Under Fannie Mae's Selling Guide, an appraiser's 12-month data show values up 6% overall, but recent sales and contracts show the market was flat from a comparable's contract date to the effective date. How should the appraiser approach that comparable's time adjustment?
Correct Answer
D) Base it on the contract-to-effective-date change, possibly none
Fannie Mae ties a comparable's time adjustment to market change between its contract date and the effective date, and that specific adjustment may differ from the overall 12-month trend. If supported evidence shows the market was flat over that interval, no adjustment may be warranted. Prorating or applying the 12-month trend ignores what actually happened over the relevant interval, and the closing date is not the starting point.
Why This Is the Correct Answer
Option D is correct because the time adjustment for a comparable is based on market change between its contract date and the effective date. Here the supported evidence shows a flat market over that interval, so the indicated adjustment may be zero even though the 12-month trend is positive.
Why the Other Options Are Wrong
Option A: Apply the 6% annual trend, prorated over the comparable's age
Option A prorates the 6% annual trend over the comparable's age. That assumes the market rose evenly during the comparable's interval, but the evidence shows it was flat then, so a prorated adjustment would overstate the change.
Option B: Apply the full 6%, since the 12-month trend governs each sale
Option B applies the full 6% because the 12-month trend supposedly governs each sale. The 12-month trend describes overall movement; the specific adjustment can differ from it and depends on the contract-to-effective-date change.
Option C: Measure the market change from the comparable's closing date
Option C measures from the comparable's closing date. The price was set when the parties agreed to terms, so the interval to analyze starts at the contract date, not settlement.
Contract to effective, nothing else
The window that matters for a time adjustment opens on the contract date and closes on the effective date. What the market did outside that window does not set the adjustment.
How to use: Use this when a question offers an annual trend alongside facts about a comparable's own interval.
Exam Tip
When a question contrasts an overall trend with evidence for a specific interval, the specific interval controls the comparable's adjustment, provided it is supported.
Common Mistakes to Avoid
- -Prorating the annual trend to every comparable
- -Starting the time interval at the closing date
- -Treating the neighborhood trend box as the adjustment rate
Concept Deep Dive
Analysis
The question separates the overall market trend from a comparable's specific time adjustment. Fannie Mae's guidance is that the adjustment reflects market change over one interval: the comparable's contract date to the effective date. A positive annual trend does not settle what happened in that particular window.
Background Knowledge
Because an appraisal is as of a specific effective date, each comparable is analyzed for market change from its contract date to that date. The 12-month trend reported in the neighborhood section is a broader measure of overall movement and may not match the change over a particular comparable's interval.
Real-World Application
An appraiser sees a strong year-over-year price index rise, but most of it happened in the spring. For a comparable that went under contract in late summer, recent contracts show no further movement, so the appraiser makes no time adjustment and explains the reasoning in the report.
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