Market conditions adjustments are warranted by:
Correct Answer
B) Supported market change between the contract date and effective date
For Fannie Mae analysis, investigate relevant market changes from the comparable contract date to the appraisal effective date. Passage of time alone does not require a nonzero adjustment; support the direction and amount with market evidence.
Why This Is the Correct Answer
Option B is correct because a market conditions adjustment depends on supported market change between the comparable's contract date and the effective date of the appraisal. The appraiser analyzes that interval to determine whether a time adjustment is warranted. If the market was stable, no adjustment may be needed even for an older sale.
Why the Other Options Are Wrong
Option A: The number of months since the sale, apart from market evidence
Option A, the number of months since the sale apart from market evidence, is wrong because the passage of time alone does not require a nonzero adjustment. The direction and amount must be supported by market evidence.
Option C: The recording date of the deed, rather than the contract date
Option C, the recording date of the deed rather than the contract date, uses the wrong starting point. The analysis runs from the date the comparable went under contract, when the price was agreed, to the effective date.
Option D: Changes in the seller’s personal finances
Option D, changes in the seller's personal finances, has nothing to do with market conditions. A seller's personal situation may bear on motivation and conditions of sale, but it is not a time adjustment.
Contract to effective date
The time adjustment clock starts when the price was agreed (contract) and stops on the appraisal's effective date.
How to use: Use this when choosing the start and end dates for a market conditions adjustment.
Exam Tip
Look for answers tying the adjustment to supported market change, not to elapsed time alone or to recording or closing dates.
Common Mistakes to Avoid
- -Adjusting for time just because months have passed
- -Measuring from the recording or closing date instead of the contract date
- -Treating a seller's personal circumstances as a market conditions factor
Concept Deep Dive
Analysis
This question tests when a market conditions (time) adjustment is warranted. Fannie Mae requires the appraiser to analyze changes in market conditions from each comparable's contract date through the effective date of the appraisal. An adjustment is warranted only when market evidence supports a change over that period.
Background Knowledge
An appraisal is made as of a specific effective date, so comparable sales must reflect market conditions on that date. Because the price of a comparable was set when it went under contract, the market conditions analysis covers the period from the contract date to the effective date.
Real-World Application
A comparable went under contract six months before the effective date. The appraiser reviews paired resales and listing trends for that period, finds prices rose modestly, and applies a supported upward market conditions adjustment.
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Previous Question
An eight-month-old sale and a recent sale are both verified competitive substitutes. Market analysis supports the adjustments needed for each. The older sale is more physically similar, while the recent sale needs larger physical adjustments. Which approach uses both relevant observations?
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