A two-bedroom condominium unit in a 1990s complex is the subject of an appraisal. An analysis of 1,240 one-unit sales of all types in the county over the past 12 months shows values rising 0.5% per month. Over the same period, 31 sales of units in the subject's complex and two nearby complexes, which buyers treat as interchangeable and which seldom compete with detached homes, show values rising 0.1% per month. Comparable 2, a unit in one of those complexes, went under contract at $250,000 six months before the effective date. What time adjustment applies to Comparable 2, at a simple rate?
Correct Answer
A) +$1,500
The time adjustment should come from properties that compete with the subject, here condominium units in the interchangeable complexes, not from a countywide mix dominated by detached homes. At 0.1% per month for 6 months, $250,000 × 0.006 = +$1,500. The county rate gives +$7,500, averaging the two rates gives +$4,500, and applying the county rate over all 12 months gives +$15,000.
Why This Is the Correct Answer
Option A is correct because the trend must reflect properties that compete with the subject. The 31 condominium sales in interchangeable complexes show 0.1% per month, so 0.1% × 6 = 0.6% and $250,000 × 0.006 = +$1,500.
Why the Other Options Are Wrong
Option B: +$4,500
Option B, +$4,500, averages the county rate and the condominium rate to 0.3% per month: $250,000 × 0.018. Averaging blends in a market the subject's buyers do not shop, so it overstates the change; the competitive rate gives +$1,500.
Option C: +$7,500
Option C, +$7,500, applies the countywide 0.5% per month for 6 months: $250,000 × 0.03. That rate is driven mostly by detached homes, which seldom compete with these units.
Option D: +$15,000
Option D, +$15,000, applies the county rate over all 12 months: $250,000 × 0.06. It uses both the wrong segment and the wrong period, since the comparable went under contract 6 months before the effective date.
Trend from the subject's rivals
Measure the trend from the homes the subject's buyers would actually consider, even if the data set is smaller.
How to use: Use this when a question offers a broad market rate and a narrower segment rate.
Exam Tip
When a stem says buyers treat certain properties as interchangeable with the subject, the trend from those properties is the one to use.
Common Mistakes to Avoid
- -Preferring the largest data set over the competitive segment
- -Averaging rates from different markets
- -Applying a 12-month trend to a 6-month interval
Concept Deep Dive
Analysis
The candidate must choose between a large but broad trend and a smaller trend from the subject's own competitive segment, then apply it for the months since contract. The bigger data set is not better when it measures a different market.
Background Knowledge
Different property types can respond to different supply and demand forces, so market conditions adjustments should be measured from the same property type and competitive segment as the subject. Fannie Mae expects neighborhood trends to reflect properties competitive with the subject.
Real-World Application
An appraiser valuing a condominium sees countywide prices climbing quickly because of detached-home demand. Condo prices in competing complexes are almost flat, so she bases the time adjustment on the condo sales and explains why 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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Previous Question
In a subdivision where about half the homes have detached two-car garages, an appraiser estimates the depreciated cost of a comparable's 3-year-old garage at $28,000. Two pairs of recent sales of otherwise similar homes, each pair differing only by a detached two-car garage, show price differences of $17,000 and $19,000. The subject has no garage. What garage adjustment to the comparable does the evidence best support?
Next Question
Two physically similar homes sell three weeks apart for $372,000 and $360,000. The first has a corner lot, the second an interior lot. Financing, concessions and market movement have not been verified. Before treating their $12,000 difference as a corner-lot adjustment, what is needed?