A model trained only on condominium sales is used for a detached house without additional supporting data or validation. What is the primary concern?
Correct Answer
A) Its applicability to a different property type has not been established
Condominium-only training data may not represent the detached house’s rights, characteristics or market relationships. Applying the model without supporting validation is an unsupported extension. It does not imply a universally larger required sample, make training R-squared uncomputable or require an arbitrary intercept recalculation for each subject. Additional suitable evidence is needed.
Why This Is the Correct Answer
Option A is correct because a model trained only on condominium sales has not been shown to apply to a detached house. Condominium data may not represent the house's ownership rights, physical characteristics or market relationships. Without additional supporting data or validation, using the model for the house is an unsupported extension.
Why the Other Options Are Wrong
Option B: Detached houses require a larger fixed sample size than condominium models
Option B claims detached houses require a larger fixed sample size than condominium models, but there is no universal required sample size by property type. The problem is applicability, not a fixed sample threshold.
Option C: R-squared cannot be computed on condominium training data
Option C says R-squared cannot be computed on condominium training data, which is false. R-squared can be computed for the training data; it just does not demonstrate applicability to a different property type.
Option D: The intercept must be changed independently for each subject
Option D says the intercept must be changed independently for each subject, which is an arbitrary fix with no support. Adjusting the intercept does not address whether the model's relationships apply to houses.
Model fits what it learned
A model knows only the kind of property it was trained on; a condo model has not learned houses.
How to use: Use this when a question asks about applying a model outside its data.
Exam Tip
When a model is applied to a property type absent from its data, the best answer usually concerns applicability or extrapolation.
Common Mistakes to Avoid
- -Assuming a good fit on one property type transfers to another
- -Believing a fixed sample size rule resolves applicability
- -Tweaking the intercept instead of addressing model applicability
Concept Deep Dive
Analysis
This question tests model applicability across property types. A model built only from condominium sales reflects condominium characteristics, rights and market relationships. Applying it to a detached house without validation is an unsupported extension.
Background Knowledge
Statistical models are reliable only within the range and type of data used to build them. Extrapolating to different property types, locations or value ranges risks applying relationships that do not hold. Comparable data should share similar physical and legal characteristics with the subject.
Real-World Application
A lender's automated tool built on downtown condo sales returns a value for a suburban detached home. The reviewing appraiser notes that the model lacks house data and relies on detached-home comparables instead.
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