A comparable is twice the size of the subject. Even after converting to price per square foot, what is the concern?
Correct Answer
B) Properties that differ greatly in size may not compete in the same market
Converting to a size-related unit handles relatively small size differences, but if properties differ significantly in size, they may not compete in the same market. Unit prices are used for residential property too.
Why This Is the Correct Answer
Option B is correct because a comparable twice the size of the subject may not compete for the same buyers. Unit conversion handles relatively small size differences, but if properties differ significantly in size, they may not compete in the same market, which weakens the comparable as evidence of the subject's value.
Why the Other Options Are Wrong
Option A: Price per square foot rises with size, so the comparable is understated
Option A claims price per square foot rises with size, so the comparable is understated. That is not the concern stated by the standard; the issue is that properties of very different size may not compete in the same market, and in many markets unit prices tend to decline rather than rise as size increases.
Option C: Unit prices are reserved for the appraisal of commercial property
Option C says unit prices are reserved for commercial property. That is wrong because units of comparison such as price per square foot are used for residential property as well.
Option D: The comparable must be adjusted by exactly 50%
Option D says the comparable must be adjusted by exactly 50%. No fixed percentage follows from a size ratio; adjustments must reflect the market's reaction, and the real concern is whether such a different-sized property competes in the same market at all.
Same Size, Same Buyers
A unit price can shrink a small size gap, but it cannot make a mansion and a cottage compete for the same buyer.
How to use: Use this when a question asks whether converting to a unit price solves a large size difference.
Exam Tip
When a comparable differs greatly in size from the subject, look for the answer about competing in the same market rather than a fixed mathematical correction.
Common Mistakes to Avoid
- -Assuming price per square foot fully corrects for any size difference
- -Believing unit prices apply only to commercial property
- -Applying an arbitrary fixed percentage adjustment based on a size ratio
Concept Deep Dive
Analysis
This question tests the limits of units of comparison. Converting prices to a size-related unit such as price per square foot can handle relatively small size differences, but it does not cure a large size gap. When properties differ greatly in size, they may appeal to different buyers and may not compete in the same market.
Background Knowledge
Units of comparison, such as price per square foot, price per unit or price per room, put sales of different sizes on a common basis. They work best when properties are reasonably similar; large size differences can place properties in different market segments with different buyers.
Real-World Application
An appraiser valuing a 1,500 sf home finds a 3,000 sf sale nearby. Even after converting to price per square foot, the appraiser recognizes that buyers of the larger home are likely shopping a different segment and searches for sales closer in size.
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
In a suburban neighborhood where nearly all homes are owner-occupied, the subject property has a finished room over the garage with a separate entrance, included in its gross living area. None of the comparable sales has such a room. A local business has offered to rent the room as an office for $500 per month. Rented homes in the area sell for about 145 times their monthly rent. Paired sales show buyers pay no more for homes with such a room than for homes of the same size without one. What is the best treatment of the separate-entrance room?
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