The 12-month price trend in a market is clearly positive, but prices were flat between a comparable’s contract date and the effective date. Under Fannie Mae guidance, the comparable’s time adjustment should be:
Correct Answer
C) Based on the market change since its contract date
A specific time adjustment may differ from the overall trend because it is based on market changes between the comparable’s contract date and the effective date. If that interval was stable, no time adjustment may be warranted.
Why This Is the Correct Answer
Option C is correct because Fannie Mae bases a comparable's time adjustment on market changes between its contract date and the effective date of the appraisal. The adjustment may differ from the 12-month trend, and if the market was stable over that period, no time adjustment may be warranted.
Why the Other Options Are Wrong
Option A: Positive, at the 12-month annual rate prorated to its age
Option A uses the 12-month annual rate prorated to the comparable's age. That assumes the trend applied evenly, but here prices were flat between the contract date and the effective date.
Option B: Positive, at the full 12-month rate for each comparable
Option B applies the full 12-month rate to each comparable. That ignores both the comparable's actual time interval and the flat market during that interval.
Option D: Negative, to offset the general upward trend
Option D makes a negative adjustment to offset the upward trend. Nothing supports a decline over the relevant period; the prices were flat, which points to no adjustment rather than a negative one.
Contract date to effective date
Measure only the change between the comparable's contract date and the effective date, not the whole year's trend.
How to use: Use this when an answer applies an annual trend directly to a comparable.
Exam Tip
Look at the specific time window in the question; the overall trend may not match what happened during that window.
Common Mistakes to Avoid
- -Applying the annual trend to all comparables
- -Using the closing date instead of the contract date for the time interval
- -Making a time adjustment without evidence for the specific period
Concept Deep Dive
Analysis
This question tests how a comparable's time adjustment relates to the broader market trend. Fannie Mae says the specific adjustment depends on market change between the comparable's contract date and the effective date. If prices were flat over that interval, the overall 12-month upward trend does not justify an adjustment.
Background Knowledge
Market conditions adjustments account for price changes between when a comparable was contracted and the effective date. Overall trends help describe the market, but the adjustment depends on the specific interval. Fannie Mae requires that time adjustments, or the lack of them, be supported.
Real-World Application
Prices rose sharply early in the year and then leveled off. A comparable that went under contract after prices leveled off receives no time adjustment, even though the 12-month trend is positive.
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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A comparable sold at a cash-equivalent price of $538,000 exactly 6 months before the effective date. Market prices have declined at a compound rate of 0.6% per month. No other adjustments apply. What is the time-adjusted price, to the nearest dollar?