A comparable sold twice in eighteen months, first at $380,000 and then at $455,000, with a documented renovation between. For the sales grid, what should the appraiser do?
Correct Answer
B) Verify both sales and the renovation before choosing one
Use each sale only in the condition and transaction context applicable when it occurred, and analyze relevance to the subject at the effective date. A renovation means the resale gap is not a pure time measure. The most recent sale is not automatically best; investigate both before choosing.
Why This Is the Correct Answer
Option B is correct because the appraiser must collect, verify and analyze the information needed for credible results. Verifying both the $380,000 and $455,000 sales and the renovation shows what each price represents, allowing the appraiser to use the sale most relevant to the subject.
Why the Other Options Are Wrong
Option A: Average the two sale prices together in the sales grid
Option A, averaging the two sale prices in the grid, blends prices that reflect different conditions and dates. The $380,000 and $455,000 sales describe the property before and after a renovation, so an average represents neither.
Option C: Reject the resale as a comparable because the price changed
Option C, rejecting the resale because the price changed, discards possibly useful evidence. A price change explained by a documented renovation does not by itself make a sale unreliable.
Option D: Use the newer sale, since a later price is the better evidence
Option D, using the newer sale because a later price is better evidence, skips the needed verification. The newer sale may well be the more relevant one, but that conclusion should follow from investigating both sales and the renovation, not from recency alone.
Two sales, two stories
Each sale tells the story of the property at that moment, so verify both before picking one.
How to use: Use this when a comparable has multiple sales with changes in between.
Exam Tip
Answers that average, reject or pick a sale without verification usually skip the required analysis.
Common Mistakes to Avoid
- -Averaging sales made in different conditions
- -Treating a resale price gap as a pure time adjustment
- -Choosing the most recent sale without verification
Concept Deep Dive
Analysis
This question tests how to handle a comparable that sold twice with a renovation in between. Each sale reflects the property's condition at its own sale date, so the appraiser must verify both sales and the renovation and then decide which sale is most relevant to the subject as of the effective date.
Background Knowledge
Appraisers must collect, verify and analyze information needed for credible results, including sales history of comparables. When a property resells after renovation, the price difference reflects both the improvements and market change, so it is not a pure time measure. Each sale should be analyzed in its own condition and context.
Real-World Application
A comparable sold for $380,000, was renovated, and resold for $455,000 eighteen months later. The appraiser confirms the scope of the renovation with the listing agent and uses the post-renovation sale because its condition is closer to the subject's.
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?
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