Besides identifying influences on value, what does a neighborhood analysis help the appraiser define, according to Fannie Mae?
Correct Answer
C) The area from which to draw sales comparison market data
A neighborhood analysis identifies the area subject to the same influences as the subject, based on typical buyers, and also defines the area from which to select the market data for the sales comparison analysis.
Why This Is the Correct Answer
Option C is correct because Fannie Mae states that neighborhood analysis enables the appraiser to identify factors influencing value and also to define the area from which to select the market data needed for a sales comparison analysis.
Why the Other Options Are Wrong
Option A: The interest rate the lender should charge on the new loan
Option A says the analysis defines the interest rate the lender should charge. Loan pricing is a lending decision, not something an appraiser's neighborhood analysis determines.
Option B: The subject’s legal description and assessor parcel number
Option B says it defines the subject's legal description and assessor parcel number. Those identifiers come from public records and are not defined by neighborhood analysis.
Option D: The insurance coverage the borrower should carry on the home
Option D says it defines the insurance coverage the borrower should carry. Insurance coverage is outside the scope of the appraiser's neighborhood analysis.
Influences and the data zone
Neighborhood analysis gives the appraiser two things: the influences on value and the zone from which to draw comparable data.
How to use: Use this when a question asks what neighborhood analysis accomplishes.
Exam Tip
Eliminate choices that describe lender, insurer or borrower decisions; they fall outside the appraiser's analysis.
Common Mistakes to Avoid
- -Treating neighborhood analysis as only descriptive
- -Drawing comparables from areas with different influences
- -Confusing appraisal tasks with lending decisions
Concept Deep Dive
Analysis
This question tests the purposes of a neighborhood analysis under Fannie Mae guidance. Beyond identifying factors that influence value, the analysis defines the area from which market data for the sales comparison approach are drawn. The other options describe lender or borrower decisions outside the appraiser's role.
Background Knowledge
A neighborhood is an area whose properties are subject to the same influences as the subject, from the viewpoint of typical buyers. Studying it reveals the factors that affect value and the boundaries within which comparable data are most relevant. This links neighborhood analysis directly to comparable selection.
Real-World Application
An appraiser studies a neighborhood bounded by a highway and a river, where buyers view homes on both sides of a park as similar. That analysis shapes both the value influences described in the report and the area searched for comparables.
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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