A retrospective appraisal of a condominium unit has an effective date of April 1. Market data show prices in the building were rising through the spring. The appraiser selects one sale with a February contract date and two with May and June contract dates. What does this choice of sale dates do?
Correct Answer
D) It brackets the effective date for market conditions
Sales with contract dates both before and after April 1 bracket the effective date, so in a rising market the earlier sale reflects lower prices and the later sales higher prices, and the subject's value falls between them for market conditions. The appraiser still analyzes the change in market conditions between each contract date and the effective date. Sale dates on either side of the effective date do not establish highest and best use or exposure time.
Why This Is the Correct Answer
Option D is correct because the February sale precedes the April 1 effective date and the May and June sales follow it, so the sales bracket the effective date. In a rising market the earlier sale is adjusted up and the later sales down.
Why the Other Options Are Wrong
Option A: It removes the need to analyze market conditions
Option A says the choice removes the need to analyze market conditions, but each sale must still be analyzed for changes from its contract date to the effective date.
Option B: It sets the exposure time for the subject
Option B ties the dates to exposure time. Exposure time is estimated from how long competing properties were marketed before they sold, not from where contract dates fall relative to the effective date.
Option C: It confirms the subject's highest and best use
Option C ties the dates to highest and best use. Sale dates reflect market conditions, not the use that produces the highest value.
Before and after the date
A time bracket has one sale on each side of the effective date, like bookends on a calendar.
How to use: Use this when a question gives contract dates on both sides of the effective date.
Exam Tip
Bracketing on time does not replace the market conditions analysis; it gives the adjustments a cross-check.
Common Mistakes to Avoid
- -Assuming bracketed dates eliminate the time adjustment
- -Using closing dates instead of contract dates for the analysis
- -Confusing bracketing the effective date with estimating exposure time
Concept Deep Dive
Analysis
The question tests bracketing on market conditions. Choosing sales that went under contract before and after the effective date places the subject's date within the time span of the data, so adjustments for time run in both directions.
Background Knowledge
Market conditions can shift between a comparable's contract date and the effective date, so each sale is analyzed for a time adjustment. Bracketing the effective date with earlier and later sales lets the appraiser check the direction and size of those adjustments against each other.
Real-World Application
For a retrospective appraisal during a spring price run-up, an appraiser uses a winter sale and two early-summer sales. The winter sale is adjusted upward and the summer sales downward, and the closeness of the adjusted prices supports the time adjustment rate.
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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