The Setup Checklist and Section Summary
Everything in this section reduces to a short list. It is the list worked through before the adjustment process begins, and it stays in the listing file with the CMA. Each item is answered yes or no, and a no is resolved before the analysis goes further.
Why the setup comes first
Every adjustment that follows is made to the sales chosen here, and adjustments generally cannot repair a sale that should not have been chosen. A market area drawn too wide admits sales from a different market. A subject documented loosely leaves the analysis comparing sales to a house that does not quite exist. A sale relied on without verification may carry a concession, a relationship between the parties or a forced timetable inside its price. Each of those problems is cheaper to find at this stage, in a few minutes with the MLS and the town’s records, than after a range has been presented to a seller. The checklist exists so that the evidence is settled before the arithmetic begins.
The checklist
The market area is stated, it was established from the properties that compete with the subject, as the sales show, rather than from a radius or a zip code, and every sale falls inside it; a sale from a different market area has been set aside with the reason noted. The comparable search started in the subject’s own town, because a neighboring municipality has its own taxes, services and assessment, so its sales reflect that town’s market, and left it, if at all, only as the exception: the property’s buyers would consider only properties of its own kind, the town had no sales of that kind that serve as good substitutes, and the file notes which town each sale came from and why it was chosen.
The timeframe follows Fannie Mae’s guidance: sales closed within the past twelve months, with the most recent and most proximate similar sales relied on first, because the most recent sale generally reflects the current market most closely and an older sale that supports a higher price does not ordinarily outweigh more recent sales of similar properties. An older sale used as the best indicator carries its reason and a note on market movement since its contract date, read from trend data for the subject’s segment.
The subject is documented: property type and style; gross living area from the best available record, with the source noted; bedroom and bath configuration; site and any site factors in both directions; condition with the facts that support the rating; improvements and features.
Gross living area is above-grade finished area only. Gross living area for the subject and each comparable is generally taken from the best available record (the assessor’s card, the public record, the MLS listing, builder plans or a prior appraisal), with the source noted. Where sources disagree, the difference is noted, not guessed at. Finished below-grade area is on its own line. The ANSI Z765 standard, which Fannie Mae requires for an appraisal, is taught so the agent knows how the appraiser measures and why the appraiser’s figure may differ from the record.
At least three closed comparable sales are used, the minimum Fannie Mae sets for an appraisal, each similar in market area, size, condition and configuration, and in style when possible, each meeting the requirements a sale is held to on a financed transaction, and each verified as a sale between unrelated parties on the open market, with concessions (including repair credits, builder incentives and personal property), financing, contract date, market exposure and the property’s condition at the time of sale checked, and the result noted in the file.
Active and pending listings are shown to position the list price within the range and are not used as evidence of value.
Each comparable is on the list because a buyer of the subject would have considered it as an alternative, not because of the price it supports; and no closer, more similar sale has been left off without a stated reason; a lower price is not one. The most recent and most proximate similar sales are the ones relied upon, and the set brackets the subject where the market allows.
Where true comparables were not available, the analysis records how far the search went back in time and how far it reached out in area, whichever produced sales that compete with the subject, and why. Any cost support for an improvement the sales cannot isolate names its current cost to build and its depreciation. The range is presented as wide as the evidence requires.
What you can now do
A market analysis prepared to this standard can be followed from its first decision to its last. The market area is drawn from the properties that compete with the subject, the subject is documented from the best available records with the sources noted, and each comparable is a verified sale that a buyer of the subject would have considered as an alternative. When a seller asks why a sale is on the list or missing from it, the file holds the answer. When the market is thin, the file shows where the search went and why each sale earned its place. With the setup settled, the adjustments that follow begin from evidence rather than from a list of prices.
Downloadable: the checklist above as a one-page office form for the listing file.
The section quiz follows.
Section 3 quiz: 20-item bank, 10 presented, 80% to pass, four-option multiple choice with remediation, drawn only from the lessons above and the section objectives.