A comparable was sold by an estate. What should the appraiser do?
Correct Answer
D) Verify the sale circumstances, analyze any market effect, and report it
Estate ownership alone does not establish nonmarket terms or require a fixed adjustment or exclusion. Verify motivation, exposure and other relevant circumstances, analyze any supported effect, and communicate material information clearly using the form and incorporated explanation as appropriate. USPAP does not create a universal rule that the same estate-sale disclosure must appear in both a grid and a particular comments section.
Why This Is the Correct Answer
Option D is correct because USPAP requires the appraiser to collect, verify and analyze all information necessary for credible results. That means checking motivation, exposure and other relevant circumstances of the estate sale, analyzing any supported market effect, and reporting it clearly so users are not misled. Estate ownership alone does not establish nonmarket terms.
Why the Other Options Are Wrong
Option A: Exclude it from the analysis, because estate sales are distressed sales
Option A, excluding the sale because estate sales are distressed sales, is wrong because an estate sale is not distressed by definition; many are marketed normally, so the circumstances must be verified before deciding how to use it.
Option B: Use it unchanged, since estate sales need no verification
Option B, using it unchanged because estate sales need no verification, is wrong because USPAP requires verification and analysis of information necessary for credible results, and conditions of sale can affect price.
Option C: Deduct a fixed estate-sale percentage without any market evidence
Option C, deducting a fixed estate-sale percentage without market evidence, is wrong because adjustments must be supported by market evidence; a blanket percentage is unsupported and may not reflect any actual effect.
Verify, analyze, report
For any unusual-sounding sale, follow three steps: verify the facts, analyze any effect, and report what you found.
How to use: Use this sequence when a comparable involves an estate, relocation or other special seller situation.
Exam Tip
Prefer options that call for verification and supported analysis over options that exclude a sale or apply a fixed adjustment by category.
Common Mistakes to Avoid
- -Treating every estate sale as a distressed sale
- -Applying a fixed percentage adjustment without market support
- -Using an estate sale without verifying its circumstances
Concept Deep Dive
Analysis
This question tests how to handle a comparable sold by an estate. Estate ownership alone does not prove nonmarket terms, so the appraiser verifies the sale circumstances, analyzes whether they affected price, and communicates the relevant information. Reject options that exclude, ignore or adjust by a fixed rule without evidence.
Background Knowledge
Conditions of sale, such as seller motivation and market exposure, can make a sale price differ from market value. Appraisers verify these conditions through parties to the sale or reliable sources, adjust only when the market supports it, and disclose material sale circumstances in the report.
Real-World Application
An appraiser finds a comparable sold by an estate through a local broker. After speaking with the listing agent, the appraiser learns it was openly marketed and sold near list price, so no condition-of-sale adjustment is supported, and the appraiser notes the estate sale and the verification in the report.
More USPAP Questions
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