Several homes in a neighborhood are vacant and boarded up. Which market force does Fannie Mae classify this as?
Correct Answer
C) Economic force
Fannie Mae lists the existence of vacant or boarded-up properties and the level of essential local support services as economic forces. Regulations and taxes are governmental forces; hazardous sites, airports and flood zones are environmental.
Why This Is the Correct Answer
Option C is correct because Fannie Mae's Selling Guide states that economic forces include the existence of vacant or boarded-up properties in the neighborhood and the level of essential local support services. Vacant, boarded homes reflect economic conditions such as weak demand or distress. Fannie Mae therefore classifies them as an economic force.
Why the Other Options Are Wrong
Option A: Governmental force
Option A, governmental force, covers items such as regulations, zoning and taxes. Fannie Mae does not place vacant or boarded-up homes in that group.
Option B: Environmental force
Option B, environmental force, covers items such as hazardous sites, airports and flood zones. Boarded-up homes are not classified there by Fannie Mae, even though they affect the neighborhood's appearance.
Option D: Social force
Option D, social force, relates to population characteristics and attitudes in the area. Fannie Mae lists vacant or boarded-up properties under economic forces, not social forces.
Boarded Up, Money Down
Boards go up on homes when the money goes down, so vacant boarded-up homes are an economic force.
How to use: Use this image to place vacant or boarded-up properties in the economic category on Fannie Mae questions.
Exam Tip
When a question names Fannie Mae's classification, answer with the category Fannie Mae uses, even if another category also sounds reasonable.
Common Mistakes to Avoid
- -Classifying boarded-up homes as an environmental force
- -Treating them as a social force because of neighborhood perception
- -Ignoring vacant properties in the neighborhood analysis
Concept Deep Dive
Analysis
This question tests how Fannie Mae groups the forces affecting neighborhood property values. Fannie Mae expressly lists vacant or boarded-up properties among economic forces. The task is to recall that classification rather than guess from the physical appearance of the homes.
Background Knowledge
Appraisers commonly analyze neighborhoods through four forces: social, economic, governmental and environmental. Fannie Mae requires appraisers to consider these forces and lists vacant or boarded-up properties and the level of essential local support services as economic. Correct classification helps the appraiser explain why a neighborhood's values are changing.
Real-World Application
An appraiser inspecting a subject finds several boarded-up homes on the same street. The appraiser reports them as an economic factor in the neighborhood analysis and considers their effect on marketability and value.
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