Over what period does Fannie Mae require the appraiser to analyze market conditions when deciding on a time adjustment for a comparable?
Correct Answer
A) From the comparable’s contract date to the effective date of the appraisal
The comparable must be analyzed for changes in market conditions from the time it went under contract to the effective date of the appraisal. A 12-month trend may differ from the change over that specific interval.
Why This Is the Correct Answer
Option A is correct because Fannie Mae requires analyzing changes in market conditions from the time the comparable went under contract to the effective date of the appraisal. That interval captures any market change between when the price was agreed and the date the value opinion applies.
Why the Other Options Are Wrong
Option B: From the comparable’s listing date to its closing date
Option B, from the comparable's listing date to its closing date, covers the marketing and escrow period of the comparable, not the gap between its price agreement and the appraisal's effective date. It ends too early to reflect conditions on the effective date.
Option C: From the comparable’s closing date to the date of the report
Option C, from the comparable's closing date to the date of the report, uses the wrong start and end points. The price was set at contract, not closing, and the value opinion applies on the effective date, which can differ from the report date.
Option D: Over the 12 months before the effective date, ignoring the contract date
Option D, the 12 months before the effective date ignoring the contract date, uses a general trend period instead of the specific interval. A 12-month trend may differ from the change between this comparable's contract date and the effective date.
Contract to effective date
The price was born at contract, and the value is stated as of the effective date; measure the market change in between.
How to use: Use this when asked which dates bound a time adjustment analysis.
Exam Tip
Watch for distractors that swap contract for closing or listing dates, or effective date for report date.
Common Mistakes to Avoid
- -Starting the analysis at the closing date instead of the contract date
- -Ending the analysis at the report date instead of the effective date
- -Substituting a general 12-month trend for the specific interval
Concept Deep Dive
Analysis
This question tests the exact period Fannie Mae requires for a market conditions analysis. The comparable's price was set at contract, and the appraisal speaks as of its effective date. The analysis must cover the interval between those two dates.
Background Knowledge
Market conditions adjustments account for changes in prices between when a comparable's price was set and the effective date of the appraisal. Using the contract date reflects when buyer and seller actually agreed on the price.
Real-World Application
A comparable went under contract in May and closed in July; the appraisal's effective date is in October. The appraiser analyzes market change from May through October to decide whether a time adjustment is warranted.
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
Unlike the subject duplex, a comparable duplex has a second-floor half bath. The seller's records show the half bath cost $22,000 to add in 2016. A contractor's current estimate to build the same half bath is $15,000, which includes $800 in permit fees, and the appraiser estimates 20% depreciation. Market data show buyers in this area pay about the depreciated cost of an added bath. What adjustment applies to the comparable?
Next Question
Market data show that buyers in a subdivision of split-level homes pay more for larger homes and for better condition. For a 1,650-sf subject in average condition, the appraiser looks for sales that include both larger and smaller homes and both better-kept and worse-kept homes. Why does the appraiser want sales on both sides of the subject?