In a Fannie Mae appraisal, reliable boundary information confirms a neighbor’s detached garage crosses onto the subject site, and verified market evidence indicates buyer resistance. Which action is appropriate?
Correct Answer
C) Describe and analyze the condition and its supported value/marketability effects
Reflect the confirmed intrusion and reported buyer resistance in relevant site analysis and reporting. Verify material rights and technical facts as needed and measure supported market effects. Title insurance alone does not eliminate the issue, and an arbitrary 10% deduction is not market evidence.
Why This Is the Correct Answer
Option C is correct because the appraiser should describe the confirmed encroachment and analyze its supported effect on value and marketability. Fannie Mae requires comment on adverse site conditions and market resistance, with an assessment of their effect. Here, verified market evidence of buyer resistance gives the basis for that analysis.
Why the Other Options Are Wrong
Option A: Ignore the issue whenever title insurance exists
Option A says to ignore the issue whenever title insurance exists. Title insurance does not remove the physical encroachment or the buyer resistance, so the adverse condition still must be addressed.
Option B: Deduct a standard 10% without market evidence
Option B applies a standard 10% deduction without market evidence. An arbitrary 10% figure is not supported analysis, and the effect must be measured from market data.
Option D: Attach the boundary survey to the report and omit any substantive analysis of the encroachment
Option D attaches the boundary survey but omits any substantive analysis of the encroachment. Attaching a document does not meet the requirement to comment on the adverse condition and assess its effect on value and marketability.
Describe, Then Measure
For an adverse site condition, describe it in the report and then measure its effect with market evidence.
How to use: Use this two-step check to eliminate answers that skip either description or analysis.
Exam Tip
Look for the answer that both reports the condition and analyzes its supported effect. Answers relying on title insurance, flat percentages or attachments alone fall short.
Common Mistakes to Avoid
- -Assuming title insurance resolves an encroachment
- -Using a rule-of-thumb percentage deduction
- -Attaching a survey without analyzing it
Concept Deep Dive
Analysis
This question tests how an appraiser handles a confirmed encroachment that the market reacts to. Fannie Mae requires the appraiser to comment on adverse site conditions and assess their effect on value and marketability. The correct answer combines describing the condition with supported analysis, not ignoring it or applying an arbitrary percentage.
Background Knowledge
An encroachment occurs when an improvement extends onto another owner's land. It can affect the use, title and marketability of the encroached-on site. Appraisers report such conditions and measure any value effect using market evidence, relying on surveys and legal information for the technical facts.
Real-World Application
A survey shows that a neighbor's garage extends three feet onto the subject lot. The appraiser describes the encroachment, reviews sales of properties with similar boundary issues showing buyer hesitation, and explains the resulting marketability effect in the report.
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