An appraiser makes a positive time adjustment. Which statement about support for it matches Fannie Mae guidance?
Correct Answer
B) It must be supported by evidence; home price indices are acceptable
Time adjustments, or the lack of them, must be supported by evidence. Fannie Mae states that using home price indices is consistent with its policy, as are statistical analysis, modeling and paired sales; the report must summarize the evidence and its sources.
Why This Is the Correct Answer
Option B is correct because Fannie Mae requires time adjustments, or the lack thereof, to be supported by evidence. It states that using home price indices to support time adjustments is consistent with its policy. Other supported methods, such as statistical analysis, modeling and paired sales, can also be used, with the report summarizing the evidence and its sources.
Why the Other Options Are Wrong
Option A: It needs no support if the 12-month market trend is positive
Option A, saying no support is needed if the 12-month trend is positive, is wrong because a trend is itself something that must be shown with evidence. Fannie Mae requires support for time adjustments regardless of the trend's direction.
Option C: It may be supported by a resale of the same property and nothing else
Option C, limiting support to a resale of the same property and nothing else, is wrong because Fannie Mae accepts several forms of evidence. Home price indices, statistical analysis, modeling and paired sales are also consistent with its policy.
Option D: It is presumed correct whenever it is under 1% per month of change
Option D, presuming the adjustment correct whenever it is under 1% per month, is wrong because no size threshold replaces the need for evidence. Small or large, a time adjustment must be supported.
Time needs proof
Making a time adjustment and skipping one both need evidence, and an HPI can be that evidence.
How to use: Use this when evaluating answer choices about support for market-conditions adjustments.
Exam Tip
Reject choices that excuse a time adjustment from support because of trend direction or small size.
Common Mistakes to Avoid
- -Thinking a rising trend needs no documentation
- -Believing only same-property resales can support a time adjustment
- -Assuming small time adjustments are presumed correct
Concept Deep Dive
Analysis
This question tests Fannie Mae guidance on supporting time adjustments. Time adjustments, or the lack of them, must be supported by evidence. Fannie Mae states that home price indices are an acceptable source of support.
Background Knowledge
Time, or market conditions, adjustments account for price changes between a comparable's sale date and the effective date of the appraisal. Support can come from repeat sales, paired sales over time, statistical analysis and published home price indices. Fannie Mae requires evidence both for making a time adjustment and for not making one.
Real-World Application
Prices in a market have risen over the past year, and the appraiser's comparables closed several months before the effective date. The appraiser checks a published home price index and repeat sales in the area, which agree on the rate of change. The report summarizes this evidence and its sources to support the positive time 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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