A comparable purchased by a relocation company requires analysis because:
Correct Answer
D) The purchase may have followed a formula, not negotiation
Why this is correct: The correct answer is 'The purchase may have followed a formula, not negotiation.' The governing concept is that a valid comparable sale must reflect typical market conditions, including arms-length negotiation. Relocation company purchases often follow a predetermined corporate formula based on an appraisal or policy, which may not reflect the open-market bargaining between a typical buyer and seller. The original explanation states these purchases follow appraisal-based formulas, making the subsequent resale a better market indicator. Why the other choices are wrong: 'Such sales cannot be verified' is wrong because relocation sales are typically well-documented and can be verified. 'Relocation company sales are always above market value' is incorrect; they are not always above market and may be at or even below market due to corporate policies. 'Corporate buyers pay only cash' is wrong because the financing method (cash or loan) does not inherently disqualify a sale, and corporate buyers may use various payment methods. Exam tip: When analyzing comparables, always ask if the sale price resulted from typical market negotiation. Institutional or corporate sales often require extra scrutiny.
Why This Is the Correct Answer
Why this is correct: The correct answer is 'The purchase may have followed a formula, not negotiation.' The governing concept is that a valid comparable sale must reflect typical market conditions, including arms-length negotiation. Relocation company purchases often follow a predetermined corporate formula based on an appraisal or policy, which may not reflect the open-market bargaining between a typical buyer and seller. The original explanation states these purchases follow appraisal-based formulas, making the subsequent resale a better market indicator. Why the other choices are wrong: 'Such sales cannot be verified' is wrong because relocation sales are typically well-documented and can be verified. 'Relocation company sales are always above market value' is incorrect; they are not always above market and may be at or even below market due to corporate policies. 'Corporate buyers pay only cash' is wrong because the financing method (cash or loan) does not inherently disqualify a sale, and corporate buyers may use various payment methods. Exam tip: When analyzing comparables, always ask if the sale price resulted from typical market negotiation. Institutional or corporate sales often require extra scrutiny.
More sales-comparison-approach Questions
Excess land differs from surplus land in that excess land:
A subject property has a 3-car attached garage. The appraiser locates two valid paired sales: Sale 1 (with 3-car garage) sold for $512,000; Sale 2 (with 2-car garage) sold for $497,600. Both properties are otherwise identical β same age, quality, GLA, lot size, and neighborhood β and sold 5 days apart in a balanced market. The appraiser also confirms via public records and listing photos that no other functional or physical differences exist. What is the indicated contributory value of the *third* garage stall?
The most appropriate unit of comparison is determined by:
An appraiser analyzes three paired sales to isolate the effect of a fireplace. In Pair 1, the property with a fireplace sold for $12,000 more; in Pair 2, $10,500 more; and in Pair 3, $13,500 more. All pairs are highly similar and recent. The appraiser selects $12,000 as the final adjustment. Which principle best supports this selection?
A paired sales analysis yields an adjustment of β$15,000 for a property located on a busy arterial street. Later, the appraiser discovers that all three paired properties with arterial exposure also had 20% smaller lots than their non-arterial counterparts β a difference not initially controlled for. What is the most appropriate action per USPAP?
An appraiser identifies two comparable sales that are identical in all respects except that Sale #1 has a finished basement (1,200 sq ft) and sold for $432,000, while Sale #2 has an unfinished basement of the same size and sold for $408,000. Both sales occurred within three weeks of each other in a stable market. The appraiser intends to apply a per-square-foot adjustment for basement finish to the subject property, which has a 1,000 sq ft finished basement. What is the appropriate paired-sales-derived adjustment amount per square foot for a finished basement?
Three sales support $520,000; the borrower's purchase contract is $505,000. May the appraisal conclude above the contract price?
An appraiser develops a $3,200 adjustment for a fireplace based on a single paired sale. The subject has a fireplace; Comparable A does not. The appraiser applies +$3,200 to Comparable A. Later, the appraiser identifies a second pair showing a $4,600 fireplace contribution. The appraiser replaces the original adjustment with $3,900 β the simple average β and applies it to Comparable A. What is the appropriate USPAP-compliant action regarding the adjustment amount?
A comparable sold for $300,000 with the seller carrying a loan 2 points below market, a benefit worth $8,000. What is its cash-equivalent price?
Three comparables adjust to $412,000 (gross adj. 5%), $405,000 (gross adj. 22%), and $410,000 (gross adj. 8%). What is the best-supported value conclusion?
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