The subject is a two-story home with a roof replaced last year. One nearby sale of a similar home was sold "as is"; the seller disclosed to buyers that its leaking roof needed replacement. The listing agent and the buyer both say the home was on the MLS for 38 days, typical for the area, and drew three offers; the buyer financed 80% of the price with a conventional loan. Market data show buyers pay less for homes that need roof replacement. How should the appraiser treat this sale?
Correct Answer
D) Use it with an adjustment for the difference in roof condition
The interviews show the conditions of a market sale: typical exposure, several offers, an informed buyer and ordinary financing, so the "as is" label does not make it distressed. What remains is a physical difference: the sale needed a roof and the subject has a new one, and market data show buyers pay less for that, so the sale is adjusted upward for condition. A conditions-of-sale adjustment would misclassify a physical difference, the buyer's knowledge of the leak is the reason the price reflects it, and the 80% loan is typical financing that calls for no adjustment.
Why This Is the Correct Answer
Option D is correct because the interviews show open exposure, competing offers and an informed buyer with ordinary financing, so the sale meets market conditions. The only remaining difference is the roof, a physical condition difference that market data show buyers discount, so the sale is adjusted for condition.
Why the Other Options Are Wrong
Option A: Exclude it, since an "as is" sale is a distressed transaction
Option A excludes the sale as distressed. Selling "as is" with disclosure does not make a sale distressed; the interviews show typical exposure and three offers.
Option B: Use it with no adjustment, since the buyer knew of the leak
Option B uses the sale with no adjustment because the buyer knew of the leak. The buyer's knowledge means the price reflects the leak, and the subject has a new roof, so the sale must be adjusted for that difference.
Option C: Use it with a conditions-of-sale adjustment for the "as is" terms
Option C makes a conditions-of-sale adjustment for the "as is" terms. The sale's conditions were those of the market; the difference is the roof's physical condition and belongs in the condition adjustment.
Sale terms versus house condition
Ask two questions in order: was the deal normal? If so, how is the house different?
How to use: Use this when a sale is labeled "as is" or has a disclosed defect.
Exam Tip
Separate the transaction from the property: verify the sale first, then put the difference on the right line of the grid.
Common Mistakes to Avoid
- -Treating any "as is" sale as distressed
- -Putting a physical difference under conditions of sale
- -Skipping an adjustment because the buyer knew of the defect
Concept Deep Dive
Analysis
The question takes two steps: first use the interviews to decide whether the sale was a market transaction, then classify the remaining difference correctly. The "as is" terms describe the property's condition, not an abnormal sale.
Background Knowledge
Conditions of sale concern the motivations and circumstances of the transaction, such as pressure on a party or a relationship between them. Condition of the property is a physical element of comparison. An openly marketed sale in poor condition is a market sale that needs a condition adjustment.
Real-World Application
An appraiser finds an "as is" sale with a failing furnace. The agent confirms normal marketing and two offers, so the appraiser uses the sale with an upward condition adjustment supported by paired sales.
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
The subject sits just inside a top-rated school attendance zone; an otherwise perfect comparable sits two blocks away, outside it. That comparable may require:
Next Question
The subject is a 1990s two-story home on the north side of Maple Run, a subdivision of similar homes that the MLS treats as one neighborhood. A school attendance boundary runs east to west through Maple Run. Over the past six months, three homes north of the boundary sold for $412,000 to $421,000, and three homes of similar size, age and condition south of it sold for $371,000 to $380,000. Four agents active in Maple Run and two recent buyers, interviewed separately, all say buyers here search by attendance zone and seldom consider homes on both sides. The county assessor values homes on both sides at the same rate per square foot. How should the appraiser define the market and select comparables?