An appraiser computes median sale prices for the same neighborhood quarter by quarter and reads the trend. What is the main hazard of this method?
Correct Answer
D) The mix of what sold may shift between quarters
Why this is correct: The median price can be distorted by a change in the composition (mix) of properties sold. If one quarter's sales include larger or higher-quality homes than another's, the median will shift even if individual property values are stable. Why the other choices are wrong: "Median prices are confidential data" is false; sale prices are typically public record. "Quarterly grouping violates reporting standards" is false; time period adjustment is a standard technique. "The method always understates appreciation" is an absolute claim not supported by appraisal principles. Exam tip: When analyzing price trends, always ask: 'Has the mix of properties sold changed?' Use paired sales or repeat sales analysis to control for quality differences.
Why This Is the Correct Answer
Why this is correct: The median price can be distorted by a change in the composition (mix) of properties sold. If one quarter's sales include larger or higher-quality homes than another's, the median will shift even if individual property values are stable. Why the other choices are wrong: "Median prices are confidential data" is false; sale prices are typically public record. "Quarterly grouping violates reporting standards" is false; time period adjustment is a standard technique. "The method always understates appreciation" is an absolute claim not supported by appraisal principles. Exam tip: When analyzing price trends, always ask: 'Has the mix of properties sold changed?' Use paired sales or repeat sales analysis to control for quality differences.
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