A comparable's recorded price includes a $9,000 credit for repairs the buyer agreed to complete. The appraiser should:
Correct Answer
B) Analyze the credit's effect on the price paid for the property
Analyze the credit’s actual market price effect and separately account for relevant property-condition differences without double counting. The $9,000 face amount does not by itself establish an inflation amount or require addition, subtraction or exclusion. Compare transaction terms and market evidence rather than treating a private credit as irrelevant.
Why This Is the Correct Answer
Option B is correct because comparables with concessions must be adjusted to reflect the impact, if any, on their sales price based on the market at the time of sale. The appraiser analyzes the $9,000 credit's actual effect on price and separately considers the condition issues it relates to, without double counting.
Why the Other Options Are Wrong
Option A: Add the credit to the recorded sale price
Option A adds the credit to the recorded sale price. The stem says the recorded price already includes the $9,000 credit, so adding it again would move the price further from what was paid for the real estate. Any adjustment must come from analysis of the credit's actual market effect, not from its face amount.
Option C: Disregard the credit as a private arrangement between the parties
Option C disregards the credit as a private arrangement between the parties. Concessions can affect the price paid, so they must be analyzed rather than ignored.
Option D: Exclude the comparable from consideration
Option D excludes the comparable from consideration. A credit does not by itself disqualify a sale; it can be analyzed and adjusted for if needed.
Credit? Check its price effect
Don't just add, subtract or toss a credit. Ask how much it actually changed what the buyer paid for the property.
How to use: Use this when a comparable's sale includes a seller credit.
Exam Tip
Answers that mechanically add, subtract or exclude based on a credit's face amount are usually traps; look for analysis of market impact.
Common Mistakes to Avoid
- -Adding a seller credit to the sale price
- -Ignoring concessions as private arrangements
- -Double counting a repair credit and a condition adjustment
Concept Deep Dive
Analysis
This question tests how to handle a seller credit in a comparable's sale. The credit's face amount does not automatically equal its effect on price. The appraiser must analyze how the credit affected the price paid and account for condition differences without double counting.
Background Knowledge
Seller credits and other concessions can change the effective price of a sale. Fannie Mae requires adjustments that reflect the market impact, if any, of concessions. When a credit relates to repairs, the appraiser must coordinate the concession analysis with the condition adjustment so the same issue is not counted twice.
Real-World Application
A comparable sold with a $9,000 seller credit because the buyer agreed to fix the deck. The appraiser verifies the terms, studies typical concessions in the market, and adjusts for the credit's price effect while making sure the deck's condition is not also adjusted for twice.
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?
People Also Study
Real Estate Market
13.6% of exam
Property Description
11.8% of exam
Land or Site Valuation
4.5% of exam
Cost Approach
13.6% of exam
Income Approach
8.2% of exam
Previous Question
A comparable backs a retention pond and the subject does not. Before deciding whether to make a site or view adjustment, what is needed?
Next Question
A paired sales analysis yields an adjustment of −$15,000 for a property located on a busy arterial street. Later, the appraiser discovers that all three paired properties with arterial exposure also had 20% smaller lots than their non-arterial counterparts — a difference not initially controlled for. What is the most appropriate action to address the confounding?