After converting sales to a unit price, how may relatively small remaining size differences be handled?
Correct Answer
B) By considering them in reconciliation within the approach
Relatively small differences in size can be considered in value reconciliation within the comparative sales approach.
Why This Is the Correct Answer
Option B is correct because relatively small differences in size can be considered in value reconciliation within the comparative sales approach. Converting to a unit price already accounts for much of the size difference. The appraiser weighs any minor remaining effect when reconciling the indications.
Why the Other Options Are Wrong
Option A: By excluding sales that differ in size by any amount
Option A excludes sales that differ in size by any amount. Small size differences can be handled in reconciliation, so excluding otherwise useful sales is not required.
Option C: By applying a fixed per-square-foot penalty to each sale
Option C applies a fixed per-square-foot penalty to each sale. A fixed penalty is not market-derived, and small remaining differences can be considered in reconciliation instead.
Option D: By switching to a different unit of comparison
Option D switches to a different unit of comparison. Changing units is not the stated way to handle small remaining size differences; they can be considered in reconciliation.
Small gaps, settle in reconciliation
After converting to a unit price, small leftover size differences are weighed in reconciliation.
How to use: Use this when a question asks how to handle minor size differences after unit conversion.
Exam Tip
Look for the option that keeps useful sales and addresses minor differences through judgment in reconciliation.
Common Mistakes to Avoid
- -Excluding comparables over minor size differences
- -Applying an unsupported fixed size penalty
Concept Deep Dive
Analysis
This question tests what happens to minor size differences after sales are converted to a unit price. Converting to a unit of comparison handles most of the size difference. Relatively small remaining differences can then be considered in reconciliation within the approach.
Background Knowledge
Units of comparison standardize prices across properties of different sizes. Unit prices can still vary with size, since larger properties often sell for less per unit, but small differences may not need a separate adjustment. Reconciliation is where the appraiser weighs such minor factors.
Real-World Application
An appraiser converts three land sales of similar size to price per acre. The slight size differences remaining are noted and weighed when reconciling the indicated price per acre for the subject.
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?
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