A comparable’s sale price included the seller’s furniture, valued by the market at $8,000. How is this handled?
Correct Answer
A) Deduct the $8,000 market value of the furniture from the sale price
When a sale price includes non-real property items such as furniture, their estimated market value must be removed from the price so that it reflects real estate only. Original cost is not market value, and adding reverses the direction.
Why This Is the Correct Answer
Option A is correct because when a sale price includes non-real property items, their estimated market value must be removed so the price reflects only the real estate. Deducting the furniture's $8,000 market value does that.
Why the Other Options Are Wrong
Option B: Add $8,000 to the sale price, since the buyer received extra items
Option B adds $8,000 to the sale price because the buyer received extra items. Since the furniture was already included in the price, adding moves in the wrong direction; its value must be deducted.
Option C: Ignore it, because furniture is part of the real estate
Option C ignores the furniture on the claim that it is part of the real estate. Movable furniture is personal property, so its value must be removed from the price.
Option D: Deduct the furniture’s original purchase cost from the sale price
Option D deducts the furniture's original purchase cost. Original cost is not market value; the deduction should be the $8,000 market value of the furniture.
Furniture out, real estate in
Strip out what moves with the seller's truck. Deduct the furniture's market value so only the real estate remains.
How to use: Use this when a sale price includes personal property.
Exam Tip
Watch for choices that add instead of subtract, or that use original cost instead of market value.
Common Mistakes to Avoid
- -Adding the value of included personal property
- -Using original cost instead of market value
- -Treating furniture as real estate
Concept Deep Dive
Analysis
This question tests removing non-real property items from a sale price. The appraisal values real estate, so personal property included in the sale must be taken out. The amount removed is the item's market value, not its original cost.
Background Knowledge
Appraisals of real estate must separate real property from personal property such as furniture or equipment. If a comparable's price includes personal property, the market value of those items is deducted. This keeps the comparison on a real-estate-only basis.
Real-World Application
A comparable vacation condo sold furnished for a single price. The appraiser verifies the furnishings' market value with the agent and deducts it so the comparable reflects the real estate only.
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Previous Question
Three comparables have been selected for a 2,050-sf home built in 1996 on a 7,800-sf site: Sale 1, 1,880 sf, built 1992, 8,400-sf site; Sale 2, 2,240 sf, built 2001, 8,900-sf site; Sale 3, 2,120 sf, built 1999, 9,300-sf site. Which elements of comparison do these sales bracket?
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