An appraiser can find only three sales in a rural market, and the best one closed 14 months ago. What is the proper course?
Correct Answer
B) Analyze its relevance and any supported market change, and explain
An older rural sale can remain relevant when verified and appropriately analyzed. Investigate changes since its contract date and adjust only for supported market effects; a stable market may support zero time adjustment. Age alone does not require exclusion or a nonzero adjustment.
Why This Is the Correct Answer
Option B is correct because an older sale may be appropriate when market conditions have limited the availability of recent sales, and the reasons must be explained in the report. The appraiser investigates market change since the contract date and adjusts only for supported effects; a stable market may support no time adjustment.
Why the Other Options Are Wrong
Option A: Reject it, since the sale is more than one year old
Option A, rejecting the sale because it is more than one year old, treats age as an automatic disqualifier. Fannie Mae recognizes that an older sale may be more appropriate when market conditions have limited recent sales, as long as the reason is explained in the report. In a thin rural market the 14-month-old sale may be the best evidence available.
Option C: Apply an arbitrary annual appreciation rate to the old sale price
Option C, applying an arbitrary annual appreciation rate, lacks market support. Any time adjustment must be based on evidence of market change over the specific period.
Option D: Use it as is, without considering any change in market conditions
Option D, using the sale as is without considering any change in market conditions, skips required analysis. The appraiser must at least investigate whether conditions changed since the contract date.
Old sale, explain and analyze
An older sale is not disqualified by age; it needs analysis of market change and an explanation.
How to use: Use this when a question offers an old comparable in a market with few sales.
Exam Tip
Reject answers with arbitrary age cutoffs or arbitrary rates; choose the one that analyzes and explains.
Common Mistakes to Avoid
- -Rejecting sales only because they are over a year old
- -Applying an unsupported appreciation rate
- -Using old sales without analyzing market change
Concept Deep Dive
Analysis
This question tests the use of an older sale in a thin rural market. Age alone does not disqualify a sale or require a nonzero time adjustment. The appraiser analyzes relevance and any supported market change and explains the choice.
Background Knowledge
In rural and thin markets, recent sales may be scarce, so older sales are sometimes the most relevant evidence. Their use must be explained, and any market conditions adjustment must be supported by data.
Real-World Application
An appraiser in a rural county finds that the most similar farmhouse sold 14 months ago. After reviewing local trends and finding prices stable, the appraiser uses the sale with no time adjustment and explains the reasoning.
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
About a third of the lots in the subject's neighborhood hold a house plus a legal second unit; the subject has a second unit and Comparable 1 does not. Forty current leases show second units rent for about $650 per month, while the main houses rent for the same amount whether or not the lot has a second unit. Sales of rented properties in the neighborhood, with and without second units, indicate a monthly gross rent multiplier of 120 on total rent. Listings of rented properties ask about 130 times their monthly rent. The one paired sale that differs by a second unit shows a $62,000 difference, but the property with the second unit was also in much poorer condition, and no market data measure that condition difference. A contractor estimates $95,000 to build a similar unit. What adjustment for the second unit does the evidence best indicate?
Next Question
The subject sits just inside a top-rated school attendance zone; an otherwise perfect comparable sits two blocks away, outside it. That comparable may require: