A comparable sold eight months before the effective date for $300,000. Paired resales show prices rising 0.5% per month (simple, not compounded) over that period. What is the time-adjusted price?
Correct Answer
A) $312,000
Eight months at 0.5% per month is a 4% increase: $300,000 × 1.04 = $312,000. The market rose after the sale, so the adjustment is upward.
Why This Is the Correct Answer
Option A is correct because eight months at 0.5% per month is a 4% increase. Applying it to the sale price gives $300,000 × 1.04 = $312,000.
Why the Other Options Are Wrong
Option B: $288,000
Option B, $288,000, adjusts downward: $300,000 × 0.96. The market rose after the sale, so the price is adjusted up: $300,000 × 1.04 = $312,000.
Option C: $301,500
Option C, $301,500, applies just one month at 0.5%: $300,000 × 1.005. The sale was eight months earlier, so the full change is 8 × 0.5% = 4%, giving $312,000.
Option D: $324,000
Option D, $324,000, uses 1% per month, or 8% over eight months: $300,000 × 1.08. The supported rate is 0.5% per month, so the correct result is $312,000.
Rising market lifts old sales
When prices have risen since a comparable sold, its price is lifted to match today's market.
How to use: Use this to check the direction of any time adjustment before calculating.
Exam Tip
Note whether the rate is monthly or annual and multiply by the matching number of periods.
Common Mistakes to Avoid
- -Adjusting downward when prices have risen
- -Applying a single month instead of the full period
- -Doubling the monthly rate by mistake
Concept Deep Dive
Analysis
This question tests a simple monthly market conditions adjustment derived from paired resales. Multiply the monthly rate by the number of months, then apply the total change to the sale price. Because prices rose after the sale, the adjustment raises the comparable's price.
Background Knowledge
Paired sales analysis is a popular way to estimate market conditions adjustments, using sales and resales of the same or highly similar properties. Once a rate is supported, older comparables are adjusted to the effective date. A simple rate is applied to the original price without compounding.
Real-World Application
An appraiser finds several homes that sold twice within a year in the same subdivision, showing about 0.5% growth per month. A comparable from eight months ago is adjusted upward 4% to reflect current conditions.
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?
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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?
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Previous Question
A supported market trend is +0.4% per month. A comparable sold for $350,000 nine months before the effective date. Using a simple (non-compounded) rate on the sale price, what is the time-adjusted price?
Next Question
A proposed grid uses a +$24,500 pool indication derived from an untested luxury segment and a −$18,200 HVAC adjustment even though the comparable’s HVAC is inferior to the subject’s. What should be done first?