Under retrospective valuation guidance, how should a sale closing after the effective date be evaluated?
Correct Answer
C) Assess whether it supports effective-date conditions and expectations, controlling intervening changes
A later-closing sale may inform a retrospective analysis when its circumstances and market context help substantiate conditions and expectations at the effective date. Evaluate intervening changes, transaction timing, comparability and a logical data cutoff. Do not substitute unforeseeable later developments for effective-date conditions. There is no categorical rule in this guidance that a subsequent closing is always excluded or can never be important evidence.
Why This Is the Correct Answer
Option C is correct because a later-closing sale may inform a retrospective analysis when its circumstances and market context help substantiate conditions and expectations at the effective date. The appraiser should evaluate intervening changes, transaction timing and comparability, and should not substitute later developments that were not foreseeable at the effective date.
Why the Other Options Are Wrong
Option A: Exclude it because its closing came after the effective date
Option A excludes the sale simply because it closed after the effective date. A subsequent sale can still provide relevant evidence of effective-date conditions, such as when its contract was negotiated close to that date.
Option B: Use it as the primary evidence because it is newer than the other comparable sales, without further analysis
Option B uses the sale as primary evidence just because it is newer than the other comparables, without further analysis. Being more recent does not make it more relevant to a past effective date; intervening changes must be considered.
Option D: Let its price determine the whole conclusion without further analysis
Option D lets the sale's price determine the whole conclusion without further analysis. One sale, especially one after the effective date, needs to be evaluated for comparability and intervening market changes before it is weighed.
Later data confirms, not replaces
A post-date sale can confirm what the market already expected at the effective date. It cannot import changes nobody could have foreseen.
How to use: Use this to judge later-closing sales in retrospective assignments.
Exam Tip
Prefer the choice that calls for evaluating the later sale against effective-date conditions over choices that exclude or rely on it automatically.
Common Mistakes to Avoid
- -Automatically excluding every sale that closed after the effective date
- -Giving a later sale the most weight just because it is newer
- -Using unforeseeable later events to set a past value
Concept Deep Dive
Analysis
This question tests the use of later data in retrospective appraisals. A sale closing after the effective date is neither automatically excluded nor automatically decisive. The appraiser asks whether it helps confirm the conditions and expectations that existed as of the effective date.
Background Knowledge
A retrospective appraisal estimates value as of a past date. Data from after that date may be used to confirm trends or conditions that market participants could reasonably anticipate at the time. The appraiser should set a logical data cutoff and explain how any later data was used.
Real-World Application
An appraiser values a home as of a date two years ago for an estate. A sale that went under contract a few weeks before that date but closed after it helps confirm market levels, while the appraiser checks for any market shifts between contract and closing.
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?
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