Over the past two months, mortgage rates in a suburban market have risen sharply. The closed sales the appraiser has found for a split-level subject all went under contract three to five months ago. Interviews with agents active in the neighborhood describe fewer offers and recent contracts at prices below those earlier sales. How should the appraiser use the interviews?
Correct Answer
B) Use them as support for the direction of market change since the closed sales
Closed sales lag a turning market, so the appraiser researches pending contracts and recent offers to learn which way prices have moved between the comparables' contract dates and the effective date. The interviews support the market conditions analysis and any time adjustment, verified where possible, but they do not replace closed sales. Ignoring them would miss evidence of the turn, and a 12-month trend for all property types comes from a different segment and may not show the recent change.
Why This Is the Correct Answer
Option B is correct because the agents' reports of fewer offers and lower recent contracts show which way prices have moved since the comparables went under contract. That evidence supports the market conditions analysis and any time adjustment while the closed sales remain the basis of the approach.
Why the Other Options Are Wrong
Option A: Replace the closed sales with the prices the agents report for pending contracts
Option A replaces the closed sales with pending contract prices reported by agents. Pending contracts have not closed and may still change, so they support the analysis rather than substitute for closed sales.
Option C: Set them aside, since contracts that have not closed are not market evidence
Option C sets the interviews aside because the contracts have not closed. Pending contracts and offers are recognized market data and are often the earliest evidence of a turn in prices.
Option D: Apply the county's 12-month trend for all property types in their place
Option D applies the county's 12-month trend for all property types instead. A broad trend from a different segment and a longer period may hide the recent change in the subject's own market.
Pending deals point the way
Closed sales are yesterday's weather; pending contracts and agents' reports show which way the wind is blowing now.
How to use: Use this when closed sales predate a recent shift in the market.
Exam Tip
Treat pending contracts and interviews as support for trend and direction, not as closed comparables and not as noise.
Common Mistakes to Avoid
- -Using pending contracts as closed comparables
- -Ignoring evidence that the market has turned
- -Applying a broad trend from a different segment
Concept Deep Dive
Analysis
The question tests how interviews about pending contracts fit into the sales comparison approach when the market has just changed. They show the direction of change that closed sales do not yet reflect and support, rather than replace, the closed-sale analysis.
Background Knowledge
Market conditions are analyzed from each comparable's contract date to the effective date. In a changing market, recent contracts, offers and agent observations give early evidence of the trend, which the appraiser combines with closed-sale data and explains in the report.
Real-World Application
After a sharp rate increase, an appraiser's best sales are four months old. Agents report recent contracts several percent lower, and the appraiser uses this, with listing data, to support a downward time adjustment.
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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