A comparable went under contract two weeks before the effective date. What does Fannie Mae expect about a time adjustment?
Correct Answer
C) Likely none, given the difficulty of identifying a market change
Comparables with contract dates recent to the effective date will likely not need a time adjustment, because a change in the market over that short interval cannot be identified.
Why This Is the Correct Answer
Option C is correct because Fannie Mae states that comparables with contract dates recent to the effective date will likely not have a time adjustment, given the inability to identify a change in the market. Two weeks is such a short interval that a measurable market change is unlikely to be shown.
Why the Other Options Are Wrong
Option A: A time adjustment is required for each comparable
Option A, requiring a time adjustment for each comparable, is wrong because Fannie Mae expects recent contracts will likely have no time adjustment. Time adjustments, or their absence, follow the evidence.
Option B: A positive adjustment equal to one month of the annual trend
Option B, a positive adjustment equal to one month of the annual trend, is wrong because it applies an arbitrary amount to a two-week interval where a market change cannot be identified.
Option D: A negative adjustment to offset closing delays
Option D, a negative adjustment to offset closing delays, is wrong because closing delays are not a market change. Market-conditions adjustments reflect changes in the market between the contract date and the effective date.
Too recent to measure
A contract only weeks old leaves no measurable market change, so expect no time adjustment.
How to use: Use this when a comparable's contract date is very close to the effective date.
Exam Tip
Watch for options that require an adjustment for each comparable; Fannie Mae ties the decision to evidence of market change.
Common Mistakes to Avoid
- -Applying a time adjustment to each comparable regardless of the interval
- -Prorating an annual trend to a very short interval without evidence
- -Treating closing delays as a reason for a market-conditions adjustment
Concept Deep Dive
Analysis
This question tests Fannie Mae's guidance on time adjustments for very recent contracts. A two-week interval is too short to identify a market change reliably. Fannie Mae expects such comparables will likely not have a time adjustment.
Background Knowledge
Market-conditions adjustments reflect changes in prices between the contract date of a comparable and the effective date of the appraisal. Fannie Mae requires time adjustments, or their absence, to be supported by evidence. For very recent contracts, a change usually cannot be identified, so no adjustment is likely.
Real-World Application
An appraiser uses a sale that went under contract two weeks ago in a moderately rising market. The appraiser reports no time adjustment and notes that no market change can be identified over so short a period.
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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