Four bungalows in the subject's neighborhood sold for $396,000 to $408,000. After the appraiser's adjustments for size, condition, garage and market conditions, their adjusted prices range from $378,000 to $431,000. What should the appraiser do next?
Correct Answer
C) Re-examine the adjustments, which widened a range they should narrow
Sound adjustments bring each sale closer to the subject and therefore closer to one another, so the adjusted range is normally narrower than the unadjusted range. Here the spread grew from $12,000 (about 3%) to $53,000 (about 14%), which points to an adjustment that is misestimated, applied in the wrong direction, or missing an element that matters. The appraiser returns to the analysis; a midpoint, an average of the middle sales or a reported range would carry the error into the value.
Why This Is the Correct Answer
Option C is correct because the adjustments widened the spread from $12,000 to $53,000, when sound adjustments should narrow it. That signals a misestimated, misdirected or missing adjustment, so the appraiser re-examines the grid before reconciling.
Why the Other Options Are Wrong
Option A: Report the midpoint of the adjusted range, about $404,500
Option A reports the midpoint of the adjusted range, about $404,500 ($378,000 + $431,000, divided by 2). A midpoint of figures produced by faulty adjustments carries the fault into the value.
Option B: Drop the sales at each end of the range and average the other two
Option B drops the sales at each end and averages the other two. Discarding sales without finding why the adjustments pushed them apart may remove good evidence and leave the error in the remaining sales.
Option D: Report a range of value in place of a point value, as the data vary
Option D reports a range of value because the data vary. The variation was created by the adjustments themselves, so it should be corrected, not reported as uncertainty about the subject.
Adjustments should tighten the spread
Compare the raw price range with the adjusted range; if adjusting made it wider, go back to the grid.
How to use: Use it as a quick check on any adjustment grid before reconciling.
Exam Tip
When a question gives both unadjusted and adjusted ranges, compare them. A wider adjusted range calls for revisiting the adjustments rather than averaging or picking a midpoint.
Common Mistakes to Avoid
- -Reporting the midpoint of a range that the adjustments distorted
- -Dropping outliers without finding the cause
- -Assuming a wide adjusted range reflects the subject rather than the analysis
Concept Deep Dive
Analysis
The question tests a check on the adjustment grid: well-supported adjustments narrow the spread among sales. When the adjusted range is wider than the unadjusted one, the adjustments, not the subject, are the likely problem.
Background Knowledge
Each adjustment is meant to make a comparable more like the subject. If the adjustments are well measured, the adjusted prices cluster more tightly than the raw prices; a wider adjusted range is a diagnostic warning that the analysis needs work.
Real-World Application
An appraiser notices that four similar sales within $12,000 of each other spread over $50,000 after adjustment. Checking the grid, the appraiser finds a condition adjustment entered with the wrong sign and corrects it.
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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