Besides serving as comparables, how can all-cash or cash-equivalent sales help a Fannie Mae appraiser?
Correct Answer
D) They help identify costs sellers customarily pay
Such sales can also help the appraiser determine the costs normally paid by sellers as a result of common practice or law in the market area.
Why This Is the Correct Answer
Option D is correct because Fannie Mae notes that such sales can help determine the costs normally paid by sellers as the result of common practice or law in the market area. This helps the appraiser distinguish customary seller costs from concessions that affect price.
Why the Other Options Are Wrong
Option A: They show the maximum loan amount a lender will offer
Option A, showing the maximum loan amount a lender will offer, is a lending decision unrelated to the comparable's sale. Cash sales do not indicate a lender's maximum loan amount.
Option B: They replace the need to verify financing on other sales
Option B, replacing the need to verify financing on other sales, is incorrect. Each comparable's financing still needs to be verified, regardless of whether other sales were all-cash.
Option C: They establish the interest rate for the subject loan
Option C, establishing the interest rate for the subject loan, confuses appraisal with lending. Interest rates are set by lenders and the market, not by the appraiser's cash comparable sales.
Cash shows the customary costs
Cash sales strip out financing effects, revealing what sellers normally pay by custom or law.
How to use: Use this when asked how cash sales help beyond being comparables.
Exam Tip
Answers about loan amounts or interest rates describe lending decisions, not appraisal uses of cash sales.
Common Mistakes to Avoid
- -Treating customary seller-paid costs as concessions
- -Skipping financing verification because some sales were cash
- -Confusing appraisal analysis with lending decisions
Concept Deep Dive
Analysis
This question tests an additional use of all-cash or cash-equivalent sales under Fannie Mae guidance. Because these sales have no financing concessions, they can help the appraiser see which costs sellers normally pay in the market as a result of common practice or law.
Background Knowledge
Cash and cash-equivalent sales reflect prices without the influence of financing concessions. Comparing them with financed sales helps the appraiser identify what sellers typically pay by custom or law, as distinct from concessions that may inflate price. This supports accurate financing and concession adjustments.
Real-World Application
An appraiser sees that in the local market sellers commonly pay certain transfer-related costs even on all-cash sales. The appraiser treats those as customary rather than as concessions requiring a price adjustment on financed 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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