Sales Comparisoneasy16.4% of exam

An active listing priced at $415,000 for 90 days without an offer tells the appraiser what about value?

Correct Answer

B) It suggests value likely lies below $415,000 — an upper bound

Why this is correct: An active listing that has not sold after a typical market exposure period (90 days) suggests the list price exceeds market value. It indicates value is likely below the list price, serving as an upper-bound indicator. Why the other choices are wrong: "It sets the value at $415,000 exactly" is false; listings are asking prices, not concluded values. "Nothing whatsoever, since only closed sales carry any evidentiary meaning" is too strict; listings provide secondary market context. "It sets a floor under the final opinion" reverses the logic; unsold listings suggest a ceiling, not a floor. Exam tip: Prolonged unsold listings suggest value is below the asking price.

Answer Options

It sets the value at $415,000 exactly

It suggests value likely lies below $415,000 — an upper bound

Nothing whatsoever, since only closed sales carry any evidentiary meaning

It sets a floor under the final opinion

Why This Is the Correct Answer

Option B is correct because a property that has failed to attract an offer over a normal exposure period indicates value below the asking price, establishing an upper bound. Listings reflect seller aspirations, and unsold time is the market's response to them. Used this way, listings bracket the value conclusion from above while closed sales and pending contracts supply the primary evidence. The appraiser should verify that exposure was adequate before drawing the inference.

Why the Other Options Are Wrong

Option A: It sets the value at $415,000 exactly

A list price is an asking figure, not a transaction, and no meeting of the minds has occurred. Sellers routinely list above market to leave negotiating room or from optimism about their own property. Treating an unaccepted asking price as the value would substitute one party's hope for market evidence.

Option C: Nothing whatsoever, since only closed sales carry any evidentiary meaning

Listings do carry evidentiary weight, particularly as indicators of the upper limit and of current competitive supply, and USPAP requires analysis of any current listing of the subject. In fast-moving or thin markets, listings and pending sales may be the most current information available. Dismissing them entirely discards useful evidence and would breach the requirement to analyze the subject's own listing.

Option D: It sets a floor under the final opinion

A floor would come from evidence that buyers will pay at least a certain amount, and an unsold listing shows the opposite. If anything, ninety days without an offer suggests value is below the asking price, not above it. The option inverts the direction of the inference.

Listings cap, sales confirm

An asking price is a ceiling nobody has agreed to. A closed sale is a number two parties actually accepted. Use listings to bracket from above and sales to establish the level.

How to use: When a stem describes an unsold listing, reach for the upper-bound answer. Choices setting an exact value or a floor are misreading which direction unsold time points.

Exam Tip

Compare days on market against the market's typical exposure period. Ninety days means something very different in a market where homes normally sell in two weeks than in one where they take six months.

Common Mistakes to Avoid

-Treating a list price as a value indication
-Ignoring listings entirely as evidence
-Failing to analyze the subject's current listing or agreement of sale
-Reading days on market without reference to the market's typical exposure period

Concept Deep Dive

Analysis

This tests the evidentiary role of listings, which supply real but asymmetric information. A list price is what a seller asks, not what a buyer has agreed to pay, so it reflects one side of the market only. When a property has been offered at $415,000 for ninety days, roughly a typical exposure period in many markets, and has drawn no offer, the market has effectively rejected that price. The reasonable inference is that value lies below the asking figure, which makes the listing an upper bound rather than a point estimate. Listings are genuinely useful in this bracketing role, and USPAP requires the appraiser to analyze all current agreements of sale, options, and listings of the subject as of the effective date. The appraiser should also confirm the listing is a fair test of the market, since poor exposure, a difficult showing arrangement, or an unmotivated seller can leave a property unsold at a price the market would otherwise accept.

Background Knowledge

You need to understand the hierarchy of market evidence, with closed sales as primary, pending contracts as strong current indicators, and listings as evidence of the upper bound and of competitive supply. You also need the USPAP requirement to analyze all agreements of sale, options, and listings of the subject as of the effective date, and the concept of a reasonable exposure period in the relevant market.

Real-World Application

Appraising in a slowing market with only two closed sales, you use three active listings to establish an upper bracket and two pending contracts to gauge current pricing. The subject's own listing at $415,000, unsold after ninety days, supports a conclusion below that figure, and you document the analysis of the listing as USPAP requires.

listingsupper bounddays on marketexposure periodmarket evidence

Was this explanation helpful?

People Also Study

Real Estate Market

13.6% of exam

Property Description

11.8% of exam

Land or Site Valuation

4.5% of exam

Cost Approach

13.6% of exam

Income Approach

8.2% of exam

Previous Question

Resales of the same renovated condo model, one year apart, differ by 4% with no unit differences. The cleanest use of this pair is:

Next Question

Verification of a suspected concession is best pursued through:

Sales Comparison Questions Practice Interactively