An estate sale closed quickly at a price below the neighborhood's range, with the executor under a court timeline. The appropriate treatment is:
Correct Answer
A) Verify how the conditions affected price, then adjust or exclude it
Investigate whether the court timeline and other conditions affected the transaction price. An estate label and low price alone do not prove duress or its amount. Use only a supportable market-equivalent comparison; otherwise do not rely on the sale for that indication.
Why This Is the Correct Answer
Option A is correct because the appraiser must collect, verify and analyze the information needed for credible results, including how the executor's court timeline and quick closing affected the price. If the effect can be measured from market evidence, a market-based adjustment can be made. If it cannot be supported, the sale should not be relied on for that indication.
Why the Other Options Are Wrong
Option B: Use it as is, because it is the most recent sale available
Option B uses the sale as is because it is the most recent sale available. Recency does not cure a possible conditions-of-sale problem, and an unverified below-range price could distort the value indication.
Option C: Average it with the other sales to offset the discrepancy
Option C averages the sale with the other sales to offset the discrepancy. Averaging hides an unexplained distortion instead of analyzing it, and it still lets an unverified price pull the indication down.
Option D: Use it without comment, because the sale was recorded publicly
Option D uses the sale without comment because it was recorded publicly. Public recording confirms that a transfer occurred, not that the price reflected typical market conditions, so verification and analysis are still required.
Verify, then adjust or exclude
Think of an unusual sale as a suspect: question it first, then either correct it with market evidence or set it aside.
How to use: Use this whenever a comparable carries an estate, court, foreclosure or other unusual motivation label.
Exam Tip
Answers that analyze the sale's conditions before deciding how to use it usually beat answers that accept or average a questionable price without investigation.
Common Mistakes to Avoid
- -Assuming an estate label and low price automatically prove a specific duress discount
- -Averaging an unverified outlier with other sales to smooth it out
- -Treating public recording as proof that the price reflects market value
Concept Deep Dive
Analysis
This question tests how to handle a comparable whose conditions of sale may not reflect typical market motivation. An estate sale under a court timeline that closed below the neighborhood range raises a question, but it does not by itself prove duress or measure its effect. The appraiser must verify the circumstances and then either make a supportable market-based adjustment or not rely on the sale.
Background Knowledge
Conditions of sale is an element of comparison that addresses unusual buyer or seller motivation, such as estate, foreclosure or related-party sales. Adjustments must reflect the market's reaction to differences, so a conditions-of-sale adjustment needs market support. When the effect cannot be measured, the sale may be given little or no weight.
Real-World Application
An appraiser finds a probate sale that closed in ten days at a price well below nearby sales. She contacts the listing agent and reviews the marketing history to learn whether the court deadline limited exposure. Finding no market data to measure the effect, she reports the sale but gives it no weight in the final indication.
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?
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