A 2,400-sf home built in 2006 on a golf-course lot is being appraised. Sale 1, on a golf-course lot, is 2,520 sf and adjusts to $541,000. Sale 2, on a golf-course lot, is 2,310 sf and adjusts to $549,750. Sale 3 is a 2,380-sf home on an interior lot that sold for $540,000; its adjusted price of $572,500 includes a $31,000 lot adjustment. No sale in the set has a lot superior to the subject's. Which sale should receive the least reliance?
Correct Answer
D) Sale 3, because its lot adjustment is not bracketed
Sale 3's indication depends on a $31,000 lot adjustment, the largest in the grid, and no sale with a superior lot exists to test it; its adjusted price of $572,500 is also well above the other two. Sales 1 and 2 match the subject's lot and bracket its GLA, so their small size adjustments are checked by each other. Being larger or smaller than the subject is not a reason for less reliance when the difference is small and bracketed.
Why This Is the Correct Answer
Option D is correct because Sale 3 needs a $31,000 lot adjustment that no sale with a superior lot can check, and it produces an outlying $572,500 indication. Most reliance belongs on the sales needing the fewest and smallest adjustments, which are Sales 1 and 2.
Why the Other Options Are Wrong
Option A: Sale 1, because it is larger than the subject
Option A, Sale 1 because it is larger, overlooks that its 120-sf GLA difference is small and is bracketed by Sale 2's smaller size, and it shares the subject's golf-course lot.
Option B: Sale 2, because it is smaller than the subject
Option B, Sale 2 because it is smaller, ignores that its 90-sf GLA difference is small and bracketed by Sale 1, and that it also matches the subject's lot.
Option C: Sale 1 and Sale 2, since their GLA adjustments offset
Option C, Sales 1 and 2, gets the logic backward: their GLA adjustments falling on both sides of the subject is a strength, because each checks the other.
Big and lonely gets less
A large adjustment that stands alone, with no sale on the other side to check it, earns the least weight in reconciliation.
How to use: Use this when choosing which adjusted sale to weight least.
Exam Tip
Look for the sale whose indication depends most on one large adjustment and whose adjusted price stands apart from the others.
Common Mistakes to Avoid
- -Giving less weight to a sale just because it is larger or smaller
- -Treating bracketed adjustments as a weakness
- -Averaging all adjusted prices equally
Concept Deep Dive
Analysis
The question tests reconciliation within the sales comparison approach. Sales whose adjustments are small and bracketed by other sales deserve the most weight, while a sale that rests on one large adjustment with no sale on the other side of the subject deserves the least.
Background Knowledge
In reconciling adjusted sale prices, more weight goes to the most comparable sales, usually those with the fewest and smallest adjustments. Bracketing adds confidence because an adjustment applied in both directions is tested by the data, while a large one-way adjustment carries the risk that its estimate is wrong.
Real-World Application
An appraiser of a golf-course home finds two recent golf-course sales and one interior-lot sale. After adjusting, the interior-lot sale's indication is well above the others, and the appraiser gives it the least weight because the lot adjustment cannot be tested.
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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Previous Question
A 1,980-sf ranch house in a neighborhood where prices have been stable is being appraised by relative comparison. Four recent sales of the same builder's floor plan are each rated similar to the subject overall. Sale 1 sold for $421,000, Sale 2 for $424,000 and Sale 3 for $426,000. Sale 4, which closed two weeks ago and is the most recent, sold for $468,000. What should the appraiser do with Sale 4?
Next Question
An appraiser uses a recent foreclosure as a comparable because it is the best available sale. According to Fannie Mae, what may the appraiser NOT assume about how the foreclosure compares with the subject?