In a non-agency assignment, an appraiser's analysis points to a value below every adjusted comparable price. What is required before reporting that conclusion?
Correct Answer
D) Reassess the analysis and provide credible supporting evidence and an explanation
First reassess the sales, adjustments and reconciliation. USPAP does not prohibit a conclusion outside the adjusted range, but such a conclusion needs credible supporting evidence and a clear explanation; choosing a low figure to be conservative or to satisfy a client is not support. For Fannie Mae loans, by contrast, the Selling Guide (B4-1.3-09) says the indicated value 'must be within the range of the adjusted sales price of the comparables'.
Why This Is the Correct Answer
Option D is correct because a conclusion below every adjusted comparable price needs reassessment of the sales, adjustments and reconciliation, followed by credible supporting evidence and a clear explanation. USPAP does not bar a conclusion outside the range, but it must be supported; note that for Fannie Mae loans the Selling Guide requires the indicated value to be within the range.
Why the Other Options Are Wrong
Option A: Choose the lowest number in the range to be conservative, without further analysis
Option A picks the lowest number in the range to be conservative, without further analysis. Choosing a figure for conservatism is not support, and the analysis pointed below the range, so the appraiser must reassess and explain rather than pick a number.
Option B: Treat USPAP as prohibiting a conclusion outside the range
Option B treats USPAP as prohibiting a conclusion outside the range. USPAP has no such prohibition; it requires that any conclusion be credibly supported and explained.
Option C: Assume a client request supplies the necessary support for it
Option C assumes a client request supplies the needed support. A client's wishes are not evidence, and relying on them would undermine the credibility and independence of the conclusion.
Outside the range? Recheck, support
An out-of-range conclusion first triggers a recheck of the analysis; if it holds, it needs evidence and an explanation, not a convenience choice.
How to use: Use it on questions where a value falls above or below all adjusted comparables.
Exam Tip
Separate USPAP requirements from agency guidelines. The question says non-agency, so the Fannie Mae within-range rule is not the controlling test here.
Common Mistakes to Avoid
- -Believing USPAP forbids any value outside the adjusted range
- -Choosing a number for conservatism instead of support
- -Applying the Fannie Mae rule to a non-agency assignment
Concept Deep Dive
Analysis
This question tests the support needed for a value conclusion outside the range of adjusted comparable prices. USPAP does not prohibit such a conclusion, but it requires credible support. The appraiser should first reassess the sales, adjustments and reconciliation, then provide evidence and an explanation if the conclusion still falls outside the range.
Background Knowledge
Reconciliation in the sales comparison approach weighs the adjusted comparable prices to reach a value indication. A conclusion outside the adjusted range usually signals that something in the data or adjustments needs review. USPAP centers on credible, supported results, while some user guidelines, such as Fannie Mae's, add a within-range requirement.
Real-World Application
An appraiser for a private lender finds the subject has a serious defect none of the comparables share, and the reconciled value falls below all adjusted prices. The appraiser rechecks the adjustments, documents market evidence for the defect's impact and explains the conclusion in the report.
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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