An adjoining owner purchases a parcel for expansion. What should be investigated?
Correct Answer
C) Whether assemblage motivation affected price and matters in the subject’s market.
Adjoining-owner assemblage motivation may affect price and warrants verification, but assemblage can also reflect supported market demand and highest and best use. It is not automatically nonmarket, nor does it prescribe a premium or direction without evidence.
Why This Is the Correct Answer
Option C is correct because a buyer who already owns the adjoining land may pay a price shaped by assemblage motivation, and that needs to be investigated. Assemblage can also reflect real, supported market demand and the highest and best use of the land, so the sale is not automatically nonmarket. The appraiser verifies the motivation and decides whether the sale is relevant evidence for the subject without assuming a premium or a direction.
Why the Other Options Are Wrong
Option A: The parcel’s assessed value, as a check on whether the recorded price is accurate.
Option A is wrong because the parcel's assessed value is not the issue to investigate here. Assessed value is set for tax purposes and does not reveal whether the adjoining buyer's assemblage motivation affected the price.
Option B: The amount of an upward distress adjustment to apply to the sale price.
Option B is wrong because it assumes an upward distress adjustment. Nothing in an adjoining-owner purchase indicates distress, and no adjustment direction or amount should be applied without market evidence.
Option D: The buyer’s loan terms, treated as the main source of any price difference.
Option D is wrong because it treats the buyer's loan terms as the main source of any price difference. The distinctive feature of this sale is the buyer's assemblage motivation, not the financing, and loan terms would only matter if they were nonmarket.
Neighbor buys: verify the why
When a neighbor buys next door, ask why they bought before trusting the price. Motivation may raise the price, or it may reflect real market demand.
How to use: Use this whenever a comparable buyer owned adjacent land or had a special reason to buy.
Exam Tip
For special-motivation sales, look for the answer that calls for verification and relevance analysis rather than an automatic adjustment or automatic exclusion.
Common Mistakes to Avoid
- -Treating every adjoining-owner sale as automatically nonmarket and discarding it
- -Adding an assumed assemblage premium without market evidence
- -Assuming the price must be adjusted for financing when the issue is buyer motivation
Concept Deep Dive
Analysis
This question tests how an appraiser handles a sale to an adjoining owner who is buying for expansion. The key idea is that the buyer's motivation may have affected the price, so the sale needs verification rather than automatic acceptance or automatic rejection. The appraiser asks whether the assemblage motivation changed the price and whether that kind of demand is relevant to the subject's market.
Background Knowledge
Assemblage is the combining of two or more parcels under one ownership, which can sometimes create value greater than the parcels separately. Sales between adjoining owners can reflect special motivation, so appraisers verify the nature and motivation of the parties before relying on the price. Whether such a sale is market evidence depends on the facts and on how highest and best use applies.
Real-World Application
An appraiser finds a vacant lot that sold to the owner of the house next door who wanted room to expand. The appraiser contacts the parties to learn whether the buyer paid extra to secure the site and checks whether other buyers in the market compete for similar lots. The sale is then weighted according to what the verification shows.
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?
People Also Study
Real Estate Market
13.6% of exam
Property Description
11.8% of exam
Land or Site Valuation
4.5% of exam
Cost Approach
13.6% of exam
Income Approach
8.2% of exam
Previous Question
Two sets of paired sales, all on a cash-equivalent basis, are alike except for one feature in each set. Homes with and without a pool sold for $505,000 and $480,000. Homes with and without a fireplace sold for $468,000 and $456,000. The subject has both features, and a comparable that sold for $470,000 has neither. The two contributions apply to the comparable, are additive and do not overlap. What is the adjusted sale price of the comparable?
Next Question
A house sold for $300,000 and resold 10 months later for $315,000 with no change to the property. Using the paired-resale method, what simple monthly market-conditions rate is indicated?