A commercial market analysis shows that the average days on market for properties sold during the past year was 120 days. What is the estimated marketing time for a typical property based on this historical indicator?
Correct Answer
A) 120 days
Why this is correct: The question asks for the estimate based on the observed historical indicator. The reported average days on market is 120 days, so that is the supported estimate. Why the other choices are wrong: The other periods are not derived from the stated average and would require additional trend or inventory assumptions. Exam tip: Use the specific indicator named in the question; do not mix average DOM with a separate months-of-supply calculation.
Why This Is the Correct Answer
Option C is correct because it properly accounts for both historical data and current market conditions. The calculation shows 24 sales per year equals 2 sales per month (absorption rate), and with 30 current listings, there's a 15-month supply (450 days theoretically). However, the historical average of 120 days serves as a baseline that must be adjusted upward due to the heavy inventory, resulting in approximately 150 days. This represents a reasonable adjustment that reflects the impact of increased supply on marketing time.
Why the Other Options Are Wrong
HAM Method
HAM = Historical + Adjustment + Market conditions. Start with Historical average, make an Adjustment based on current inventory levels, and consider overall Market conditions to reach a reasonable estimate.
How to use: When you see marketing time questions, remember HAM: look for the historical average days on market, calculate if current inventory suggests an adjustment is needed, and apply market judgment to determine the final estimate.
Exam Tip
Always look for both historical sales data and current inventory levels in marketing time questions. The answer typically requires adjusting historical averages based on current market supply conditions.
Common Mistakes to Avoid
- -Using only historical average without considering current inventory
- -Calculating theoretical months of supply without adjusting for market realities
- -Over-adjusting historical data without considering continued market activity
Concept Deep Dive
Analysis
This question tests understanding of market analysis and marketing time estimation for commercial properties. Marketing time estimation requires analyzing both historical sales data (absorption rate) and current market conditions (inventory levels). The appraiser must calculate the absorption rate from past sales, determine months of supply from current inventory, and adjust the historical average days on market based on current market conditions. This involves understanding that increased inventory typically leads to longer marketing times than historical averages would suggest.
Background Knowledge
Marketing time estimation requires understanding absorption rates (sales per time period), months of supply calculations (current inventory ÷ absorption rate), and how current market conditions affect historical averages. Appraisers must balance mathematical calculations with market judgment to provide realistic marketing time estimates.
Real-World Application
In practice, appraisers use marketing time analysis to support their exposure time estimates in appraisal reports. This analysis helps clients understand realistic timeframes for selling properties and supports the appraiser's market value conclusion by demonstrating market conditions.
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