An appraiser applies a time adjustment to the comparables. What does Fannie Mae require about its support and reporting?
Correct Answer
B) It should be supported by other comparables when possible and be explained
Time adjustments should be supported by other comparables (such as sales and contracts) whenever possible, and in all instances the appraiser must explain the time adjustment in the report.
Why This Is the Correct Answer
Option B is correct because Fannie Mae states that time adjustments should be supported by other comparables, such as sales and contracts, whenever possible. It also requires that in all instances the appraiser provide an explanation for the time adjustment in the appraisal report. Option B captures both the support expectation and the explanation requirement.
Why the Other Options Are Wrong
Option A: It must equal the change in a published home price index for the county
Option A is wrong because it claims the time adjustment must equal the change in a published county home price index. Fannie Mae looks to support from other comparables such as sales and contracts, and does not tie the adjustment to a single published index figure.
Option C: It needs no explanation in the report when it is under five percent
Option C is wrong because it says no explanation is needed when the adjustment is under five percent. Fannie Mae requires an explanation for the time adjustment in all instances, with no size threshold that removes that duty.
Option D: It may be applied to closed sales but not to listings
Option D is wrong because it limits time adjustments to closed sales and bars them for listings. The guidance concerns supporting and explaining the time adjustment; it does not bar listings from being considered or adjusted in a market-conditions analysis, and listings and contracts can help show the direction of the market.
Support it, then explain it
Think of two S-words: Support from other comparables when possible, and a Statement in the report in all instances. Support is the goal when possible; the explanation is required in all instances.
How to use: Use this when a question asks what Fannie Mae requires for time adjustments.
Exam Tip
When an option offers a percentage threshold that excuses an explanation, compare it with the Fannie Mae wording that the explanation is required in all instances.
Common Mistakes to Avoid
- -Skipping the explanation because the time adjustment is small
- -Copying a published index change without checking it against local sales and contracts
- -Assuming listings and contracts have no role in supporting market-conditions adjustments
Concept Deep Dive
Analysis
This question tests what Fannie Mae expects when an appraiser adjusts comparables for changing market conditions over time. The guidance has two parts: support the adjustment with other comparables, such as sales and contracts, whenever possible, and explain the adjustment in the report in all instances. Look for the option that combines market support with a reporting duty.
Background Knowledge
A time, or market conditions, adjustment accounts for price changes between a comparable's contract or sale date and the effective date of the appraisal. Because markets can rise, fall or stay flat, the adjustment should rest on market evidence such as other sales, contracts and listings, and the reasoning should be disclosed so a reader can follow it.
Real-World Application
An appraiser sees prices in a subdivision rising over the past several months and applies an upward time adjustment to two older sales. She supports the rate with recent pending contracts and newer closed sales in the area, then writes a short paragraph in the report describing the data and how she derived the adjustment.
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
A comparable sold for $384,000 and has 1,600 square feet of gross living area. The subject has 1,700 square feet. Using price per square foot of GLA as the unit of comparison, with no other differences, what does the comparable indicate for the subject?
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Days on market for the comparables averaged 18, while the subject has been listed 140 days without an offer. This suggests: