A subject site is much larger than the sites of the comparables. What does this suggest to a Fannie Mae lender?
Correct Answer
A) The subject may not be a typical residential property for the area
If the subject has a significantly larger site than the comparables, it may not be a typical residential property for the neighborhood; lenders must give special attention to zoning, highest and best use and comparability.
Why This Is the Correct Answer
Option A is correct because Fannie Mae states that a subject with a significantly larger site than the comparables may not be a typical residential property for the neighborhood. That signals the lender to give special attention to zoning, highest and best use and the comparability of the sales.
Why the Other Options Are Wrong
Option B: The comparables should receive a fixed 10% upward adjustment
Option B, a fixed 10% upward adjustment to the comparables, invents a rule with no market support. Site adjustments must reflect market evidence, not a preset percentage.
Option C: The site size difference can be ignored
Option C, that the site size difference can be ignored, is wrong because a much larger site may affect value, use and comparability. It calls for analysis rather than being dismissed.
Option D: The appraisal must use the cost approach instead
Option D, that the appraisal must use the cost approach instead, is not what the guidance says. A larger site prompts closer review of typicality and comparability; it does not require replacing the sales comparison approach.
Big lot, look twice
A site far larger than its neighbors is a cue to check zoning, highest and best use and comparability.
How to use: Use this when a question describes a subject site much bigger than the comparables.
Exam Tip
Look for answers that call for closer review of typicality and use; reject answers with fixed percentage adjustments or mandated approach changes.
Common Mistakes to Avoid
- -Applying a fixed percentage adjustment for site size
- -Ignoring large site differences
- -Assuming a large site requires abandoning the sales comparison approach
Concept Deep Dive
Analysis
This question tests Fannie Mae guidance on subjects with significantly larger sites than the comparables. A much larger site can signal that the property is not typical for the neighborhood. Lenders should then look closely at zoning, highest and best use and comparability.
Background Knowledge
Properties that differ greatly from neighborhood norms may have different highest and best uses or limited marketability. A much larger site can indicate potential for subdivision, agricultural use or other non-typical uses that affect lending risk.
Real-World Application
A subject house sits on five acres in a neighborhood of quarter-acre lots. The appraiser checks zoning for possible subdivision, analyzes highest and best use and searches for sales with similar acreage.
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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