Comparable 2, a Cape Cod home, sold for $389,000 after 21 days on the market. Under the sale contract, the seller stayed in the house for 60 days after closing without paying rent while her new home was being finished. How should the appraiser treat the rent-free occupancy?
Correct Answer
B) As a term of the sale whose effect on the price should be measured
Free occupancy after closing is something of value the buyer gave the seller as part of the deal, so it is a transactional element: the price may reflect it. The appraiser verifies the arrangement and measures its effect on the price, for example by the market rent the seller did not pay, then adjusts if the market shows an effect. It is not a physical difference, since the house is unchanged, and not a market conditions item, which measures price changes between the contract date and the effective date; the 21 days on market does not affect the answer.
Why This Is the Correct Answer
Option B is correct because the 60 days of rent-free occupancy was part of the contract and gave the seller a benefit, so the price may reflect it. The appraiser treats it as a term of the sale, verifies it, and measures from the market whether and how much it changed the price.
Why the Other Options Are Wrong
Option A: As an event after closing that has no bearing on the sale price
Option A treats the stay as an event after closing with no bearing on the price. The arrangement was agreed before closing as part of the deal, so it may have shaped the price.
Option C: As a physical difference, because the buyer moved into the house later
Option C calls it a physical difference because the buyer moved in later. The house itself is the same; what differs is the deal, which makes it a transactional element.
Option D: As a market conditions item, because possession came 60 days later
Option D calls it a market conditions item because possession came 60 days later. Market conditions measure price changes between the contract date and the effective date, not a benefit one party gave the other.
Read the whole deal
Anything the buyer and seller traded besides the house and the cash, such as free occupancy, belongs in the terms of the sale.
How to use: Use it when a comparable's contract includes a rent-back, an occupancy agreement or other side terms.
Exam Tip
Classify an item by what it changes: the property, the deal or the market. A rent-back changes the deal.
Common Mistakes to Avoid
- -Ignoring arrangements that take effect after closing
- -Treating delayed possession as a market conditions adjustment
- -Assuming the deed shows all the terms of a sale
Concept Deep Dive
Analysis
The question tests recognizing a transactional element that is not a financing term. A seller's rent-free stay after closing was agreed in the contract, so it can affect what the buyer paid and must be analyzed with the other terms of the sale.
Background Knowledge
Transactional elements of comparison include property rights conveyed, financing terms, conditions of sale, expenditures made immediately after purchase and market conditions. Arrangements such as a seller rent-back, a rent guarantee or included personal property can make the recorded price differ from a sale on typical terms.
Real-World Application
While verifying a sale with the listing agent, an appraiser learns the seller stayed in the house for two months after closing rent free. The appraiser records the arrangement, compares it with market rent for similar homes and checks whether it affected the price.
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?
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