Verified market evidence attributes a $15,000 increase in a comparable’s recorded price to favorable financing. What signed concession adjustment removes that price effect? The adjustment is not assumed from seller cost alone.
Correct Answer
B) −$15,000
Recorded price − 15000 = cash-equivalent price; signed adjustment=−15000. Common errors: adjusting upward instead of downward gives $15,000; concluding that no adjustment is needed gives $0; deducting the price effect twice gives −$30,000.
Why This Is the Correct Answer
Option B is correct because removing a $15,000 price effect from favorable financing requires subtracting $15,000 from the recorded price. The signed adjustment is −$15,000, which brings the comparable to its cash-equivalent price. The amount is based on verified market evidence, not just the seller's cost.
Why the Other Options Are Wrong
Option A: −$30,000
Option A is wrong because −$30,000 deducts the financing price effect twice: −2 × $15,000 = −$30,000. The verified effect is $15,000, so the adjustment is −$15,000.
Option C: $0
Option C is wrong because $0 assumes no adjustment is needed. Market evidence shows the financing raised the recorded price by $15,000, so a −$15,000 adjustment is required.
Option D: $15,000
Option D is wrong because $15,000 adjusts upward instead of downward. The financing inflated the price, so it must be removed with −$15,000, and Fannie Mae does not accept positive concession adjustments.
Concessions Come Off
A concession that inflated the price comes off the comparable; it is not added back.
How to use: Use this phrase to choose a negative sign for a concession adjustment.
Exam Tip
For concession questions, choose a downward adjustment equal to the market-supported price effect, not double that amount and not a positive figure.
Common Mistakes to Avoid
- -Using the seller's cost as the adjustment without checking market reaction
- -Making a positive concession adjustment
- -Deducting the same price effect twice
Concept Deep Dive
Analysis
This question tests a financing concession adjustment based on verified market evidence. The recorded price is $15,000 higher because of favorable financing, so that amount is removed to reach a cash-equivalent price. Fannie Mae does not accept positive adjustments for concessions.
Background Knowledge
Cash equivalence converts a sale with atypical financing into the price it would have brought on typical terms. When favorable financing raises the price, the comparable is adjusted downward. Fannie Mae requires concession adjustments to reflect the market's reaction and does not accept positive adjustments for concessions.
Real-World Application
A comparable buyer assumed a below-market loan. Verified sales show buyers paid about $15,000 more because of it. The appraiser enters −$15,000 to state the sale on a cash-equivalent basis.
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