Four verified park-proximity pairs indicate $7,200, $6,800, $8,100 and $7,900. Recent listings suggest weaker buyer preference. Before reducing the mean by five percent, what must the appraiser establish?
Correct Answer
B) That relevant market evidence supports the proposed reduction’s direction and magnitude
Changing buyer preference does not by itself establish a five-percent revision. Verify whether recent evidence is relevant to the same segment and supports the direction and magnitude before modifying the paired indication. SR 1-5 does not require an adjustment to equal a listing change, and four observations do not guarantee the same adjustment in every market.
Why This Is the Correct Answer
Option B is correct because the appraiser must establish that relevant market evidence supports both the direction and the magnitude of the proposed reduction. Changing buyer preference does not by itself establish a five-percent revision. The recent evidence must also be relevant to the same market segment before the paired indication is modified.
Why the Other Options Are Wrong
Option A: That the listing slowdown by itself proves a five-percent reduction in the paired amount
Option A claims the listing slowdown by itself proves a five-percent reduction in the paired amount. A slowdown can have many causes and does not measure the specific change in buyer preference for park proximity.
Option C: That SR 1-5 requires the adjustment to equal the latest listing change
Option C claims SR 1-5 requires the adjustment to equal the latest listing change. SR 1-5 does not require any adjustment to equal a listing change; it is not the rule that sets adjustment amounts.
Option D: That four observations establish the same adjustment in other markets
Option D claims four observations establish the same adjustment in other markets. Four pairs in one market do not guarantee the same contribution elsewhere, and other markets need their own evidence.
Direction and size both need proof
To change an adjustment, show which way the market moved and by how much.
How to use: Use this when an answer proposes modifying a supported adjustment based on a general trend.
Exam Tip
When a question asks what must be established before changing an adjustment, pick the answer requiring market support for both direction and amount.
Common Mistakes to Avoid
- -Revising a supported adjustment based only on anecdotal market slowdown
- -Attributing rules to USPAP standards that they do not contain
- -Assuming an adjustment from one market applies in another
Concept Deep Dive
Analysis
This question tests whether a proposed change to a supported paired-sales adjustment has its own support. The four pairs indicate a range of $6,800 to $8,100, and a five-percent reduction would change that indication. A slowdown in listings hints at weaker preference but does not by itself measure the size or confirm the direction of any change.
Background Knowledge
Paired sales indications are a form of market evidence for adjustment amounts. When market conditions or preferences change, the appraiser may revise an adjustment, but any revision needs its own support. Listings reflect asking prices and exposure, which can inform analysis but must be interpreted carefully.
Real-World Application
An appraiser's park-proximity pairs average about $7,500, but agents report softer interest near the park. Before reducing the figure, she looks for recent closed sales in the same segment that show whether buyers now pay less and by how much.
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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