About a third of the lots in the subject's neighborhood hold a house plus a legal second unit; the subject has a second unit and Comparable 1 does not. Forty current leases show second units rent for about $650 per month, while the main houses rent for the same amount whether or not the lot has a second unit. Sales of rented properties in the neighborhood, with and without second units, indicate a monthly gross rent multiplier of 120 on total rent. Listings of rented properties ask about 130 times their monthly rent. The one paired sale that differs by a second unit shows a $62,000 difference, but the property with the second unit was also in much poorer condition, and no market data measure that condition difference. A contractor estimates $95,000 to build a similar unit. What adjustment for the second unit does the evidence best indicate?
Correct Answer
B) $78,000
The rent evidence is deep, current and specific to the feature: $650 per month capitalized at the sales-based multiplier of 120 is $78,000. The one paired sale cannot isolate the second unit because the two properties also differ in condition by an unmeasured amount, and a single pair is weak support in any case. The 130 multiplier comes from asking prices, and the $95,000 is a construction cost, not the market's reaction.
Why This Is the Correct Answer
Option B is correct because forty leases show a lot with a second unit earns about $650 a month more in total rent, since the main houses rent the same either way, and the multiplier from sales of rented properties is 120 on total rent, giving $650 x 120 = $78,000. That indication rests on ample, current market data, while the one pair is mixed with an unmeasured condition difference.
Why the Other Options Are Wrong
Option A: $62,000
Option A, $62,000, comes from the single paired sale. The property with the second unit was also in much poorer condition, so the $62,000 gap blends the unit with condition, and an adjustment from one pair may not be valid.
Option C: $84,500
Option C, $84,500, uses the multiplier of 130 from listings: $650 x 130 = $84,500. Asking prices are not sale prices, so the multiplier should come from closed sales of rented properties, which give 120 and $78,000.
Option D: $95,000
Option D, $95,000, is the contractor's cost to build a unit. Cost is not market derived and may differ from what buyers pay; the rent evidence shows a contribution of $78,000.
Weigh the data, not the method
No method always wins; ample clean rent data beats one muddy pair.
How to use: Use this when a question offers a single paired sale alongside plentiful rental data.
Exam Tip
Ask whether the pair truly isolates the feature. If it is one pair with another difference that cannot be measured, look to the method with more and cleaner data.
Common Mistakes to Avoid
- -Trusting a single pair that differs in another unmeasured element
- -Deriving a multiplier from asking prices
- -Using construction cost as the market's reaction
Concept Deep Dive
Analysis
The question tests weighing the quality of evidence. A paired sale is strong only when it isolates the feature; one pair with an unmeasured condition difference does not. Forty leases and a sales-based multiplier give a well-supported rent capitalization figure, so the rent method is the better support here.
Background Knowledge
Paired sales analysis requires sales that differ only in the feature being measured, or that have already been adjusted for other differences, and an amount from a single pair may not be valid. Capitalizing a rent difference converts a permanent rent gain into an adjustment using a market-derived multiplier. The best-supported method depends on the quantity and quality of each kind of data.
Real-World Application
In a neighborhood with many houses that have legal second units, an appraiser finds dozens of leases for the units but only one sale pair, and that pair also differs in condition. She capitalizes the unit rent at a multiplier drawn from closed sales of rented properties and explains why the pair received little weight.
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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