After adjustment, four comparables indicate $355,000–$362,000 but the pending contract on the subject is $380,000. What should the appraiser do?
Correct Answer
B) Investigate the contract discrepancy and report a supported conclusion
Analyze the contract, terms and discrepancy together with the verified sales evidence, then report a supported conclusion in the assignment’s permitted form. The contract neither automatically controls nor requires a range rather than a point. A blanket momentum adjustment is unsupported.
Why This Is the Correct Answer
Option B is correct because the appraiser must analyze the subject's contract, its terms and the reason it differs from the comparable evidence, then report a supported conclusion. The contract is neither automatically controlling nor something to average in; the analysis determines what it shows about value.
Why the Other Options Are Wrong
Option A: Use the contract price, because it is the newest data available
Option A uses the contract price because it is the newest data. A contract is evidence to be analyzed, and being recent does not make it control the conclusion over verified sales.
Option C: Average the contract price with the four comparable indications
Option C averages the contract price with the four comparable indications. Averaging is a mechanical step that skips the investigation of why the contract differs.
Option D: Add a five-percent momentum adjustment without any market evidence
Option D adds a five-percent momentum adjustment without market evidence. Any market conditions adjustment must be supported by evidence; an unsupported blanket adjustment is not acceptable.
Gap means dig
When the contract and the comparables disagree, the gap is a question to investigate, not a number to adopt or average.
How to use: Use this when a subject contract price differs materially from the comparable indications.
Exam Tip
Choices that adopt, average or adjust toward the contract without analysis skip the required investigation.
Common Mistakes to Avoid
- -Adopting the contract price because it is the most recent data
- -Averaging the contract with comparable indications
- -Making an unsupported adjustment to close the gap
Concept Deep Dive
Analysis
This question tests how to handle a subject contract price well above the adjusted comparable range. USPAP requires analyzing all agreements of sale for the subject current as of the effective date. The appraiser investigates the gap between the $380,000 contract and the $355,000–$362,000 indications and reports a conclusion the evidence supports.
Background Knowledge
The subject's contract can reveal terms, concessions, personal property or buyer motivations that explain a price different from market evidence. USPAP and Fannie Mae guidance require analysis of contract sales and listings. The final opinion must be supported and reported in the form the assignment permits.
Real-World Application
An appraiser learns that the $380,000 contract includes a $15,000 seller credit and furniture. After accounting for these terms and reviewing the sales, the appraiser concludes $360,000 and explains the difference 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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Over the past two months, mortgage rates in a suburban market have risen sharply. The closed sales the appraiser has found for a split-level subject all went under contract three to five months ago. Interviews with agents active in the neighborhood describe fewer offers and recent contracts at prices below those earlier sales. How should the appraiser use the interviews?