An appraiser is valuing a home for the executor of an estate; no lender is involved. Comparable 3, a brick ranch, sold for $348,000. In this county, sellers customarily pay the transfer tax and the owner's title policy, but in this sale the buyer agreed to pay those costs, $6,800 in total, in return for a lower price. The buyer also paid $4,200 of closing costs that buyers customarily pay here. Paired sales and agent interviews show that when buyers take on the seller's customary costs, prices are about $6,000 lower than they would otherwise be. What is Comparable 3's price after adjustment for this term of sale?
Correct Answer
B) $354,000
The buyer took on costs the seller normally pays, and in exchange the price was negotiated down, so the recorded price is below what the home would have brought on customary terms. The adjustment is upward by the market's measured reaction, about $6,000: $348,000 + $6,000 = $354,000. Adding the full $6,800 assumes the market reacts dollar for dollar, which the evidence does not show, and the $4,200 of costs buyers normally pay is part of every typical sale here and needs no adjustment.
Why This Is the Correct Answer
Option B is correct because the paired sales and interviews show prices are about $6,000 lower when buyers take on the seller's customary costs. Adjusting upward by that market reaction gives $348,000 + $6,000 = $354,000.
Why the Other Options Are Wrong
Option A: $348,000
Option A, $348,000, makes no adjustment. The price was lowered in exchange for the buyer paying the seller's costs, so the recorded price is below a sale on customary terms; the market evidence shows about $6,000.
Option C: $354,800
Option C, $354,800, adds the $6,800 of seller costs dollar for dollar ($348,000 + $6,800). The adjustment should match the market's reaction, which the evidence measures at about $6,000, giving $354,000.
Option D: $359,000
Option D, $359,000, adds both the $6,800 of seller costs and the $4,200 of buyer costs ($348,000 + $6,800 + $4,200). Buyers customarily pay their own $4,200 in every sale here, so only the market's $6,000 reaction to the shifted seller costs belongs in the adjustment.
Follow the shifted cost
Only costs moved away from local custom matter; ask which way the price moved in return and by how much the market says.
How to use: Use it when a comparable's buyer or seller paid costs the other side normally pays.
Exam Tip
Read the assignment's rules as well as the facts: Fannie Mae's Selling Guide does not accept positive adjustments for sales or financing concessions, but this appraisal is not for a lender. Customary costs paid by the usual party do not need an adjustment.
Common Mistakes to Avoid
- -Adding the full cost the buyer took on without checking the market's reaction
- -Adjusting for closing costs each party customarily pays
- -Assuming every transactional adjustment is downward
Concept Deep Dive
Analysis
The question tests a transactional element that runs the opposite way from a seller concession. When the buyer takes on costs the seller usually pays, the price falls, so the comparable is adjusted upward, by the amount the market shows rather than the cost itself.
Background Knowledge
Terms of sale cover who pays which costs. A sale in which the parties follow local custom needs no adjustment; when one party takes on the other's customary costs, the price usually shifts to compensate, and the appraiser measures that shift from the market.
Real-World Application
An appraiser verifying a sale learns the buyer paid the seller's transfer tax to win the house at a lower price. The appraiser checks other sales with the same arrangement, finds a consistent price effect, and adjusts the comparable upward by that amount.
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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