A townhouse comparable listed at $419,000 and sold for $412,000. As part of the purchase, the buyer also took over the $9,000 unpaid balance of a $15,000 special assessment for a new sewer main, billed with the property taxes. The subject received the same sewer main, and its assessment has been paid in full. Paired sales in the subdivision show homes that still carry an unpaid balance sell for less than paid-off homes by about the amount of the balance. What is the comparable's price on the subject's paid-off basis?
Correct Answer
B) $421,000
The buyer's total consideration was the cash price plus the assessment balance assumed, and the market data show that balance lowered the price dollar for dollar. To match the paid-off subject, add the $9,000 balance: $412,000 + $9,000 = $421,000. Adding the original $15,000 assessment gives $427,000, starting from the list price gives $434,000, and $412,000 ignores the assumed debt.
Why This Is the Correct Answer
Option B is correct because the buyer paid $412,000 and also took on the $9,000 still owed on the assessment. The market data show the balance reduced the price by its amount, so on the subject's paid-off basis the comparable indicates $412,000 + $9,000 = $421,000.
Why the Other Options Are Wrong
Option A: $412,000
Option A, $412,000, leaves out the $9,000 balance the buyer assumed. The comparable sold encumbered by that debt while the subject is paid off, so the recorded price understates the price of an unencumbered home.
Option C: $427,000
Option C, $427,000, adds the original $15,000 assessment ($412,000 + $15,000). Only $9,000 remained unpaid and passed to the buyer, so only $9,000 is added.
Option D: $434,000
Option D, $434,000, starts from the $419,000 list price and adds the original $15,000 assessment. A list price is not a transaction price, and only the $9,000 balance was assumed, so the figure overstates the indication.
Price plus what buyer took
Total consideration is the cash paid plus any debt the buyer took over. Add what was still owed, not the original bill.
How to use: Use this when a comparable's buyer assumed a lien, assessment or loan the subject does not carry.
Exam Tip
Separate the original assessment from the balance still owed; only the balance passed to the buyer.
Common Mistakes to Avoid
- -Adding the original assessment instead of the remaining balance
- -Using the list price as the starting point
- -Ignoring liabilities the buyer assumed
Concept Deep Dive
Analysis
The question tests the full consideration a buyer gave: cash plus a liability taken over. Because the subject is free of the assessment and the market prices the unpaid balance dollar for dollar, the comparable is restated by adding the balance actually assumed. The list price and the original assessment amount are distractions.
Background Knowledge
Special assessments pay for public improvements such as sewers or sidewalks and can remain as a balance owed on the property. When a buyer takes over an unpaid balance, the cash price alone understates total consideration compared with a home whose assessment is paid. Market evidence, such as paired sales, shows how buyers price the balance.
Real-World Application
In a subdivision that financed a new sewer main through assessments, some owners paid in full and others pay in installments. The appraiser checks the tax bill for each comparable, finds remaining balances, and uses paired sales to show buyers discount for them before restating the prices.
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
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Next Question
A home with a fireplace sold for $420,240. An otherwise identical home without one sold four months earlier for $412,000. The market rose a supported 0.5% per month (simple) over that period. After adjusting for market conditions, what does this pair indicate for the fireplace?