A regression model of 400 sales returns a coefficient of $62 per square foot of GLA. Before using it, the appraiser should confirm:
Correct Answer
B) The sample, specification and model performance are appropriate for the subject’s market
Check whether the sample and specification fit the subject’s market and property type, and investigate model quality and coefficient stability before use. A large sample alone does not establish applicability, nor does agreement with construction cost or a vendor label.
Why This Is the Correct Answer
Option B is correct because a regression coefficient is useful only if the sample and model specification fit the subject's market and property type and the model performs well. The appraiser should investigate model quality and how stable the coefficient is before using it. A large sample alone does not establish that the result applies to the subject.
Why the Other Options Are Wrong
Option A: The sample includes each sale recorded countywide during the study period, of all property types
Option A, requiring a sample of each countywide sale of all property types, is wrong because mixing unrelated property types and markets can make the model less relevant to the subject. Relevance to the subject's market matters more than sheer coverage.
Option C: The coefficient equals a construction-cost figure exactly
Option C, requiring the coefficient to equal a construction-cost figure exactly, is wrong because a market-derived coefficient measures buyer reaction, which can differ from cost. Agreement with cost is not the test of a model's reliability.
Option D: The software vendor has certified the model for appraisal use
Option D, requiring the software vendor to certify the model, is wrong because a vendor label does not show that the model fits this subject's market. The appraiser remains responsible for judging the data and model.
Fit before you trust
Check that the data and model fit the subject's market before trusting any coefficient.
How to use: Use this when an answer choice offers sample size, cost or a vendor label as proof of a model's reliability.
Exam Tip
Choose the answer that checks relevance and model quality; outside labels or size alone do not prove a model fits.
Common Mistakes to Avoid
- -Assuming a large sample makes a model reliable
- -Requiring market coefficients to match construction costs
- -Relying on software labels instead of testing the model
Concept Deep Dive
Analysis
This question tests how an appraiser should evaluate a regression coefficient before relying on it. A coefficient is only as good as the data and model behind it. The appraiser should check that the sample, model specification and performance fit the subject's market and property type.
Background Knowledge
Multiple regression can estimate the contribution of individual property features from a set of sales. Its results depend on whether the sales represent the relevant market, whether the model includes appropriate variables and how well the model performs. Appraisers should understand and test a model before relying on its coefficients.
Real-World Application
An appraiser runs a regression on 400 sales and gets $62 per square foot of GLA. Reviewing the data, the appraiser removes condominiums and sales from a distant submarket, reruns the model and checks how well it fits. The coefficient stays stable, so the appraiser uses it with a summary of the analysis in the report.
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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