For a Fannie Mae appraisal subject to B4-1.3-09, the reported SCA adjusted comparable prices are $292,000, $298,000 and $305,000. The SCA indicated value is $310,000. Which issue is shown?
Correct Answer
D) The conclusion sits above all three indications
For the specified Fannie Mae sales-comparison indication, B4-1.3-09 requires it to be within the reported adjusted comparable-sales range. Here the range is $292,000 to $305,000, so $310,000 is outside it. This program rule does not require using the mean and should not be presented as a universal USPAP rule for every final value reconciliation.
Why This Is the Correct Answer
Option D is correct because the $310,000 indicated value sits above all three adjusted prices of $292,000, $298,000 and $305,000. Fannie Mae B4-1.3-09 states that the sales comparison indicated value must be within the range of the adjusted sale prices of the reported comparables. A conclusion above the highest adjusted price fails that requirement.
Why the Other Options Are Wrong
Option A: The conclusion should equal the mean of the three indications
Option A is wrong because the rule does not require the conclusion to equal the mean of the three indications, which would be about $298,333 (($292,000 + $298,000 + $305,000) / 3). The requirement is that the value fall within the range.
Option B: Nothing is wrong with the indicated value as reported
Option B is wrong because saying nothing is wrong ignores that $310,000 is above the highest adjusted price of $305,000. That places the indicated value outside the required range.
Option C: The three indications are too close together to support any conclusion
Option C is wrong because indications spanning $292,000 to $305,000 being close together is not a defect. Close agreement among adjusted sales is generally a sign of consistency, not a reason to reject them.
Stay inside the fence
The lowest and highest adjusted prices are fence posts. Under Fannie Mae, the sales comparison indicated value must land inside the fence.
How to use: Use the fence image to check any Fannie Mae question that compares an indicated value with adjusted comparable prices.
Exam Tip
First find the lowest and highest adjusted prices, then check whether the indicated value falls between them.
Common Mistakes to Avoid
- -Thinking the indicated value must equal the average of the adjusted prices
- -Missing that the conclusion exceeds the highest adjusted price
- -Presenting a Fannie Mae program rule as a universal USPAP requirement
Concept Deep Dive
Analysis
This question tests a specific Fannie Mae rule: the indicated value in the sales comparison approach must fall within the range of the adjusted sale prices of the reported comparables. With adjusted prices from $292,000 to $305,000, an indicated value of $310,000 lies outside the range. The rule concerns the range, not the mean.
Background Knowledge
The adjusted sale prices of comparables form the range from which the sales comparison indication is reconciled. Fannie Mae requires the indicated value to fall within that range for its loans. This is a program requirement and should not be stated as a universal USPAP rule for all assignments.
Real-World Application
A reviewer for a Fannie Mae loan notices the indicated value is $5,000 above the highest adjusted sale. The appraiser must revisit the adjustments or comparable selection, since the indicated value cannot sit outside the adjusted range under that guidance.
More Sales Comparison Questions
Which stated cause of supported value loss is external?
Improvement cost new is $450,000. Separately supported improvement depreciation deductions of $45,000, $25,000, $15,000 are expressly nonoverlapping and not already excluded from cost new. Add supported site value of $125,000, already reflecting any site losses. What total indicated value results?
Which two depreciation categories may each be classified as curable or incurable by comparing the cost to remedy a deficiency with the value gained?
Improvement cost new is $800,000. Separately supported improvement depreciation deductions of $120,000, $80,000, $40,000 are expressly nonoverlapping and not already excluded from cost new. No site is included. What depreciated improvement amount results?
The principle of anticipation in real estate valuation states that:
Which highest-and-best-use criterion addresses whether a proposed use is allowed by zoning and applicable legal restrictions?
Three comparables produce adjusted indications of $312,000, $309,000 and $315,000, requiring gross adjustments of 9%, 14% and 22% respectively. Verification also establishes that the first sale is the closest competitive substitute and its adjustments are better supported than the other two. Which indication deserves the most weight on those facts?
When reconciling value indications from the three approaches to value, an appraiser should:
A property sold at a cash-equivalent price of $1,062,500. Its stabilized annual NOI is $85,000. What is the indicated overall rate?
In reconciliation, an appraiser should:
People Also Study
Real Estate Market
13.6% of exam
Property Description
11.8% of exam
Land or Site Valuation
4.5% of exam
Cost Approach
13.6% of exam
Income Approach
8.2% of exam
Related Tools
Previous Question
The subject contains 1,900 square feet. The three comparables contain 1,700, 1,780 and 1,840 square feet, and gross living area is supported at $70 per square foot. What is the concern?
Next Question
A comparable’s verified price is $305,000 and evidence establishes a $5,000 concession-induced price increase. Its consistently measured comparison area is 2000 sqft. What is the normalized cash-equivalent sale price per square foot?