A buyer paid $412,000 for a home in a neighborhood where similar homes recently sold for about $385,000. In an interview, the listing agent explains that the buyer owns the house next door and paid extra to add the side yard to his own lot. Which element of comparison does this information concern?
Correct Answer
D) Conditions of sale
The buyer's purpose was unusual: as the adjoining owner, he paid a premium that a typical buyer would not pay, so the price reflects his motivation rather than market value. Motivation of the parties falls under conditions of sale. The home's location is the same as its neighbors', the interest conveyed is not in question, and nothing in the facts concerns a change in the market over time.
Why This Is the Correct Answer
Option D is correct because the buyer paid extra for a reason unique to him, adding land to his adjoining lot. A price driven by an atypical motivation reflects the conditions of the sale, not the market value of the home.
Why the Other Options Are Wrong
Option A: Location
Option A, location, does not fit. The home sits in the same neighborhood as the similar sales; the premium came from the buyer's purpose, not from where the home is.
Option B: Property rights conveyed
Option B, property rights conveyed, does not fit. Nothing suggests a different interest, such as a leased fee, was transferred; the issue is why the buyer paid more.
Option C: Market conditions
Option C, market conditions, does not fit. That element covers price changes over time, and the similar sales are recent; the premium came from one buyer's motive.
Why they bought is conditions
Who the parties were and why they dealt are conditions of sale; what was sold and where it sits are property elements.
How to use: Use this when an interview reveals a buyer's or seller's unusual motive.
Exam Tip
Link motivation, pressure or relationship between the parties to conditions of sale.
Common Mistakes to Avoid
- -Calling an atypical buyer premium a location difference
- -Confusing conditions of sale with market conditions
- -Using an adjoining owner's price without investigation
Concept Deep Dive
Analysis
The question tests recognizing which element of comparison an interview finding affects. An adjoining owner paying a premium for his own reasons is an atypical motivation, which is a condition of sale.
Background Knowledge
Conditions of sale cover the motivations and circumstances of buyer and seller, including related parties, duress and buyers with special reasons to pay more, such as an adjoining owner. Interviews with parties or agents are often the only way to learn of these conditions.
Real-World Application
An appraiser notices a sale well above the neighborhood range. The selling agent explains the buyer owned the adjoining lot and wanted to build a larger garage, so the appraiser treats the price as reflecting a condition of sale.
More Sales Comparison Questions
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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?
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