An appraiser has strong resale data for small office buildings and weak data for single-family homes. Why should the home’s market conditions adjustment not simply use the office data?
Correct Answer
B) Because different property types may face different economic forces
Different types of property may be subject to different economic forces, so the market conditions adjustment should be estimated with data from the same property type as the subject.
Why This Is the Correct Answer
Option B is correct because different types of property may be subject to different economic forces. For that reason, the market conditions adjustment should be estimated using data from the same property type as the subject. Office resale trends may not match single-family trends even in the same area.
Why the Other Options Are Wrong
Option A: Because office buildings sell at higher prices than single-family homes
Option A says office buildings sell at higher prices than single-family homes. Price level is not the issue; the problem is that the two property types may be driven by different economic forces.
Option C: Because resale data cannot be used for market conditions adjustments
Option C says resale data cannot be used for market conditions adjustments. That is wrong because resales of the same property over time are a recognized way to measure market conditions; the data just needs to come from the subject's property type.
Option D: Because market conditions adjustments apply to commercial property
Option D says market conditions adjustments apply to commercial property. Market conditions adjustments apply to residential property too, so this does not explain why the office data should not be used.
Same type, same trend
Measure a home's time trend with home sales, not office sales.
How to use: Use this when choosing data for a market conditions adjustment.
Exam Tip
When data from a different property type is offered, look for the answer about different economic forces acting on different property types.
Common Mistakes to Avoid
- -Borrowing market trends from a different property type
- -Thinking resale data cannot measure market conditions
- -Believing market conditions adjustments are only for commercial property
Concept Deep Dive
Analysis
This question tests the source of data for a market conditions adjustment. Different property types respond to different economic forces. Reason through why data from office buildings may not reflect how single-family values changed.
Background Knowledge
Market conditions adjustments reflect changes in value over time. Office, retail, industrial and residential markets each respond to their own mix of demand drivers, financing and supply. Using data from the same property type keeps the adjustment tied to the subject's market.
Real-World Application
An appraiser sees office values in town rising quickly due to new employers. Single-family resale data are thin, but the appraiser searches a wider residential area and listing trends rather than borrowing the office rate.
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?
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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?
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