The appraiser’s adjustments are so large that the subject may not conform to its neighborhood. Under Fannie Mae guidance, what follows?
Correct Answer
D) The underwriter decides if the value is supported
If the adjustments are great enough to indicate that the property may not conform to the neighborhood, the underwriter must determine whether the opinion of value is adequately supported. There is no automatic rejection or cap.
Why This Is the Correct Answer
Option D is correct because Fannie Mae states that if the extent of the appraiser's adjustments is great enough to indicate the property may not conform to the neighborhood, the underwriter must determine whether the opinion of value is adequately supported. The issue triggers a support review, not an automatic outcome.
Why the Other Options Are Wrong
Option A: The appraisal is rejected without further review
Option A is wrong because the appraisal is not rejected without further review. The guidance calls on the underwriter to decide whether the value opinion is adequately supported.
Option B: Each adjustment must be capped at 25% of the price
Option B is wrong because the guidance does not cap each adjustment at 25% of the price. It directs the underwriter to judge whether the value is adequately supported.
Option C: The appraiser must switch to using cost data alone
Option C is wrong because the guidance does not require the appraiser to switch to cost data alone. The response is an underwriter review of whether the value is supported.
Big Adjustments, Underwriter Decides
When adjustments get big enough to question conformity, the underwriter decides whether the value is supported.
How to use: Use this phrase to rule out answers proposing automatic rejection, caps, or forced approach changes.
Exam Tip
Answers with automatic results or fixed percentage caps are usually less consistent with Fannie Mae's support-based guidance than an answer calling for review.
Common Mistakes to Avoid
- -Assuming large adjustments mean automatic rejection
- -Applying fixed percentage caps that are not in the guidance
- -Believing the appraiser must drop the sales comparison approach
Concept Deep Dive
Analysis
This question tests what Fannie Mae says happens when large adjustments suggest the subject may not conform to its neighborhood. The guidance places a review decision with the underwriter. It does not create an automatic rejection, a cap, or a change of approach.
Background Knowledge
Large adjustments can signal that the subject is unusual for its area, such as an over-improvement. Fannie Mae relies on lender underwriting to judge whether the appraisal still supports the value. Adjustment size alone does not decide acceptability.
Real-World Application
An appraiser values a much larger custom home in a neighborhood of small starter homes. The adjustments needed are very large, so the lender's underwriter reviews whether the value opinion is adequately supported. The underwriter, not a formula, makes that decision.
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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