An appraiser completing a sales comparison approach for a home in Chapel Hill finds a comparable that sold 8 months ago. The appraiser must make a:
Why Market conditions (time) adjustment if the market has changed Is Correct
Answer C: Market conditions (time) adjustment if the market has changed
An appraiser must analyze comparable sales for changes in market conditions between the comparable's contract date and the appraisal's effective date to decide whether a time adjustment is warranted. Fannie Mae says a comparable with a recent contract date will likely have no time adjustment, and that time adjustments, or the lack of them, must be supported by evidence. Adjustments must reflect market analysis rather than rules of thumb, so no flat percentage reduction for age applies.
Exam Tip: Property Valuation
Valuation questions focus on the three approaches to value: sales comparison, cost, and income. Know which approach is best for which property type. The income approach uses cap rate and NOI — memorize these formulas.
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Key Terms to Know
Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
DepreciationA reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
Purchase AgreementA legally binding contract between a buyer and seller that outlines the terms and conditions of a real estate sale.
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