Under Fannie Mae’s comparable-selection guidance, how should comparable sales relate to the subject property?
Correct Answer
A) They should be competitive and appeal to the same market participants
Fannie Mae says comparables need not be identical; they should be competitive with the subject and appeal to the same buyers who would consider it. Recency matters but does not override competitiveness, and sales needing no adjustment are rare and not required.
Why This Is the Correct Answer
Option A is correct because Fannie Mae states that comparable sales do not have to be identical to the subject but should be competitive and appeal to the same market participants who would also consider buying the subject. A sale that competes for the same buyers reflects how the market would price the subject.
Why the Other Options Are Wrong
Option B: They should match the subject in each of its physical features
Option B says comparables should match the subject in each of its physical features. Fannie Mae expressly says comparables need not be identical; differences are handled through supported adjustments.
Option C: They should be the most recent closed sales, wherever located
Option C says to use the most recent closed sales wherever located. Recency matters, but a sale from a location that does not compete for the same buyers is not a good comparable, and recency does not override competitiveness.
Option D: They should be chosen from sales that need no adjustments at all
Option D says comparables should be sales that need no adjustments at all. Such sales are rare and not required; the adjustment process exists to account for differences between competitive sales and the subject.
Same buyers, not same house
A good comparable is one the subject's likely buyer would also have considered. It does not need to be a twin of the subject.
How to use: Use this when an answer demands identical features or zero adjustments for comparables.
Exam Tip
When a choice requires comparables to be identical or adjustment-free, compare it with the competitiveness standard; Fannie Mae asks for competing properties, not clones.
Common Mistakes to Avoid
- -Rejecting a competitive sale because one physical feature differs
- -Choosing the newest sales regardless of whether they compete with the subject
- -Believing a good comparable must need no adjustments
Concept Deep Dive
Analysis
This question tests what Fannie Mae expects from comparable selection. The guidance stresses that comparables need not be identical to the subject but should compete with it and draw the same buyers. Look for the answer built around competitiveness and shared market participants rather than exact physical matching, recency alone or zero adjustments.
Background Knowledge
Comparable selection rests on the principle of substitution: a buyer will not pay more for a property than for an equally desirable substitute. Sales that compete with the subject for the same pool of buyers best reflect the subject's market value. Remaining differences are addressed with market-supported adjustments.
Real-World Application
An appraiser values a three-bedroom ranch and finds a recent sale of a slightly larger two-story home nearby that attracted the same first-time buyers. Because it competed for the same buyers, the appraiser uses it and adjusts for the size and design differences.
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?
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
Previous Question
Why should the appraiser look for comparables whose economic characteristics, such as lease terms, match the subject’s?
Next Question
A buyer paid $412,000 for a home in a neighborhood where similar homes recently sold for about $385,000. In an interview, the listing agent explains that the buyer owns the house next door and paid extra to add the side yard to his own lot. Which element of comparison does this information concern?