Under Fannie Mae's Selling Guide, an appraiser reports three sales of split-level homes with adjusted prices of $401,000, $407,000 and $415,000 and gross adjustments of 6%, 4% and 11%. The reconciliation comment reads: "All three sales were considered. Indicated value: $406,000." What does this comment lack?
Correct Answer
D) An explanation of which sales got the most weight and why
Fannie Mae requires the comments to reflect the appraiser's reconciliation of the adjusted values and identify why the sale or sales given the most weight were relied on. The comment names a value but says nothing about how the three indications were weighed. A statement that adjustments were made is not acceptable on its own, Fannie Mae sets no net or gross adjustment limits, and a simple average is not a reconciliation.
Why This Is the Correct Answer
Option D is correct because Fannie Mae's Selling Guide requires the appraiser's comments to reflect the reconciliation of the adjusted values and identify why the sales given the most weight were chosen. This comment states a value without explaining how the $401,000, $407,000 and $415,000 indications were weighed.
Why the Other Options Are Wrong
Option A: A statement that adjustments were made to each of the sales
Option A asks for a statement that adjustments were made to each sale. Fannie Mae says a statement that only recognizes an adjustment was made is not acceptable, and it would not explain the reconciliation in any case.
Option B: A showing that each sale's net adjustment is under 15%
Option B asks for a showing that each net adjustment is under 15%. Fannie Mae has no specific limits or guidelines for net or gross adjustments, so this would not cure the missing reconciliation.
Option C: The simple average of the three adjusted sale prices
Option C asks for the simple average of the adjusted prices. Averaging treats every sale as equally reliable and is not the weighing of evidence the comment must explain.
Say who carried the weight
A good reconciliation comment names the sales relied on most and gives the reason, such as fewest adjustments or closest match.
How to use: Use it when judging whether a reconciliation comment would satisfy a Fannie Mae review.
Exam Tip
Rule-of-thumb percentage limits on adjustments are not Fannie Mae requirements. Look for the option that asks for the reasoning behind the weighting.
Common Mistakes to Avoid
- -Thinking a value inside the range needs no explanation
- -Believing Fannie Mae caps net or gross adjustments
- -Using a simple average as the reconciliation
Concept Deep Dive
Analysis
The question tests recognizing what a Fannie Mae reconciliation comment must contain. A value within the range is not enough; the comment must show how the adjusted prices were weighed and why the sales given the most weight earned it.
Background Knowledge
Reconciliation within the sales comparison approach weighs the adjusted prices by comparability and data quality and reaches one indication. Fannie Mae requires the report to explain that weighing and to keep the indicated value within the range of the adjusted sale prices.
Real-World Application
A reviewer returns an appraisal whose reconciliation says only that all sales were considered. The appraiser revises it to state that Sale 2, with the smallest gross adjustment and the same model, received the most weight, and why.
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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