A sale above listing involved an exchange buyer. What should be investigated?
Correct Answer
B) Whether transaction-specific timing or motivation affected price relative to market evidence.
Exchange participation and an above-list price are reasons to investigate motivation, not proof of overpayment or a specific adjustment. Exchange deadlines can create buyer time pressure, so verify whether timing or motivation affected price relative to the actual market benchmark, exposure and terms. No law mandates an exchange premium, list price does not automatically equal market value, and transfer fees do not necessarily explain the price difference.
Why This Is the Correct Answer
Option B is correct because exchange participation and an above-list price are reasons to investigate whether transaction-specific timing or motivation affected the price. Exchange deadlines can create buyer time pressure, so the appraiser compares the price with the market benchmark, exposure and terms. These facts call for verification, not an assumed adjustment.
Why the Other Options Are Wrong
Option A: Whether exchange sales are above market by law in that state.
Option A is wrong because no law makes exchange sales above market in a state. Any price effect has to be found through market analysis of the specific transaction.
Option C: Whether the listing agent’s commission rate caused the sale price to rise.
Option C is wrong because the listing agent's commission rate is not the issue to investigate here. The concern is whether the exchange buyer's timing or motivation pushed the price above the market level.
Option D: Whether the recorded transfer fees explain the difference between list and sale price.
Option D is wrong because recorded transfer fees do not necessarily explain a gap between list and sale price. The more relevant question is whether buyer motivation or timing affected the price.
Motivation Check Before Adjusting
When a buyer had a reason to hurry, check whether that hurry changed the price before deciding on any adjustment.
How to use: Use this check whenever a comparable involves a buyer or seller with special pressures.
Exam Tip
Prefer answers that call for verifying motivation against market evidence over answers that assume a legal rule or a fixed explanation.
Common Mistakes to Avoid
- -Assuming an exchange buyer overpaid without verifying the sale
- -Treating list price as market value
- -Attributing price differences to transfer fees or commissions without evidence
Concept Deep Dive
Analysis
This question tests conditions of sale analysis when a buyer may have had special motivation. An exchange buyer facing deadlines may pay more than typical buyers, but that is not proven by the facts alone. The appraiser investigates whether timing or motivation affected the price compared with market evidence.
Background Knowledge
Conditions of sale address whether the buyer and seller acted typically, including whether either was under unusual pressure. A sale above list price does not by itself prove overpayment, since list price is not automatically market value. Verification with parties to the sale helps reveal atypical motivation.
Real-World Application
A comparable sold above list to a buyer completing a tax-deferred exchange. The appraiser contacts the agent and learns the buyer faced a closing deadline. She compares the price with other recent sales to decide whether a conditions of sale adjustment is supported.
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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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?
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Previous Question
A comparable has an extra 200 sf garage relative to the subject. Verified market evidence supports a $32/sf contribution for this difference, while an earlier unsupported adjustment used $45/sf. What signed market-supported adjustment should replace it? No fixed materiality threshold or required addendum format is assumed.
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Under Fannie Mae Selling Guide B4-1.3-09 regarding sales or financing concessions on comparable sales, which statement is correct?