A comparable sale of $412,000 is rated against a 1,600-square-foot ranch subject as follows: location similar, site similar, gross living area inferior (1,450 square feet), condition inferior, garage similar. What does this relative comparison indicate about the subject's value?
Correct Answer
A) Above $412,000
The comparable is inferior to the subject in size and condition and similar in every other element, so it is inferior overall. A buyer would pay more for the subject than for this sale, so the indication is a value above $412,000. Treating the sale as about equal ignores the two inferior ratings, a lower value reverses the direction, and the ratings give a direction even without dollar adjustments.
Why This Is the Correct Answer
Option A is correct because a sale that is smaller and in worse condition, with everything else similar, is less desirable than the subject. Its $412,000 price is therefore a floor for the subject's value.
Why the Other Options Are Wrong
Option B: About $412,000
Option B treats the subject as worth about $412,000. That would fit a sale similar overall, but this sale is inferior in two elements and superior in none.
Option C: Below $412,000
Option C places the value below $412,000, which reverses the direction. Inferior comparables indicate a higher value for the subject, not a lower one.
Option D: Undetermined without dollar adjustments
Option D says no indication is possible without dollar adjustments. Relative comparison gives a direction without amounts: a sale that is inferior in some elements and similar in the rest indicates a value above its price.
Worse comp, higher subject
If the comparable is worse than the subject, the subject is worth more than the comparable's price.
How to use: Use it to turn an overall qualitative rating into a value direction.
Exam Tip
Rate the comparable against the subject, not the subject against the comparable. Then the direction of value follows the same logic as a plus or minus adjustment.
Common Mistakes to Avoid
- -Reversing the direction for an inferior comparable
- -Treating a sale with inferior ratings as similar overall
- -Believing qualitative ratings give no indication without dollar adjustments
Concept Deep Dive
Analysis
The question tests reading a qualitative grid. When a comparable's differences are all inferior or similar, it is inferior overall and the subject's value lies above its price. The direction matches the direction a quantitative adjustment would take.
Background Knowledge
In relative comparison analysis, each comparable is rated superior, similar or inferior to the subject element by element and then overall. An inferior comparable indicates a value above its price; a superior one indicates a value below its price.
Real-World Application
An appraiser lacking paired data for condition notes that a nearby sale is smaller and dated. The report states that the sale is inferior overall and indicates a value for the subject above its price.
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?
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