An appraiser is valuing a vacant lakefront residential lot with 90 feet of lake frontage and 19,800 square feet of area. Three lakefront lots on the same lake sold recently: Lot 1, with 100 front feet and 23,000 square feet, for $250,000; Lot 2, with 80 front feet and 20,000 square feet, for $200,000; and Lot 3, with 120 front feet and 18,000 square feet, for $300,000. Agents report that buyers here compare lots by their lake frontage, and all four lots have the same west-facing view. What value do these sales indicate for the subject lot?
Correct Answer
B) $225,000
The market here prices lakefront lots by frontage, and the sales confirm it: each sold for $2,500 per front foot ($250,000 / 100, $200,000 / 80, $300,000 / 120), while their prices per square foot vary widely. Applying $2,500 to the subject's 90 front feet gives $225,000. Pricing by area, whether from Lot 2 alone ($198,000) or from all three lots ($243,400), or by an average price per lot ($250,000), uses a unit these buyers do not use, and the shared view needs no adjustment.
Why This Is the Correct Answer
Option B is correct because all three lots sold for $2,500 per front foot ($250,000 / 100, $200,000 / 80 and $300,000 / 120). The subject's 90 front feet at $2,500 indicate $225,000.
Why the Other Options Are Wrong
Option A: $198,000
Option A, $198,000, applies Lot 2's $10.00 per square foot ($200,000 / 20,000) to the subject's 19,800 square feet. Buyers here pay for frontage, not area, and the per-square-foot prices of the three lots vary widely.
Option C: $243,400
Option C, about $243,400, applies the combined $12.30 per square foot of the three lots ($750,000 / 61,000) to 19,800 square feet. Area is not the unit these buyers use, so the figure misprices the subject's 90 front feet.
Option D: $250,000
Option D, $250,000, is the average price per lot ($750,000 / 3). Price per site ignores the frontage differences that drive price on this lake.
Price what buyers measure
Find the unit that makes the sales line up; on a lake where buyers count frontage, that is price per front foot.
How to use: Use it when lots differ mainly in frontage, area or count and you must pick a unit of comparison.
Exam Tip
Test candidate units on the sales: the one that gives nearly the same rate for every sale is usually the one the market uses. A feature every lot shares needs no adjustment.
Common Mistakes to Avoid
- -Using price per square foot where buyers pay for frontage
- -Averaging lot prices without regard to frontage
- -Adjusting for a feature all the lots share
Concept Deep Dive
Analysis
The question tests choosing the unit of comparison the market uses and applying it. Agents say buyers compare lots by frontage, and the sales show a constant price per front foot while price per square foot varies, so price per front foot is the right unit.
Background Knowledge
Units of comparison convert sale prices into a common measure, such as price per front foot, per square foot, per site or per unit. The right unit is the one market participants use; a unit that gives consistent results across the sales is a sign it matches how buyers pay.
Real-World Application
An appraiser valuing a lakefront lot finds that recent lot sales line up closely per front foot but scatter per square foot. The appraiser values the subject by its frontage and explains the choice of unit in the report.
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?
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