Fannie Mae’s guidance on the size of net and gross adjustments to a comparable is best described as:
Correct Answer
B) There are no set limits; adjustment size or count is not the sole test
Fannie Mae has no specific limitations or guidelines on net or gross adjustments, and the number or amount of dollar adjustments must not be the sole determinant of a comparable’s acceptability. The 15%/25% figures are old rules of thumb, not current requirements.
Why This Is the Correct Answer
Option B is correct because Fannie Mae does not have specific limitations or guidelines associated with net or gross adjustments. The number and amount of dollar adjustments must not be the sole determinant of whether a comparable is acceptable.
Why the Other Options Are Wrong
Option A: Net adjustments may not exceed 15% and gross adjustments 25% of the sale price
Option A states that net adjustments may not exceed 15% and gross adjustments 25% of the sale price. These are old rules of thumb, not current Fannie Mae requirements.
Option C: Gross adjustments may not exceed 10% of the sale price for any comparable
Option C says gross adjustments may not exceed 10% of the sale price for any comparable. Fannie Mae sets no such numerical cap on gross adjustments.
Option D: Each comparable may receive at most three line-item adjustments
Option D limits each comparable to at most three line-item adjustments. Fannie Mae imposes no limit on the number of adjustments; what matters is that they are market supported.
No caps, just support
Fannie Mae dropped the 15/25 caps. What counts is whether each adjustment is supported by the market.
How to use: Use this when a choice cites a fixed net or gross percentage limit.
Exam Tip
Choices with exact percentage caps or line-item counts are describing rules Fannie Mae does not impose.
Common Mistakes to Avoid
- -Treating 15% net and 25% gross as current Fannie Mae limits
- -Rejecting a comparable solely because of large adjustments
- -Limiting the number of adjustments regardless of actual differences
Concept Deep Dive
Analysis
This question tests knowledge of Fannie Mae's current position on adjustment size. Older rules of thumb set percentage limits, but Fannie Mae does not impose them. The size or number of adjustments is not the sole test of a comparable's acceptability.
Background Knowledge
Appraisers once relied on informal percentage guidelines for net and gross adjustments. Fannie Mae's guidance now focuses on whether adjustments reflect the market rather than on fixed caps. Large adjustments may still call for explanation, but they do not by themselves disqualify a comparable.
Real-World Application
In a rural market, the best available comparable needs gross adjustments of about 30% because of location and size differences. The appraiser uses it, explains why it is the best available evidence, and supports each adjustment with market data.
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
Comparable 2, a single-family home on the ridge of a tract with a valley view, sold for $410,000; the subject is an otherwise similar interior home with no view. Leases in the tract show ridge homes rent for $2,475 per month and interior homes for $2,300. Rented homes in the tract sell at a monthly gross rent multiplier of 160. Current listings of ridge homes ask about $25,000 more than interior homes, and the builder charged an $18,000 lot premium for ridge lots when the tract opened in 2009. What is Comparable 2's price after the view adjustment?
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Which economic principle most directly explains using competitive substitutes as evidence in sales comparison?