Foreclosures make up a large share of sales in the subject’s neighborhood. Besides choosing comparables, what must a Fannie Mae appraisal address?
Correct Answer
A) The prevalence of such sales and their impact
The appraiser must address in the report the prevalence of foreclosures and short sales in the subject’s neighborhood and their impact.
Why This Is the Correct Answer
Option A is correct because Fannie Mae requires the appraiser to address in the appraisal report the prevalence of such sales in the subject's neighborhood and their impact. This tells the reader how distressed sales are influencing the market where the subject competes.
Why the Other Options Are Wrong
Option B: The names of the lenders that foreclosed on each property
Option B asks for the names of the lenders that foreclosed on each property. That information does not describe market conditions and is not the required reporting.
Option C: The foreclosure timeline required under state law
Option C asks for the foreclosure timeline under state law. Legal foreclosure procedures are outside the market analysis the requirement addresses.
Option D: The borrower’s plans if the subject were foreclosed
Option D asks for the borrower's plans if the subject were foreclosed. That concerns the borrower, not the market conditions affecting value.
How many, how much effect
For distressed sales, report how common they are and how much they move the market.
How to use: Use this when asked what must be reported about foreclosures or short sales in a neighborhood.
Exam Tip
Choose the answer that addresses market conditions; lender names, legal procedures and borrower plans are not market analysis.
Common Mistakes to Avoid
- -Ignoring the share of distressed sales because the subject is not distressed
- -Discussing foreclosure legal procedures instead of market effects
- -Selecting comparables without addressing neighborhood market conditions
Concept Deep Dive
Analysis
This question tests a Fannie Mae reporting requirement when distressed sales are common. Beyond selecting comparables, the appraiser must address in the report how prevalent foreclosures and short sales are in the neighborhood and how they affect the market. Choose the answer about market prevalence and impact rather than unrelated details.
Background Knowledge
Foreclosures and short sales can affect prices, marketing times and buyer behavior in a neighborhood. When they are a significant share of sales, they become part of the market the subject competes in. The appraiser describes their prevalence and effect so the report reflects actual market conditions.
Real-World Application
In a neighborhood where about a third of recent sales were bank-owned, the appraiser notes this share in the report and explains that these sales have pressured prices on traditional sales as well.
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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In a market with few sales, an appraiser considers a sale from a competing neighborhood. Using it requires:
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Two verified otherwise-matched cash-equivalent sales are $663,000 at 2550 sqft and $597,000 at 2150 sqft. Consistent area measurement and market controls support applying the extracted marginal rate to a comparable of 2200 sqft sold for $555,000, toward a subject of 2450 sqft. What are the extracted rate, signed comparable adjustment and adjusted price?