Under Fannie Mae Selling Guide B4-1.3-09 regarding sales or financing concessions on comparable sales, which statement is correct?
Correct Answer
B) Positive adjustments for sales or financing concessions are not acceptable; concession adjustments must reflect the market's reaction so the comparable indicates what it would have sold for without the concessions
Under the expressly named Fannie Mae policy, positive sales/financing concession adjustments are not acceptable, and any downward effect follows market reaction rather than automatic seller cost. Common concessions still need analysis. This program rule is not labeled a universal USPAP prohibition.
Why This Is the Correct Answer
Option B is correct because Fannie Mae states that positive adjustments for sales or financing concessions are not acceptable. Adjustments must reflect the difference between what the comparables sold for with the concessions and what they would have sold for without them, so the amount approximates the market's reaction.
Why the Other Options Are Wrong
Option A: Positive adjustments for sales or financing concessions are required whenever the comparable seller paid no points
Option A is wrong because it calls for positive concession adjustments when the comparable seller paid no points. Fannie Mae does not accept positive adjustments for sales or financing concessions.
Option C: Concession adjustments must equal the seller’s dollar cost of the concessions on a strict cash-equivalency basis with no market analysis, and positive adjustments are made when the comparable seller paid no points
Option C is wrong because it requires adjustments to equal the seller's dollar cost with no market analysis and allows positive adjustments. Fannie Mae requires adjustments to approximate market reaction and does not accept positive concession adjustments.
Option D: Financing concessions may be disregarded if they are common in the neighborhood, whether or not they affected the price
Option D is wrong because concessions cannot be disregarded just because they are common in the neighborhood. The appraiser must analyze whether they affected price and adjust to reflect the market's reaction.
Down Only, Market Measured
Under Fannie Mae, concession adjustments go down only, and their size comes from market reaction.
How to use: Use this phrase to eliminate choices with positive concession adjustments or cost-only amounts.
Exam Tip
Reject any choice that allows positive concession adjustments or sets the amount purely at seller cost.
Common Mistakes to Avoid
- -Adding value when a comparable had no concessions
- -Setting the adjustment at the seller's dollar cost without market analysis
- -Ignoring concessions because they are common in the area
Concept Deep Dive
Analysis
This question tests Fannie Mae's policy on concession adjustments. Positive adjustments for concessions are not acceptable, and any adjustment reflects market reaction. The candidate must find the statement that matches both parts of that policy.
Background Knowledge
Sales and financing concessions can inflate a comparable's recorded price. Fannie Mae requires downward adjustments based on market reaction, not simply the seller's cost. This is a Fannie Mae program requirement for its loans.
Real-World Application
A comparable seller paid part of the buyer's closing costs. The appraiser studies sales with and without similar credits to see how the market reacted. She enters a downward adjustment based on that reaction rather than on the full credit amount.
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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