Market evidence indicates an otherwise matched installed feature has no material positive or negative effect on sale price. It cost thousands to install. What supports no adjustment for that feature?
Correct Answer
A) The supported absence of a material market price effect
Adjustments reflect supported market reaction to the difference. A feature may add value, have no material effect or reduce value; installation cost alone does not decide. The stated absence of a material price effect supports no feature adjustment. Age or a 1% cost rule does not establish that, and agent opinions are evidence to assess rather than automatic proof.
Why This Is the Correct Answer
Option A is correct because sales comparison adjustments are meant to reflect the market's supported reaction to a difference between properties. Here the market evidence shows no material positive or negative price effect from the feature. A feature can add value, add nothing or even reduce value, and its installation cost does not decide which. With no supported market effect, no adjustment is warranted.
Why the Other Options Are Wrong
Option B: A rule that features under five years old need no adjustment
Option B relies on a supposed rule that features under five years old need no adjustment. No such age rule exists; whether an adjustment is needed depends on supported market reaction to the feature, not on how new it is.
Option C: A lender rule that excludes costs below 1% of price
Option C points to a lender rule that excludes costs below 1% of price. A cost-percentage cutoff does not measure market reaction, and the need for an adjustment is decided by evidence of the feature's effect on price, not by comparing its cost to the sale price.
Option D: The installation invoice alone, as proof of value
Option D treats the installation invoice alone as proof of value. An invoice shows what the feature cost, not what buyers will pay for it; a feature that cost thousands can contribute much less, or nothing, in the market.
Cost is not contribution
Think: the invoice tells you what the owner spent; the market tells you what the feature is worth. Only the market's answer drives the adjustment.
How to use: Use this whenever an answer choice equates what a feature cost with what it adds to value.
Exam Tip
When a stem says market evidence shows no material price effect, look for the answer grounded in that market evidence rather than in cost, age or a fixed percentage rule.
Common Mistakes to Avoid
- -Adjusting a feature by its installation cost instead of its market contribution
- -Assuming any expensive improvement must add value
- -Applying made-up age or cost-percentage cutoffs to decide whether to adjust
Concept Deep Dive
Analysis
This question tests the difference between cost and market contribution in the sales comparison approach. The stem states that market evidence shows the feature has no material effect on sale price, even though it was expensive to install. Because adjustments mirror how buyers and sellers actually react to a difference, the supported finding of no market effect is what justifies leaving the feature unadjusted.
Background Knowledge
Contributory value is the amount a component adds to the value of the whole property as measured by the market, and it can differ sharply from the component's cost. Appraisers estimate adjustments from market evidence such as paired sales or statistical analysis. Cost data can be a starting point for investigation but does not by itself establish market contribution.
Real-World Application
An owner spent heavily on an elaborate built-in aquarium wall and expects the appraisal to reflect it. Paired sales in the neighborhood show buyers pay no more for homes with such custom features. The appraiser makes no adjustment for it and explains that the market data show no material price effect.
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?