A condominium comparable with substantially lower HOA dues than the subject may require:
Correct Answer
A) An adjustment where the market prices the difference
Analyze the market effect of dues together with included services, reserves, condition and restrictions. Lower dues alone do not prescribe a premium or adjustment direction. The market-supported difference matters, not a mechanical capitalization of every fee difference.
Why This Is the Correct Answer
Option A is correct because the appraiser's adjustments must reflect the market's reaction to differences between properties. If the market prices a dues difference, an adjustment is warranted in the amount and direction the market supports. Dues are analyzed together with included services, reserves, condition and restrictions.
Why the Other Options Are Wrong
Option B: No adjustment, since HOA dues are not part of value
Option B says no adjustment is needed because HOA dues are not part of value. That is wrong because dues can affect what buyers will pay, and if the market reacts to a dues difference, an adjustment may be needed.
Option C: Exclusion of the sale because HOA dues cannot be compared
Option C says the sale must be excluded because HOA dues cannot be compared. Dues differences can be analyzed and, where the market prices them, adjusted for; they do not by themselves make a sale unusable.
Option D: An upward adjustment to the comparable for the lower dues
Option D says to make an upward adjustment to the comparable for the lower dues. Lower dues alone do not set an adjustment direction; lower dues may reflect fewer services or weaker reserves, so the market evidence decides. An automatic upward adjustment is also the wrong direction if buyers paid more for the comparable's lower dues.
Dues need market proof
A dues difference matters only as much as buyers show it matters in their prices.
How to use: Use this when a comparable's HOA dues differ from the subject's.
Exam Tip
Prefer answers that tie the adjustment to market evidence over answers that ignore dues or prescribe a fixed direction.
Common Mistakes to Avoid
- -Ignoring HOA dues as unrelated to value
- -Assuming lower dues by themselves justify an upward adjustment to the comparable
- -Mechanically capitalizing each fee difference without market support
Concept Deep Dive
Analysis
This question tests how to handle HOA dues differences between condominium comparables. The key is that adjustments must reflect the market's reaction to the difference. Lower dues alone do not dictate whether or which way to adjust; the appraiser analyzes what the dues cover and how the market prices the difference.
Background Knowledge
HOA dues pay for shared services, maintenance and reserves in condominium and planned communities. Buyers weigh dues against what they receive, so the same dollar difference can have different market effects. Market-derived adjustments reflect how buyers in the subject's market actually respond.
Real-World Application
A condo subject pays higher monthly dues than a comparable in a nearby project, but the subject's dues include utilities and a well-funded reserve. The appraiser reviews sales in both projects to see whether buyers actually pay less for the higher-dues units before deciding on any adjustment.
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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