An appraiser plans to capitalize a monthly rent difference to measure the value of a finished basement in a detached single-family home. Recent sales in the area indicate monthly gross rent multipliers of 118 for fourplexes, 132 for duplexes, 158 for rented detached single-family homes, and 175 for condominium units. Which multiplier should the appraiser apply?
Correct Answer
C) 158
A multiplier must come from sales comparable to the subject, starting with the same type of property. The 158 multiplier from rented detached single-family homes reflects the same buyers and income pattern as the subject; the fourplex, duplex and condominium multipliers come from different property types with different investors and expenses.
Why This Is the Correct Answer
Option C is correct because 158 comes from rented detached single-family homes, the same property type as the subject. Multipliers must be derived from sales comparable to the subject, beginning with a similar type of property.
Why the Other Options Are Wrong
Option A: 118
Option A, 118, comes from fourplex sales. Small multi-unit buildings are bought mainly by investors and carry different expenses and vacancy, so their multiplier does not fit a detached home.
Option B: 132
Option B, 132, comes from duplex sales. A duplex is a different property type with a different buyer pool and income pattern, so its multiplier would misstate the basement's value.
Option D: 175
Option D, 175, comes from condominium unit sales. Condominiums have association fees, shared ownership and a different market of buyers, so their multiplier is not comparable to a detached home.
Same house type, same multiplier
Match the multiplier to the subject the way you match a comparable: same type of home first.
How to use: Use this when a question lists several multipliers for different property types.
Exam Tip
If several multipliers are offered, pick the one from the property type that matches the subject, not the highest, lowest or average.
Common Mistakes to Avoid
- -Using a multi-unit multiplier for a single-family home
- -Averaging multipliers across property types
Concept Deep Dive
Analysis
The question tests the selection of the multiplier, not the arithmetic. A rent difference is only as reliable as the multiplier used to convert it, and that multiplier must come from sales of the same kind of property as the subject.
Background Knowledge
Gross rent multipliers vary by property type because buyers, expenses and risk differ. Sources on income multipliers require that they be derived from sales of properties similar in type, income stream, buyers and market conditions.
Real-World Application
An appraiser in a mixed neighborhood of houses, duplexes and condominiums finds multipliers that differ widely by type. For a house's rent-based adjustment, the appraiser uses only sales of rented houses.
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?
A comparable listed at $420,000 and sold for $399,000. What sale-to-list price ratio (sale price ÷ list price) does this indicate?
An appraiser wants to describe the neighborhood boundaries in a Fannie Mae report. Which approach is acceptable?
Which of these is listed by Fannie Mae as a sales or financing concession?
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
Adjustments for property rights conveyed, cash equivalence (financing) and non-real property items are usually made to the total sale price. How are these adjustments typically expressed?
Next Question
Two percentage adjustments, +10% and −5%, apply to a $300,000 comparable. What are the adjusted prices under the additive and the multiplicative methods?