A pending sale at $455,000 has not closed. As evidence in the grid, a pending sale is best used to:
Correct Answer
A) Signal current market direction, supporting the conclusion
Why this is correct: The correct answer, 'Signal current market direction, supporting the conclusion,' is the proper use. A pending sale (under contract but not closed) indicates current market activity and price levels. However, it is not a closed transaction and carries risks (e.g., financing failure), so it supports rather than replaces closed sales. Why the other choices are wrong: 'Replace closed sales entirely, being the freshest data available' is wrong; pending sales are less reliable than closed sales. 'Establish the exact value of the subject with no adjustments needed' is wrong; pending sales still require adjustment for differences. 'Set an absolute floor beneath which the value cannot be concluded' is wrong; a pending contract price does not set a definitive market floor. Exam tip: Use pending sales as *supporting* market evidence, not as primary comparables.
Why This Is the Correct Answer
A pending sale is the most current market signal available but is not a completed transaction, so it supports a conclusion about market direction rather than establishing value by itself.
Why the Other Options Are Wrong
Option B: Replace closed sales entirely, being the freshest data available
Replacing closed sales would discard verified transactions in favour of provisional ones that may renegotiate or fail.
Option C: Establish the exact value of the subject with no adjustments needed
A pending price is not the subject's value. Comparability adjustment is still required.
Option D: Set an absolute floor beneath which the value cannot be concluded
A provisional price cannot establish an absolute floor, since the transaction may not complete at that figure.
Freshest but Not Final
Freshest but Not Final. It shows you where the market is heading; it does not tell you where it landed.
How to use: Use pendings and listings to bracket and to show direction, and closed sales to conclude.
Exam Tip
Listings work the same way at the other end — they generally set an upper bracket, since properties usually sell at or below asking price.
Common Mistakes to Avoid
- -Weighting a pending sale as though it were closed
- -Using a pending price without adjustment
- -Treating a provisional price as a floor or ceiling
Concept Deep Dive
Analysis
A pending sale carries a price the parties have agreed but no completed transaction behind it. That makes it the freshest market signal available — more current than any closed sale, since closings reflect negotiations from weeks or months earlier — while also making it provisional, because the deal may renegotiate after inspection or appraisal, or fail entirely. The appropriate use follows from both facts: a pending sale supports a conclusion about market direction, corroborating that prices are rising, holding or falling, and it helps bracket the range within which the subject should fall. It does not carry the weight of a closed sale. The distractors overreach in three ways. Replacing closed sales entirely discards verified transactions for unverified ones. Treating a pending price as the subject's value skips comparability adjustment altogether. And using it as an absolute floor gives provisional evidence a certainty it does not have.
Background Knowledge
Pending sales indicate current market direction and help bracket a value conclusion but are not completed transactions. Closed and verified sales carry greater weight in the sales comparison approach.
Real-World Application
An appraiser cites a pending sale at $455,000 as corroborating a rising market and supporting the upper end of the concluded range, while relying on closed sales for the conclusion.
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A residential appraisal includes three comparables. One comparable has a 15% larger lot than the subject. The appraiser applies a dollar adjustment of −$12,500 to that comparable’s sale price. A second comparable has a 10% smaller lot and receives a +$7,800 adjustment. The third comparable has a 5% larger lot and receives −$4,100. Which adjustment sequence most likely complies with USPAP Standards Rule 1-4 and common industry practice?
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Two sales differ only in that one backs onto a busy road, selling for $16,000 less. Before adopting that figure the appraiser should: