A $2,100 feature effect is supported only in a lower-price competitive segment, and the subject is verified to compete in another segment. What should be done before applying it?
Correct Answer
C) Obtain relevant evidence or validate its applicability to the subject’s segment.
The established lower-tier effect is not automatically transferable to the stipulated different competitive segment. Seek relevant support or validate applicability using an appropriate method; paired sales are not the only permissible evidence. SR 1-4(a), rather than the cost subsection 1-4(b), addresses sales-comparison analysis.
Why This Is the Correct Answer
Option C is correct because credible assignment results require support by relevant evidence and logic, and a $2,100 effect proven only in a lower-price segment is not automatically transferable to a different competitive segment. The appraiser should obtain relevant evidence from the subject's segment or validate that the effect applies there. Paired sales are not the only acceptable way to do this.
Why the Other Options Are Wrong
Option A: Apply it as is, since paired indications transfer between segments.
Option A says to apply the $2,100 as is because paired indications transfer between segments. That is wrong because buyers in different segments may value the feature differently, so the evidence must be shown to be relevant to the subject's segment.
Option B: Scale it by the ratio of the two segments’ median prices.
Option B says to scale the $2,100 by the ratio of the two segments' median prices. That mechanical scaling assumes the feature's value moves in proportion to price, which is not supported without evidence from the subject's segment.
Option D: Use an extraordinary-assumption label as a substitute for credible evidence.
Option D says to use an extraordinary-assumption label in place of credible evidence. A label does not create support; the adjustment still needs relevant evidence and logic.
Right segment, right evidence
Evidence travels only as far as the buyers who created it; check that it fits the subject's buyers.
How to use: Use this when an adjustment comes from a different price tier or market segment.
Exam Tip
Be wary of answers that transfer, scale or relabel evidence without checking its relevance to the subject's market segment.
Common Mistakes to Avoid
- -Assuming adjustments from one segment transfer to another
- -Scaling an adjustment by a price ratio without support
- -Using an extraordinary assumption to cover missing evidence
Concept Deep Dive
Analysis
This question tests whether an adjustment supported in one market segment can be applied to a subject in a different segment. Credible results require support by relevant evidence and logic. Reason through whether the lower-tier evidence is relevant to the subject's segment without further checking.
Background Knowledge
Markets break into segments where different groups of buyers and sellers compete. An adjustment measured in one segment reflects those buyers' preferences and may not hold elsewhere. Relevant evidence comes from the market or segment in which the subject competes.
Real-World Application
An appraiser has a paired sales indication for a finished basement from starter homes and is appraising a home in a higher-priced segment. The appraiser looks for sales or other supported analysis in the higher segment before deciding whether the starter-home figure applies.
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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