Under Fannie Mae Selling Guide B4-1.3-09 on sales or financing concessions, which statement correctly describes the market effect that should drive any comparable adjustment?
Correct Answer
C) Deduct only the price effect shown by the market; no positive adjustments
For the cited Fannie policy, measure any price increase attributable to the concession using market evidence and deduct that supported amount. Seller outlay is not automatically the adjustment; positive concession adjustments are not allowed under this program policy. Typicality does not replace analysis.
Why This Is the Correct Answer
Option C is correct because Fannie Mae requires comparables with concessions to be adjusted for the impact, if any, on their sale prices based on the market at the time of sale, and states that positive adjustments for concessions are not acceptable. So the appraiser deducts only the price effect supported by market evidence. The seller's outlay is not by itself the adjustment amount.
Why the Other Options Are Wrong
Option A: Always subtract the full seller cost, regardless of any price effect
Option A is wrong because it says to always subtract the full seller cost regardless of any price effect. The adjustment must reflect the market impact on price, which may be less than the seller's cost or nothing at all.
Option B: Never analyze concessions when they are common in the market area
Option B is wrong because it says never to analyze concessions when they are common in the market area. Concessions being typical does not replace the requirement to analyze their effect on comparable sale prices.
Option D: Add the seller’s cost whenever the subject has fewer concessions
Option D is wrong because adding the seller's cost when the subject has fewer concessions would be a positive concession adjustment, which Fannie Mae does not accept. It also uses cost rather than the market price effect.
Concessions only push down
For Fannie Mae, a concession adjustment can only take price out of a comparable, and only as much as the market shows it added.
How to use: Use this when an answer suggests adding value for concessions or subtracting the seller's full dollar cost.
Exam Tip
Separate the seller's cost of a concession from its effect on price; the adjustment follows the price effect.
Common Mistakes to Avoid
- -Deducting the seller's full concession cost without measuring the price effect
- -Making positive adjustments for concessions on a Fannie Mae report
- -Skipping concession analysis because concessions are common locally
Concept Deep Dive
Analysis
This question tests Fannie Mae's policy on adjusting comparables for sales or financing concessions. The adjustment reflects the market impact, if any, on the comparable's sale price, not the seller's out-of-pocket cost. Fannie Mae also does not accept positive adjustments for concessions.
Background Knowledge
Sales and financing concessions, such as seller-paid closing costs or below-market financing, can inflate a comparable's recorded price. The appraiser measures how much of the price reflects the concession, using market evidence, and adjusts downward for that amount. Under the Fannie Mae policy, concession adjustments only go downward.
Real-World Application
A comparable sold with the seller paying the buyer's closing costs. The appraiser studies similar sales with and without concessions to measure how much the concession raised the price, then deducts only that supported amount.
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