An appraiser has three adjusted comparable prices. What must the appraiser’s comments explain under Fannie Mae guidance?
Correct Answer
D) The reconciliation of adjusted values and why some got most weight
Fannie Mae requires the appraiser’s comments to reflect the reconciliation of the adjusted (indicated) values and to identify why the sales given the most weight were chosen. A simple average or a target value does not meet that requirement.
Why This Is the Correct Answer
Option D is correct because Fannie Mae requires the appraiser's comments to reflect the reconciliation of the adjusted (or indicated) values for the comparable sales. The comments must also identify why the sales given the most weight were chosen in arriving at the indicated value. This explains the appraiser's reasoning rather than just a number.
Why the Other Options Are Wrong
Option A: The simple average of the adjusted prices, and nothing more
Option A is wrong because the simple average of the adjusted prices, and nothing more, gives no explanation of reconciliation or why certain sales deserve more weight. A mechanical average does not meet the commentary requirement.
Option B: The lender’s preferred value and how the comparables support it
Option B is wrong because the lender's preferred value is not a basis for an appraiser's conclusion. Building the analysis around a target value would undermine the appraiser's independence.
Option C: The original listing prices of the comparables and their dates
Option C is wrong because the original listing prices of the comparables and their dates are not what the reconciliation comments must explain. The required comments concern the adjusted values and the weighting of sales.
Reconcile, then reveal the weight
Two parts: reconcile the adjusted values, then reveal why the most-weighted sales earned that weight. Both must appear in the comments.
How to use: Use this two-part check when asked what Fannie Mae requires in sales comparison comments.
Exam Tip
Answers built on a simple average or a client's desired value are poor choices for reconciliation questions; look for reasoning about weight.
Common Mistakes to Avoid
- -Averaging adjusted prices and offering no explanation
- -Letting a lender's target value drive the reconciliation
- -Confusing listing history with reconciliation commentary
Concept Deep Dive
Analysis
This question tests Fannie Mae's commentary requirement for reconciling the sales comparison approach. After adjusting the comparables, the appraiser must explain how the adjusted values were reconciled and why particular sales received the most weight. Answers that substitute a formula or a client's target do not satisfy that requirement.
Background Knowledge
Reconciliation in the sales comparison approach weighs the adjusted indications according to comparability and the reliability of the adjustments. Fannie Mae wants the reasoning visible so a reviewer can see why some sales were relied on more than others. A simple average treats all sales as equally reliable, which may not be true.
Real-World Application
An appraiser's three adjusted sales indicate $402,000, $408,000 and $415,000. She explains that the $408,000 sale needed the fewest and best-supported adjustments and is on the same street, so it received the most weight in her indicated value.
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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