A townhouse in the subject's development sold for $365,000 three weeks ago. It backs onto a wooded greenbelt, while the subject backs onto a neighbor's yard, but its original bathrooms are dated, while the subject's were remodeled last year. Interviews with local agents and the development's recent sales indicate buyers react to the greenbelt setting and to remodeled bathrooms by about the same amount. In a relative comparison analysis, what does this sale indicate for the subject?
Correct Answer
C) A value close to $365,000, because it is similar overall
Relative comparison weighs a sale's superior and inferior elements against each other to reach an overall rating. Here the superior greenbelt setting and the inferior dated bathrooms have about the same effect on buyers, so the sale is similar overall and its price indicates a value near $365,000. Options A and B each look at one element and ignore the other, and Option D wrongly assumes relative comparison cannot proceed without dollar amounts.
Why This Is the Correct Answer
Option C is correct because the comparable's superior greenbelt setting and inferior dated bathrooms have about the same effect on price, so they offset and the sale is similar to the subject overall. A sale that is similar overall indicates a value close to its own price, here $365,000. Relative comparison reaches this rating without stating either difference in dollars.
Why the Other Options Are Wrong
Option A: A value above $365,000, because its bathrooms are inferior
Option A says the value is above $365,000 because the comparable's bathrooms are inferior. That looks at only one element; the comparable's superior greenbelt setting pulls the other way by about the same amount, so the net effect is not upward.
Option B: A value below $365,000, because its setting is superior
Option B says the value is below $365,000 because the comparable's setting is superior. That also isolates one element and ignores the dated bathrooms, which offset the greenbelt advantage by about the same amount.
Option D: No indication until each difference is measured in dollars
Option D says there is no indication until each difference is measured in dollars. Relative comparison is designed to compare sales without stating dollar or percentage adjustments, so the sale still indicates a value once its overall rating is set.
Plus and minus cancel
One superior element and one inferior element of similar market effect cancel to similar overall. Judge the whole sale, not its single loudest feature.
How to use: Use this when a comparable is better in one way and worse in another.
Exam Tip
Before choosing a direction, check whether the comparable has differences pointing both ways and whether the facts say how they compare in market effect.
Common Mistakes to Avoid
- -Rating a sale on one element and ignoring an offsetting one
- -Believing relative comparison needs dollar adjustments to produce an indication
Concept Deep Dive
Analysis
The question tests how relative comparison reaches an overall rating when a comparable is superior in one element and inferior in another. The candidate must net the two elements rather than react to either one alone. Because buyers treat the two differences about equally, they offset and the sale rates similar overall.
Background Knowledge
In relative comparison analysis, each comparable is rated superior, similar, or inferior to the subject, element by element and then overall. Superior and inferior elements can offset one another when the market reacts to them by similar amounts. The overall rating is what places the sale above, near, or below the subject's value.
Real-World Application
An appraiser compares a townhouse with a recent sale that has a better lot position but an older interior. Local agents and recent sales show buyers weigh the two about equally, so she rates the sale similar overall and relies on it heavily.
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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