Before using a quarterly median-price trend to adjust older sales, which assessment is most relevant?
Correct Answer
A) Check data adequacy and whether changing sale composition confounds the apparent time trend
Assess counts, data quality and changes in the types of properties sold. Quarterly median movement can reflect mix changes rather than a pure time effect. A fitted line need not pass through every point or establish future growth. The same properties need not sell each quarter, though repeat-sale or other controlled analyses may help distinguish composition from market movement.
Why This Is the Correct Answer
Option A is correct because quarterly medians can move when the types of properties sold change, not only when market prices change. Checking sale counts, data quality and changes in composition helps determine whether the apparent trend reflects a true time effect. Adjustments to a comparable also depend on market change between that sale's contract date and the effective date.
Why the Other Options Are Wrong
Option B: Require the identical properties to sell in each quarter of the period
Option B, requiring identical properties to sell in each quarter, is an unrealistic requirement. Repeat-sale or other controlled analyses can help separate composition from market movement, but the same properties do not need to sell every quarter.
Option C: Require the fitted line to pass through each quarterly median
Option C, requiring the fitted line to pass through each quarterly median, misunderstands trend fitting. A fitted line summarizes the overall pattern and need not pass through every point.
Option D: Assume the historical quarterly trend will persist and apply it to each older sale unchanged
Option D, assuming the historical trend will persist and applying it unchanged to each older sale, skips the needed analysis. A historical trend does not establish future growth, and each adjustment should reflect market change between that sale's contract date and the effective date.
Mix moves medians
A median can rise because bigger or better homes sold, not because prices rose. Check the mix before trusting the trend.
How to use: Use this when a question asks what to check before applying a median-price trend.
Exam Tip
Choose answers that test whether the data support the trend over answers that impose rigid requirements or assume the trend continues.
Common Mistakes to Avoid
- -Treating a median-price change as pure appreciation
- -Applying a historical trend unchanged without checking its basis
- -Requiring a trend line to hit every data point
Concept Deep Dive
Analysis
This question tests the reliability of a median-price time trend used for market-condition adjustments. Quarterly median changes can reflect shifts in the mix of properties sold rather than true price change, so data adequacy and composition effects should be assessed before applying the trend.
Background Knowledge
Market-condition (time) adjustments account for price changes between a comparable's contract date and the effective date of the appraisal. Median price series are easy to compute but sensitive to changes in the size, quality or location of properties sold. Paired sales, repeat sales or regression controls can help isolate the time effect.
Real-World Application
An appraiser sees the quarterly median price jump 8% and considers adjusting older comparables upward. On review, a new subdivision of larger homes began closing that quarter, so much of the increase reflects composition rather than appreciation.
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