In a neighborhood with declining values and marketing times over six months, what must Fannie Mae lenders confirm about the sales comparison analysis?
Correct Answer
D) That listings and contract sales are analyzed, noting concessions
Lenders must confirm that the appraiser analyzes listings and contract sales as well as closed sales, uses the most recent and similar sales, and pays particular attention to sales or financing concessions in declining or over-supplied markets.
Why This Is the Correct Answer
Option D is correct because Fannie Mae requires lenders to confirm that the appraiser analyzes listings and contract sales as well as closed sales in these markets. The guidance also calls for using the most recent and similar sales and paying particular attention to sales or financing concessions. Option D reflects both the broader data set and the attention to concessions.
Why the Other Options Are Wrong
Option A: That only closed sales older than six months are used in the grid
Option A is wrong because it calls for using only closed sales older than six months. In a declining market the guidance emphasizes the most recent and similar sales, plus listings and contract sales, so restricting the grid to older closings runs the opposite way.
Option B: That listings are excluded from the analysis because they are unreliable
Option B is wrong because it says listings are excluded as unreliable. Fannie Mae expects listings and contract sales to be analyzed in these markets because they show current pricing direction.
Option C: That concessions are ignored in the analysis because they are typical
Option C is wrong because it says concessions are ignored because they are typical. Fannie Mae calls for particular attention to sales or financing concessions in declining or over-supplied markets.
Falling market: look forward
In a soft market, closed sales show where prices were, while listings and contracts show where they are going. Watch concessions closely because they rise when buyers have leverage.
How to use: Use this when a question describes declining values, over-supply or long marketing times.
Exam Tip
For declining or over-supplied markets, look for answers that broaden the data to listings and contracts and give concessions closer attention.
Common Mistakes to Avoid
- -Relying only on older closed sales in a declining market
- -Excluding listings and pending sales from the analysis
- -Ignoring concessions because many sellers offer them
Concept Deep Dive
Analysis
This question tests Fannie Mae's added expectations for sales comparison analysis in weak markets, such as those with declining values or marketing times over six months. In these markets lenders must confirm the appraiser analyzes listings and contract sales along with closed sales and pays particular attention to concessions. Recent, similar data matters most when prices are falling.
Background Knowledge
Closed sales reflect contracts signed weeks or months earlier, so in a declining market they can lag current conditions. Listings and pending contracts show where prices are heading, and concessions often grow in weak markets, which can mask true price levels.
Real-World Application
An appraiser working in a neighborhood where homes now take seven months to sell includes two active listings and a pending sale alongside closed sales. She notes that several closed sales involved seller-paid closing costs and analyzes their effect on 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?
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?
A comparable went under contract two weeks before the effective date. What does Fannie Mae expect about a time adjustment?
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Previous Question
Comparable 1, a two-story home, sold for $465,000. The buyer assumed the seller's loan, which had a $260,000 balance at 4.5% interest with 180 monthly payments remaining, when new loans carried 6.5%. The buyer's payment is $276 a month less than on a new $260,000 loan at the market rate. The seller had originally borrowed $320,000. Paired sales in the subdivision over the past year show that homes sold with assumable low-rate loans of similar balance and remaining term brought about $12,000 more than similar homes bought with new market-rate loans. What amount should the appraiser deduct from Comparable 1's price for the financing?
Next Question
An owner lives in the subject, a single-family home with a two-car garage; Comparable 1 has a one-car garage. No paired sales isolate the difference, but about a third of the neighborhood's homes are rented, and leases show two-car homes rent for $90 more per month. The lender's reviewer questions a rent-based garage adjustment because the subject is not rented. Which response is best?