A comparable sold for $410,000 with a $9,000 seller-paid closing-cost credit. Market analysis shows the credit raised its price by $6,000. Under Fannie Mae guidance, what concession adjustment applies?
Correct Answer
A) −$6,000
The negative adjustment should equal the increase in price attributable to the concession, here $6,000. A dollar-for-dollar deduction of the seller’s $9,000 cost is not appropriate unless the market reaction is the full amount, and positive concession adjustments are not acceptable.
Why This Is the Correct Answer
Option A is correct because Fannie Mae requires the negative adjustment to equal the increase in the comparable's price attributable to the concession. Market analysis shows the $9,000 credit raised the price by $6,000, so the adjustment is −$6,000. The adjusted price would be $410,000 − $6,000 = $404,000.
Why the Other Options Are Wrong
Option B: −$9,000
Option B shows −$9,000, which deducts the seller's full credit dollar for dollar. The adjustment should reflect the market's price reaction, which was measured at $6,000, not the $9,000 face amount.
Option C: −$15,000
Option C shows −$15,000, which deducts both the $9,000 credit and its $6,000 price effect. The price effect already measures what the credit added to the price, so only −$6,000 is deducted.
Option D: $0
Option D shows $0, which treats the credit as a closing cost that did not affect the price. Market analysis shows it raised the price by $6,000, so a −$6,000 adjustment is required.
Adjust the effect, not the gift
The concession is the gift; the adjustment is only what the gift added to the price.
How to use: Use this when a question gives both a concession amount and its measured price effect.
Exam Tip
When a stem gives both a concession amount and a market price effect, the price effect is the adjustment, and its sign is negative.
Common Mistakes to Avoid
- -Deducting the full face amount of the concession by default
- -Deducting both the concession and its price effect
- -Ignoring a concession that the market shows affected the price
Concept Deep Dive
Analysis
This question tests how Fannie Mae measures a concession adjustment. The adjustment is based on the increase in sale price attributable to the concession, not on the concession's face amount. Here the market evidence shows a $6,000 price effect from a $9,000 credit.
Background Knowledge
Sales and financing concessions can raise recorded prices above the value of the real estate. Fannie Mae directs appraisers to make negative adjustments equal to the price increase attributable to the concession. A dollar-for-dollar deduction is appropriate only when the market reaction equals the full concession.
Real-World Application
A comparable closed with a $9,000 seller credit. The appraiser compares similar sales with and without credits and finds buyers paid about $6,000 more when a credit was offered. She enters a −$6,000 concession adjustment and explains the support.
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?
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?
Which of these is listed by Fannie Mae as a sales or financing concession?
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Two controlled cash-equivalent pairs in the same market isolate differences: A has 3 bedrooms and 2 garage bays at $410,000; B is otherwise identical with 4 bedrooms at $430,000; C is otherwise identical to A but has 1 garage bay at $395,000. A comparable at $380,000 has 3 bedrooms and 1 bay; the subject has 4 bedrooms and 2 bays. Apply only these supported differences. What adjustments and price result?
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