Under Fannie Mae's Selling Guide, an appraiser is valuing a colonial in a subdivision where prices have risen about 0.5% a month for the past year. Three closed sales, each time-adjusted to the effective date, indicate $402,000, $409,000 and $416,000. Two similar colonials are under contract at $419,000 and $423,000, verified with the listing agents, and a third has been listed at $435,000 for 40 days. Over the same year, condominium prices in the city fell 3%. How should the contracts and the listing be used in reconciling the sales comparison approach?
Correct Answer
D) Use them to support a value in the upper part of the closed-sale range
Contracts and listings may be used as supporting data, but the indicated value in the sales comparison approach must stay within the range of the adjusted closed sales, here $402,000 to $416,000. Verified contracts above that range in a rising market point to the upper part of it, so they support a value near $416,000 rather than replacing the closed sales. A contract price is not an adjusted closed sale, and an unsold listing shows what a seller hopes for. The condominium trend comes from a different segment and says nothing about colonials in this subdivision.
Why This Is the Correct Answer
Option D is correct because Fannie Mae allows contracts and listings as supporting data, and the indicated value must stay within the $402,000 to $416,000 range of the adjusted closed sales. Verified contracts at $419,000 and $423,000 in a rising market support a value in the upper part of that range.
Why the Other Options Are Wrong
Option A: Conclude at $423,000, as the contracts are the most current evidence
Option A concludes at $423,000 because the contracts are the most current evidence. That value lies above every adjusted closed sale, and Fannie Mae requires the sales comparison indication to fall within that range.
Option B: Average the six figures, weighting contracts and the listing like sales
Option B averages the six figures, weighting the contracts and listing like closed sales. Contracts have not closed and the listing has not sold, so they support the analysis rather than serving as equal indications, and a simple average is not a reconciliation.
Option C: Set them aside and lower the value for the falling condominium market
Option C sets them aside and lowers the value for the falling condominium market. The condominium trend comes from a different segment; the subject's own market is rising, and the contracts are useful support.
Closed sales set the range
Closed, adjusted sales set the range; contracts and listings help choose a point inside it.
How to use: Use it when pending sales or listings sit above or below the adjusted closed-sale range.
Exam Tip
Trends must come from the subject's own segment. A contract or listing above the range suggests the upper end; it does not lift the value outside the range.
Common Mistakes to Avoid
- -Valuing at a pending contract price above the closed-sale range
- -Treating listings as if they were closed sales
- -Applying a trend from a different property segment
Concept Deep Dive
Analysis
The question tests how pending contracts and listings fit into reconciliation. They are supporting data that can show where within the closed-sale range the subject falls, but they are not adjusted indications and cannot carry the value outside that range.
Background Knowledge
Closed sales are the core evidence in the sales comparison approach. Pending contracts and current listings show the direction of the market and the competition the subject faces now, which helps the appraiser decide where within the adjusted range the value belongs.
Real-World Application
In a rising market, an appraiser finds two pending sales of the same model slightly above the adjusted closed sales. The appraiser reconciles near the top of the closed-sale range and cites the contracts as support in the report.
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
A comparable’s buyer obtained a conventional loan from a bank at market terms. Is a financing adjustment needed?
Next Question
A comparable recorded price is $568,000 with seller concessions costing $18,000. Verified market analysis attributes only $11,000 of the recorded price increase to them. What price results after removing the verified concession price effect only?