A three-bedroom townhouse with a recently updated kitchen is under appraisal. The appraiser ranks four sales overall, taking the kitchen into account: Sale A at $288,000 and Sale B at $295,000 are inferior, and Sale C at $304,000 and Sale D at $311,000 are superior. The appraiser then concludes a value of $308,000, citing the updated kitchen. What is the error in this conclusion?
Correct Answer
A) $308,000 exceeds the price of Sale C, which is ranked superior to the subject
The ranking places the subject above $295,000 (Sale B) and below $304,000 (Sale C). A value of $308,000 is higher than Sale C even though Sale C is better than the subject, so it lies outside the bracket the appraiser's own ranking set; citing the kitchen counts it twice, since the ranking already reflected it. Falling below Sale D is consistent with the ranking, and neither a straight average nor closeness to one group is the test.
Why This Is the Correct Answer
Option A is correct because Sale C at $304,000 is ranked superior to the subject, so the subject's value must be below $304,000. A $308,000 conclusion contradicts that ranking, and the kitchen cannot justify it because the ranking already took the kitchen into account.
Why the Other Options Are Wrong
Option B: $308,000 differs from the $299,500 average of the four sale prices
Option B points to the $299,500 average of $288,000, $295,000, $304,000 and $311,000. A conclusion need not equal a simple average of unadjusted prices; the problem is that $308,000 is above a superior sale.
Option C: $308,000 falls below the price of Sale D, which is ranked superior to the subject
Option C notes that $308,000 is below Sale D's $311,000. That relationship is correct, because the subject is inferior to Sale D, so it is not the error.
Option D: $308,000 is closer to the superior sales than to the inferior sales
Option D objects that $308,000 is nearer the superior sales. A conclusion may sit nearer one side of the bracket when the evidence supports it; the fault here is that it lies beyond the lowest superior sale.
Stay inside the brackets
A value above a superior sale or below an inferior sale contradicts the ranking that produced it.
How to use: Use it to test any reconciled value against the ranked array before accepting it.
Exam Tip
When a conclusion seems high or low, check it against the nearest superior and inferior sales. Also ask whether the reason given was already counted in the ranking.
Common Mistakes to Avoid
- -Adding value for a feature already considered in the ranking
- -Testing the conclusion against the highest superior sale instead of the lowest
- -Treating the simple average of sale prices as the required value
Concept Deep Dive
Analysis
The question tests whether a value conclusion stays inside the bracket set by the ranking. Once the comparables are ranked, the conclusion must sit between the highest inferior and lowest superior prices. Raising the value for a feature already weighed in the ranking double counts it and breaks the bracket.
Background Knowledge
In bracketing, each superior sale sets a ceiling and each inferior sale sets a floor. Fannie Mae applies a parallel rule to quantitative grids: the indicated value must fall within the range of the adjusted sale prices.
Real-World Application
A reviewer reads a report that ranks a sale as superior and then concludes a value above that sale's price because of the subject's finished basement. The reviewer asks the appraiser to reconcile the conflict, either by re-ranking the sale with support or by bringing the value inside the bracket.
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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