A comparable cash price is $375,000 nine months before the effective date. Use an explicitly SIMPLE, non-compounded +0.80% monthly adjustment on original price. What signed time amount and adjusted price result?
Correct Answer
B) +$27,000; $402,000
375000×0.008×9=27000;375000+27000=402000. Common errors: adjusting downward instead of upward gives −$27,000; $348,000; not adding the time adjustment to the price gives +$27,000; $375,000; applying only one month of the change gives +$3,000; $378,000.
Why This Is the Correct Answer
Option B is correct because 375,000 × 0.008 × 9 = $27,000, a positive time adjustment for rising prices. Adding it to the sale price gives 375,000 + 27,000 = $402,000. Because the rate is simple, it applies only to the original price, not to a growing balance.
Why the Other Options Are Wrong
Option A: −$27,000; $348,000
Option A, −$27,000; $348,000, is wrong because it adjusts downward instead of upward: 375,000 − 27,000 = 348,000. The +0.80% monthly rate means the older sale is adjusted up by $27,000 to $402,000.
Option C: +$27,000; $375,000
Option C, +$27,000; $375,000, is wrong because it computes the $27,000 adjustment but does not add it to the price. The adjusted price is 375,000 + 27,000 = $402,000.
Option D: +$3,000; $378,000
Option D, +$3,000; $378,000, is wrong because it applies only one month of change: 375,000 × 0.008 = 3,000, and 375,000 + 3,000 = 378,000. The sale was nine months before the effective date, so the adjustment is 3,000 × 9 = $27,000, giving $402,000.
Simple: price times rate times months
For simple monthly adjustments, multiply the original price by the monthly rate and by the number of months.
How to use: Use this for any time adjustment labeled simple or non-compounded.
Exam Tip
Confirm both the number of months and whether the adjusted price includes the time amount.
Common Mistakes to Avoid
- -Using one month instead of the full number of months
- -Adjusting downward in a rising market
- -Computing the time amount but not adding it to the price
Concept Deep Dive
Analysis
This question tests a simple, non-compounded monthly time adjustment. The rate applies to the original price each month, so the total is price × rate × months. Rising prices mean an older sale is adjusted upward.
Background Knowledge
Market-conditions adjustments account for price changes between a comparable's sale date and the effective date. With simple interest, the change is earned only on the original amount, unlike compounding. Time adjustments must be supported by evidence such as resales or market trend data.
Real-World Application
Resale data shows prices rising about 0.8% per month in the subject's market. An appraiser adjusts a sale from nine months earlier by $27,000 using the simple method. The report cites the market data supporting the rate.
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?
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