For a foreclosure comparable in a UAD-compliant Fannie Mae appraisal, how must the financing type be identified?
Correct Answer
A) As an REO sale
For UAD-compliant appraisals, the appraiser must identify the financing type as REO sale or short sale, as appropriate. A foreclosure sold by the lender is an REO sale.
Why This Is the Correct Answer
Option A is correct because a foreclosure comparable sold by the lender is real estate owned (REO), and UAD-compliant appraisals must identify it as an REO sale. Fannie Mae requires the appraiser to use REO sale or short sale, as appropriate.
Why the Other Options Are Wrong
Option B: As a relocation sale
Option B, a relocation sale, describes a sale tied to an employee relocation, not a lender-owned foreclosure. It does not match the comparable described.
Option C: As an arm’s length sale
Option C, an arm's length sale, does not identify the distressed nature of the transaction. For a foreclosure comparable, the UAD requires the specific REO sale designation.
Option D: As a short sale
Option D, a short sale, applies when a lender agrees to accept less than the loan balance before foreclosure, while the owner still holds title. A completed foreclosure resold by the lender is an REO sale instead.
Foreclosed and bank-owned: REO
If the bank already took the house back, it is real estate owned; if the owner is still selling for less than the debt, it is a short sale.
How to use: Use this to tell REO sales from short sales on UAD questions.
Exam Tip
Distinguish who is selling: a lender after foreclosure means REO, an owner with lender approval to sell short means short sale.
Common Mistakes to Avoid
- -Labeling a bank-owned foreclosure as a short sale
- -Reporting a distressed sale as an ordinary arm's length sale
- -Confusing relocation sales with foreclosure sales
Concept Deep Dive
Analysis
This question tests UAD reporting for foreclosure comparables under Fannie Mae guidance. For UAD-compliant appraisals, the appraiser must identify the financing type as REO sale or short sale, as appropriate. A foreclosure sold by the lender after taking title is an REO sale.
Background Knowledge
The Uniform Appraisal Dataset standardizes how sale and financing types are reported so lenders can identify distressed sales. REO sales are sales by a lender that acquired the property through foreclosure; short sales are sales by the owner for less than the mortgage debt with lender approval.
Real-World Application
An appraiser uses a comparable that the bank sold after foreclosure. On the UAD-compliant report, the appraiser identifies it as an REO sale and considers whether its condition and marketing 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?
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?
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Previous Question
Market data show that buyers in a subdivision of split-level homes pay more for larger homes and for better condition. For a 1,650-sf subject in average condition, the appraiser looks for sales that include both larger and smaller homes and both better-kept and worse-kept homes. Why does the appraiser want sales on both sides of the subject?
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