A comparable cash price is $520,000 six months before the effective date. Apply a supported SIMPLE, non-compounded monthly increase of 1.25% of original price. What signed time adjustment and adjusted price result?
Correct Answer
C) +$39,000; $559,000
520000×0.0125×6=39000;520000+39000=559000. Common errors: adjusting downward instead of upward gives −$39,000; $481,000; not adding the time adjustment to the price gives +$39,000; $520,000; applying only one month of the change gives +$6,500; $526,500.
Why This Is the Correct Answer
Option C is correct because $520,000 × 0.0125 × 6 = $39,000, an upward adjustment of +$39,000. Adding it to the original price gives $520,000 + $39,000 = $559,000. With simple change, each month's 1.25% is based on the original price.
Why the Other Options Are Wrong
Option A: −$39,000; $481,000
Option A, −$39,000 and $481,000, comes from adjusting downward instead of upward: $520,000 − $39,000 = $481,000. The stipulated change is an increase, so the correct result is +$39,000 and $559,000.
Option B: +$39,000; $520,000
Option B, +$39,000 and $520,000, comes from computing the adjustment correctly but not adding it to the price. The adjusted price should be $520,000 + $39,000 = $559,000.
Option D: +$6,500; $526,500
Option D, +$6,500 and $526,500, comes from applying only one month of the change: $520,000 × 0.0125 = $6,500. Over 6 months the adjustment is $6,500 × 6 = $39,000, giving $559,000.
Find dollars, then add
Price times rate times months gives the dollar adjustment; then add it to the price.
How to use: Use this when a question asks for both the time adjustment and the adjusted price.
Exam Tip
When an answer lists both an adjustment and a price, check that the price equals the original price plus the signed adjustment.
Common Mistakes to Avoid
- -Subtracting a time adjustment in a rising market
- -Calculating the adjustment but forgetting to add it to the price
- -Using one month of change instead of the full period
Concept Deep Dive
Analysis
This question tests a simple time adjustment stated as both a signed dollar amount and an adjusted price. First compute the dollar adjustment from the original price, then add it. The increase means the adjustment is positive.
Background Knowledge
Time adjustments account for changes in market conditions between a comparable's sale date and the effective date. Under simple change, the monthly rate is applied to the original price for each month. The adjustment is added for rising markets and subtracted for declining ones, and it must be supported by evidence.
Real-World Application
In a rising market supported by paired resales, an appraiser adjusts a comparable that sold for $520,000 six months earlier. The grid shows a +$39,000 market conditions adjustment and an adjusted price of $559,000.
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?
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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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Four bungalows in the subject's neighborhood sold for $396,000 to $408,000. After the appraiser's adjustments for size, condition, garage and market conditions, their adjusted prices range from $378,000 to $431,000. What should the appraiser do next?