Applying a market conditions adjustment derived from detached homes to a condominium comparable requires:
Correct Answer
D) Support that the two segments moved together
Establish that the detached-home trend is representative of the condominium competitive segment over the relevant interval. Segments can move differently. Do not halve a rate arbitrarily or assume time affects all property types identically; first choose comparables and data relevant to the subject.
Why This Is the Correct Answer
Option D is correct because a time adjustment measured on detached homes is reliable for a condominium only if the two segments actually moved together over the relevant period. Different property types may be subject to different economic forces, so the market conditions adjustment should ideally be measured using sales of the same property type. Without that support, the borrowed rate may misstate the change in condominium values.
Why the Other Options Are Wrong
Option A: Excluding the condominium from the grid
Option A, excluding the condominium from the grid, is not required. The condominium may be an appropriate comparable; the issue is supporting the time adjustment, not removing the sale.
Option B: No support, since time affects all properties
Option B, no support because time affects all properties, assumes all property types change at the same rate. Segments can move differently, so the adjustment needs evidence.
Option C: Halving the rate for the condominium
Option C, halving the rate for the condominium, is an arbitrary change with no market basis. An adjustment should come from evidence about the condominium segment, not a rule of thumb.
Same type, same trend
Measure a time trend with the same property type you are appraising. Borrowing another type's trend requires proof they moved together.
How to use: Use this phrase whenever a time adjustment comes from a different market segment.
Exam Tip
Answers that skip support or apply arbitrary fractions are weak. Look for the choice that asks for evidence the data represents the subject's segment.
Common Mistakes to Avoid
- -Assuming all property types appreciate at the same rate
- -Halving or scaling a rate without market evidence
- -Dropping a usable comparable instead of supporting the adjustment
Concept Deep Dive
Analysis
This question tests whether a market conditions adjustment can be transferred between property types. Different property types may respond to different economic forces, so a detached-home trend cannot be assumed to apply to condominiums. The appraiser needs support that the two segments moved together before applying it.
Background Knowledge
Market conditions adjustments reflect changes in value between a comparable's sale date and the effective date. Because property types and segments can respond to different demand and supply forces, the adjustment is best measured with sales of the same type as the subject. Any data borrowed from another segment needs support that it represents the subject's market.
Real-World Application
An appraiser valuing a condominium finds a clear price trend in detached homes but few condo resales. Before using the detached trend, the appraiser compares available condo sales and paired resales to see whether condos followed the same pattern. The appraiser documents that support in the report.
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