A comparable backs a retention pond and the subject does not. Before deciding whether to make a site or view adjustment, what is needed?
Correct Answer
A) Evidence of any material market reaction to the actual exposure difference
Investigate whether the differing pond exposure has a material market price effect. The supported adjustment may be positive, negative or zero depending on evidence. Being in the same subdivision does not establish equal utility, and a pond label does not justify an automatic 5% premium or exclusion. Account for actual differences without double counting a related site or view effect.
Why This Is the Correct Answer
Option A is correct because adjustments must reflect the market's reaction to differences between properties. The appraiser needs evidence of whether the pond exposure has a material price effect, and the supported adjustment could be positive, negative or zero.
Why the Other Options Are Wrong
Option B: A rule of no adjustment whenever the subdivision, lot size and floor plan match
Option B applies a rule of no adjustment whenever the subdivision, lot size and floor plan match. Matching those items does not show that buyers treat pond exposure as equal; that must be tested with market evidence.
Option C: Exclusion of the pond-adjacent sales from the grid
Option C excludes the pond-adjacent sales from the grid. The pond difference does not by itself disqualify the sales; the appraiser can adjust if the market supports it.
Option D: An automatic 5% premium based on the pond label
Option D applies an automatic 5% premium based on the pond label. A fixed percentage tied to a label is not market based, and the actual effect may be positive, negative or none.
Market decides the pond
A pond can help, hurt or not matter. Only market evidence tells you which way and how much.
How to use: Use this for any location or view feature adjustment question.
Exam Tip
Choose the answer requiring market evidence over automatic rules, fixed percentages or blanket exclusions.
Common Mistakes to Avoid
- -Assuming water features always add value
- -Applying a fixed percentage premium for a view label
- -Double counting a site and view adjustment for the same feature
Concept Deep Dive
Analysis
This question tests the requirement that adjustments reflect the market's reaction. A comparable backing a retention pond might sell for more, less or the same as an otherwise similar home. The appraiser needs evidence of how buyers react before deciding on any adjustment.
Background Knowledge
Site and view adjustments should reflect how buyers in the specific market respond to features such as water, ponds or open space. The same feature can be valued differently in different markets. The appraiser should also avoid double counting when site and view effects overlap.
Real-World Application
In a subdivision, some homes back a stormwater retention pond. The appraiser compares resales of pond-backing and interior lots and finds little price difference, so the appraiser makes no site adjustment and explains the analysis.
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?
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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?
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