An owner lives in the subject, a single-family home with a two-car garage; Comparable 1 has a one-car garage. No paired sales isolate the difference, but about a third of the neighborhood's homes are rented, and leases show two-car homes rent for $90 more per month. The lender's reviewer questions a rent-based garage adjustment because the subject is not rented. Which response is best?
Correct Answer
A) Use the rent difference, since it reflects the market's response to the garage
The method measures a lasting rent difference the market pays for a feature, and value rests on what a typical purchaser would expect, not on the current owner's use. Where many similar homes are rented, the $90 market rent difference is good evidence of what buyers pay for the extra garage space, so the subject need not be leased. Cost is not market derived, and omitting the adjustment ignores a real difference.
Why This Is the Correct Answer
Option A is correct because the technique capitalizes a permanent rent difference that the market pays for a feature, and value reflects the income a typical purchaser could expect. Leases of similar homes show the second garage space earns $90 more per month, which is evidence of its value to buyers whether or not the subject is rented.
Why the Other Options Are Wrong
Option B: Use the rent difference once the subject has been leased to a tenant
Option B waits for the subject to be leased. The adjustment is measured from market rents of similar homes, not from the subject's own lease, so the owner's occupancy does not block the method.
Option C: Use the cost to build the garage, since the owner earns no rent from it
Option C switches to the cost to build the garage. Cost may not equal what buyers pay, while the rent evidence here is drawn from the market, so cost is the weaker support.
Option D: Make no adjustment, since an owner-occupied home earns no rent
Option D makes no adjustment because the owner earns no rent. The comparable still lacks a garage space that buyers value, and skipping the adjustment leaves a known difference unaccounted for.
Market rent, not owner's rent
The adjustment follows what the market would pay to rent the feature, not whether this owner rents it out.
How to use: Use this when a question suggests occupancy prevents a rent-based adjustment.
Exam Tip
Owner occupancy does not change market rent; ask whether the market data on rents of similar homes are adequate.
Common Mistakes to Avoid
- -Believing the subject must be rented to use rent data
- -Switching to cost when market rent evidence exists
Concept Deep Dive
Analysis
The question tests whether the income capitalization adjustment depends on the subject actually producing rent. It does not: the method measures the market's rent response to a feature, and that response reflects what typical buyers will pay whether or not the current owner lives in the home.
Background Knowledge
Market value reflects the typical buyer, not the present owner. When a feature commands a steady rent premium among similar homes, capitalizing that premium measures its contribution even for an owner-occupied subject.
Real-World Application
An appraiser values an owner-occupied bungalow in a neighborhood with many rentals. Lacking paired sales for an extra garage bay, the appraiser documents the rent premium tenants pay for two-car homes and capitalizes it with a local multiplier.
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
In a neighborhood with declining values and marketing times over six months, what must Fannie Mae lenders confirm about the sales comparison analysis?
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The subject property and a comparable sale are both two-story homes with detached two-car garages built at the same time as the houses and in similar condition. A cost service shows the garage would cost $32,000 to build new, and the appraiser estimates it is 25% depreciated. Using cost analysis, what adjustment should be made to the comparable for the garage?