A proposed grid uses a +$24,500 pool indication derived from an untested luxury segment and a −$18,200 HVAC adjustment even though the comparable’s HVAC is inferior to the subject’s. What should be done first?
Correct Answer
A) Check the pool indication’s applicability and fix the HVAC direction
Recheck both applicability and adjustment direction. A premium from luxury properties is not automatically transferable to the subject’s segment. If the comparable HVAC is inferior and a positive contribution is supported, the adjustment toward the subject is upward. Do not resolve conflicting analyses by mechanically weighting unrelated feature adjustments; net percentages do not establish a five-percent acceptance rule.
Why This Is the Correct Answer
Option A is correct because the first step is to test whether the luxury-segment pool indication applies to the subject's segment and to fix the HVAC adjustment direction. Adjustments must reflect the market's reaction to the actual differences between properties. An inferior comparable feature calls for an upward adjustment toward the subject if a positive contribution is supported.
Why the Other Options Are Wrong
Option B: Accept the grid because the net adjustment is below five percent
Option B accepts the grid because the net adjustment is below five percent. A low net percentage does not cure a wrong-direction adjustment or an unsupported indication, and net percentage is not a test that validates individual adjustments.
Option C: Average the two feature amounts into one combined adjustment
Option C averages the pool and HVAC amounts into one combined adjustment. These are unrelated features with separate problems, and mechanically blending them would hide both errors rather than correct them.
Option D: Treat SR 1-5 as a rule requiring the adjustments to be averaged
Option D treats SR 1-5 as a rule requiring the adjustments to be averaged. No standard calls for averaging unrelated feature adjustments; each adjustment needs its own market support and correct direction.
CIA: Comparable Inferior, Add
When the Comparable is Inferior, Add to its price; when it is superior, subtract.
How to use: Use this to check the sign of each line on a sales comparison grid.
Exam Tip
When a grid has a sign error or a questionable data source, the best first step is usually to verify and correct those items rather than to accept the totals.
Common Mistakes to Avoid
- -Subtracting for a feature the comparable lacks or has in inferior form
- -Using a feature premium from a different market segment without testing it
- -Relying on a low net percentage to accept a grid
Concept Deep Dive
Analysis
This question tests reviewing grid adjustments for both applicability and direction. A pool premium measured in a different, untested luxury segment may not apply to the subject's market. Separately, when a comparable's feature is inferior to the subject's, a supported adjustment to that comparable is upward, so a negative HVAC adjustment points the wrong way.
Background Knowledge
Grid adjustments are made to the comparable to make it resemble the subject. If the comparable is inferior in a feature, its price is adjusted upward; if superior, downward. Market evidence must also come from a market segment relevant to the subject, since contributions can differ between segments.
Real-World Application
A reviewer finds that an appraiser borrowed a pool premium from high-end estate sales for a modest tract home and entered a minus adjustment for a comparable with an older, inferior HVAC system. The reviewer asks for local evidence on the pool and a corrected positive HVAC adjustment if the market supports one.
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
A comparable sold eight months before the effective date for $300,000. Paired resales show prices rising 0.5% per month (simple, not compounded) over that period. What is the time-adjusted price?
Next Question
A townhouse comparable listed at $419,000 and sold for $412,000. As part of the purchase, the buyer also took over the $9,000 unpaid balance of a $15,000 special assessment for a new sewer main, billed with the property taxes. The subject received the same sewer main, and its assessment has been paid in full. Paired sales in the subdivision show homes that still carry an unpaid balance sell for less than paid-off homes by about the amount of the balance. What is the comparable's price on the subject's paid-off basis?