A ranch home near the subject was sold by its owner to her cousin. In an interview, the listing agent confirms that the home was listed on the MLS for 34 days, typical for the area, drew two offers from other buyers, and closed at a price and terms in line with other recent sales. How may the appraiser treat this sale?
Correct Answer
C) Use it as a comparable, since it was an open-market sale
A family relationship is a reason to investigate a sale, not a reason by itself to reject it. The interview shows typical market exposure, competing offers and market terms, so the conditions of a market value sale were present and the sale can serve as a comparable. No conditions-of-sale adjustment is needed because the relationship did not affect the price, and there is no reason to demote it to supporting data.
Why This Is the Correct Answer
Option C is correct because the interview shows the home was openly marketed for a typical period, drew offers from other buyers and closed at market terms. Those are the conditions of a market value sale, so the relationship did not affect the price and the sale can be used.
Why the Other Options Are Wrong
Option A: Exclude it, because the buyer and seller are related
Option A excludes the sale because the parties are related. A relationship calls for investigation, and here the investigation shows the sale was openly marketed at market terms.
Option B: Use it after a conditions-of-sale adjustment for the relationship
Option B makes a conditions-of-sale adjustment for the relationship. An adjustment is needed only if the relationship affected the price, and the interview shows it did not.
Option D: Use it as supporting data but not as a comparable sale
Option D uses the sale only as supporting data. A verified open-market sale of a similar home qualifies as a comparable; nothing in the facts limits it to support.
Relatives can still sell at market
Kinship rings the bell for checking; exposure, rival offers and market terms answer it.
How to use: Use this when a related-party sale has been verified with someone who knows the transaction.
Exam Tip
Do not reject a related-party sale by reflex; read what verification found about exposure and terms.
Common Mistakes to Avoid
- -Rejecting related-party sales by reflex
- -Adjusting for a relationship that did not affect the price
- -Confusing a verified sale with supporting data
Concept Deep Dive
Analysis
The question tests what an interview can establish about a related-party sale. The relationship raises a question; the agent's account of exposure, competing offers and market terms answers it.
Background Knowledge
Related-party sales are often below market because of love and affection or other non-market motives, so appraisers verify them. When verification shows open exposure, competition from other buyers and market terms, the sale meets the conditions of market value.
Real-World Application
An appraiser finds a sale from a brother to a sister. The agent explains it was listed publicly, the sister outbid two strangers, and the price matched nearby sales, so the appraiser uses it and notes the verification.
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?
In a neighborhood with declining values and marketing times over six months, what must Fannie Mae lenders confirm about the sales comparison analysis?
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?
According to the Interagency Appraisal and Evaluation Guidelines, which items should an appraisal’s market conditions discussion include?
A comparable listed at $420,000 and sold for $399,000. What sale-to-list price ratio (sale price ÷ list price) does this indicate?
An appraiser wants to describe the neighborhood boundaries in a Fannie Mae report. Which approach is acceptable?
Which of these is listed by Fannie Mae as a sales or financing concession?
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Previous Question
A builder is still selling homes in the subdivision where the subject property, a new two-story home, is located. The subject's buyer chose the builder's finished-basement option, and Comparable 2, the same model sold by the same builder last month, has an unfinished basement. The builder's current price list shows the finished-basement option at $31,000, and the builder's sales manager says options carry a 20% gross margin. A 2019 cost manual shows $22.50 per square foot for 900 square feet of basement finish. Both homes have the builder's $12,000 kitchen upgrade package. Agents active in the subdivision report that buyers treat the option as adding about what the builder charges. What amount should be added to Comparable 2's price for the basement finish?
Next Question
A comparable cash price is $375,000 nine months before the effective date. Use an explicitly SIMPLE, non-compounded +0.80% monthly adjustment on original price. What signed time amount and adjusted price result?