Paired resales of unchanged single-family homes in the neighborhood show prices rising at a steady pace. In a typical pair, a home sold for $320,000 ten months before the effective date and resold for $332,800 two months before it. Comparable 3 went under contract at $350,000 six months before the effective date. What market conditions adjustment applies to Comparable 3?
Correct Answer
D) $10,500
The pair rose $12,800 on $320,000, a 4% change over the eight months between its two sales, or 0.5% per month. Comparable 3 went under contract six months before the effective date: 0.5% × 6 = 3%, and 3% × $350,000 = $10,500. Spreading the 4% over the ten months from the first sale to the effective date gives $8,400, applying the pair's dollar change gives $9,600, and computing the percentage on the resale price gives $10,096.
Why This Is the Correct Answer
Option D is correct because the pair rose $12,800 on $320,000, or 4% over the eight months between its two sales, which is 0.5% per month. Comparable 3 went under contract six months before the effective date, so 0.5% × 6 = 3%, and 3% × $350,000 = $10,500.
Why the Other Options Are Wrong
Option A: $8,400
Option A, $8,400, spreads the pair's 4% change over the ten months from its first sale to the effective date (0.4% per month × 6 = 2.4% of $350,000). The monthly rate is the change divided by the months between the two sales, eight here, which gives 0.5% per month and $10,500.
Option B: $9,600
Option B, $9,600, applies the pair's dollar change of $1,600 per month for six months. A $320,000 home's dollar change does not transfer to a $350,000 comparable; the percentage rate does, giving $10,500.
Option C: $10,096
Option C, $10,096, measures the change on the resale price ($12,800 / $332,800 = 3.846% over eight months, then six months on $350,000). The percentage change is figured on the earlier sale, which gives 4% and $10,500.
Percent of first price, months between sales
Turn the resale gain into a percent of the first price and divide by the months between the two sales; then apply that rate for the comparable's own months to the effective date.
How to use: Use this sequence for any paired-resale time adjustment question.
Exam Tip
When a pair's sale dates are given relative to the effective date, subtract them to get the months between the sales before finding the monthly rate.
Common Mistakes to Avoid
- -Dividing the pair's change by the months to the effective date instead of the months between sales
- -Applying a dollar change instead of a percentage rate
- -Using the resale price as the base for the percentage
Concept Deep Dive
Analysis
The question tests the full paired-resale procedure: find the percentage change on the first sale, divide by the months between the two sales, then apply the monthly rate to the comparable for the months from its contract date to the effective date. Two different periods appear in the facts, and each step uses its own.
Background Knowledge
Sales and resales of the same unchanged property isolate the effect of time. The change is converted to a monthly percentage and applied to each comparable for the period between its contract date and the effective date of the appraisal.
Real-World Application
In a rising suburban market, an appraiser pulls several homes that sold twice without changes. The resales show a consistent monthly rate, which the appraiser applies to each comparable from its contract date and explains in the report.
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 single-family home was listed at $339,000 and sold for $332,000 with seller financing at a rate well below the market rate. Paired sales of similar homes bought with conventional loans show the seller financing raised the price by $14,000. The sale went under contract eight months and closed six months before the effective date. Market data show a 4% increase in prices since the contract date and 3% since the closing date. Under Fannie Mae's Selling Guide, what is the comparable's price after the financing and market conditions adjustments?
Next Question
A comparable has an extra 200 sf garage relative to the subject. Verified market evidence supports a $32/sf contribution for this difference, while an earlier unsupported adjustment used $45/sf. What signed market-supported adjustment should replace it? No fixed materiality threshold or required addendum format is assumed.