -Using only the contract-to-closing interval
- -Reporting the adjusted price when the adjustment is asked for
Concept Deep Dive
Analysis
This question tests which date drives a market-conditions adjustment for Fannie Mae analysis. The stem states that evidence supports the increase over the contract-to-effective interval, which is seven months. The signed dollar adjustment is the price times the monthly rate times seven.
Background Knowledge
The contract date reflects when the price was set, so it is the logical starting point for measuring market change to the effective date. Time adjustments, or the lack of them, must be supported by evidence. A simple rate is applied to the original price only.
Real-World Application
A comparable went under contract in spring but closed in summer. The appraiser measures the market-conditions adjustment from the contract date, since that is when the price reflected the market.
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