A trainee analyzing a ranch-style home rates each comparable on view, condition, and location, scoring +1 for superior, 0 for similar, and −1 for inferior. A $380,000 sale scores +1 for view, −1 for condition, and +1 for location, a net of +1, so the trainee subtracts $5,000, a round figure chosen for each point. After doing the same for two other sales, the trainee averages the three results and reports $378,000. What is the main flaw in this analysis?
Correct Answer
A) The ratings show direction, not amount, and the $5,000 per point has no market basis
Relative comparison ratings record only whether a sale is better or worse than the subject; they are not stated as dollar or percentage amounts. Converting points into $5,000 each and averaging the results turns the ratings into dollar adjustments that no market evidence measures, while adjustments must reflect the market's reaction. The direction (subtracting for a superior sale) is right, so Option B is wrong; a percentage would be just as unfounded (Option C); and netting elements into an overall rating is part of relative comparison (Option D).
Why This Is the Correct Answer
Option A is correct because superior, similar, and inferior ratings are not dollar or percentage amounts, and the trainee chose $5,000 per point without any market evidence. Adjustments must reflect how the market reacts to a difference, so a round figure applied to scores produces unsupported adjustments dressed up as precision. The average of three such figures inherits the same flaw.
Why the Other Options Are Wrong
Option B: Superior ratings call for upward adjustments, so the sale should indicate $385,000
Option B says the sale should indicate $385,000 because superior ratings call for upward adjustments. That reverses the rule: a comparable that is superior to the subject is adjusted downward, so 380,000 + 5,000 = $385,000 moves the wrong way.
Option C: The net score should be applied as a percentage of the $380,000 price instead
Option C says the net score should be applied as a percentage of the $380,000 price. Changing the scale from dollars to a percentage leaves the real problem in place, because no market evidence measures what a rating point is worth in either form.
Option D: Ratings for different elements should be kept separate rather than netted overall
Option D says ratings for different elements should be kept separate rather than netted overall. Relative comparison does weigh element ratings together into an overall rating of each sale; the error lies in converting those ratings into dollars, not in combining them.
Ratings rank, they don't price
A plus or minus tells you which way, not how much. Only market evidence turns a difference into dollars.
How to use: Use this when a question shows qualitative scores being multiplied, added, or averaged as money.
Exam Tip
When an analysis turns ratings into dollars, ask where the dollar figure came from; if it came from no market data, that is the flaw.
Common Mistakes to Avoid
- -Treating rating scores as dollar adjustments
- -Believing a consistent arbitrary figure makes an adjustment market based
- -Adding to a superior comparable instead of subtracting
Concept Deep Dive
Analysis
The question tests whether a candidate understands what relative comparison ratings mean. Ratings show direction and relative standing, not magnitude. Assigning an arbitrary dollar value to each point and averaging the results creates quantitative adjustments without market support, which defeats the purpose of both techniques.
Background Knowledge
Qualitative techniques rank comparables as superior or inferior to the subject without stating adjustments as dollar amounts or percentages. Quantitative adjustments, by contrast, must be measured from market data such as paired sales. Mixing the two by pricing rating points with an arbitrary figure gives neither a sound ranking nor a market-based adjustment.
Real-World Application
A reviewer finds a work file in which plus and minus ratings were each converted into a fixed dollar amount. The reviewer asks the trainee either to present the analysis as a ranking or to measure the adjustments from paired sales or other market data.
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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