An appraiser cannot find comparables similar to the subject within its market area. According to Fannie Mae, what should happen next?
Correct Answer
B) Consider expanding the search, explaining outside sales and adjusting
If the available sales are not similar, the appraiser decides whether to expand the market area search. If outside sales are used, the report must explain the rationale and include location adjustments if warranted.
Why This Is the Correct Answer
Option B is correct because Fannie Mae says the appraiser needs to decide whether expanding the market area search is appropriate. If sales outside the market area are used, the appraiser must explain the rationale and make location adjustments if warranted.
Why the Other Options Are Wrong
Option A: Use the dissimilar local sales anyway, without any comment
Option A, using the dissimilar local sales anyway without any comment, leaves the report unsupported. Dissimilar sales need explanation and analysis, not silence.
Option C: Stop the sales comparison approach and rely on the cost approach
Option C, stopping the sales comparison approach and relying on the cost approach, is not the guidance. The appraiser should first consider expanding the search for comparable sales.
Option D: Use the nearest sales in any market area, without adjustment
Option D, using the nearest sales in any market area without adjustment, ignores location differences. Sales from outside the market area may need location adjustments if warranted, along with an explanation.
Expand, explain, adjust
When local comparables run short, consider expanding the search, explain the choice and adjust for location if warranted.
How to use: Use this when a question describes a lack of similar sales near the subject.
Exam Tip
Pick the answer that keeps the sales comparison approach and adds explanation and support, not one that drops it or skips adjustments.
Common Mistakes to Avoid
- -Using dissimilar sales without explanation
- -Dropping the sales comparison approach when comparables are scarce
- -Using distant sales without considering location adjustments
Concept Deep Dive
Analysis
This question tests what Fannie Mae expects when similar comparables are not available in the subject's market area. The appraiser decides whether to expand the search. If outside sales are used, the report must explain why and include location adjustments if warranted.
Background Knowledge
Comparables should ideally come from the subject's market area, but unusual properties or thin markets may require looking further. When the appraiser goes outside the area, the report should explain the choice and account for location differences.
Real-World Application
A large custom home has no similar sales in its subdivision. The appraiser uses sales from a comparable neighborhood across town, explains why, and applies a supported location 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 $520,000. A seller concession cost $15,000, but verified market evidence attributes only $8,000 of the price to it. What cash-equivalent price results?
Next Question
A townhouse in the subject's development sold for $365,000 three weeks ago. It backs onto a wooded greenbelt, while the subject backs onto a neighbor's yard, but its original bathrooms are dated, while the subject's were remodeled last year. Interviews with local agents and the development's recent sales indicate buyers react to the greenbelt setting and to remodeled bathrooms by about the same amount. In a relative comparison analysis, what does this sale indicate for the subject?