For some property types, comparables may come from a regional or national market. Which kind of property is this most likely?
Correct Answer
A) A specialized property competing beyond its locality
For most homes the neighborhood is a key determinant of comparability, but some property types compete in regional, national or even international markets, so their comparables may come from a wider area.
Why This Is the Correct Answer
Option A is correct because a specialized property that competes beyond its locality draws buyers from a regional, national or international market. Its comparables may therefore come from a wider area than the immediate neighborhood. Typical homes, by contrast, compete mainly within their local market.
Why the Other Options Are Wrong
Option B: A typical starter home in a suburban subdivision
Option B, a typical starter home in a suburban subdivision, is wrong because such homes compete mainly with similar homes nearby. Plenty of local comparables usually exist, and buyers rarely look regionally or nationally for them.
Option C: A condominium unit in a large urban project
Option C, a condominium unit in a large urban project, is wrong because condo units typically compete with other units in the same or nearby projects. Their comparables usually come from the local market.
Option D: A vacant residential lot in a growing small town
Option D, a vacant residential lot in a growing small town, is wrong because residential lots compete mainly with other local lots. Buyers for such land are typically drawn from the local area.
Rare property, wide net
The more unusual the property, the wider the area where its competitors and buyers are found.
How to use: Use this to decide which property type would justify comparables from outside the local market.
Exam Tip
When a question asks which property draws comparables from a regional or national market, look for the specialized or unique one rather than a typical home or lot.
Common Mistakes to Avoid
- -Limiting comparable searches to the neighborhood for specialized properties
- -Assuming large urban condo projects draw national comparables
- -Using distant comparables for typical homes when local sales exist
Concept Deep Dive
Analysis
This question tests how the market area for comparables depends on property type. For most homes the neighborhood is a key factor in comparability, but some properties compete in regional, national or even international markets. The reasoning is to pick the property whose buyers would look well beyond the local area.
Background Knowledge
The market area for comparables is defined by where competing properties and likely buyers are found. For ordinary housing that is usually the neighborhood or nearby competing areas. For unique or specialized properties, such as large estates, resorts or special-purpose facilities, the competitive market may extend much farther.
Real-World Application
An appraiser valuing a large equestrian estate finds no similar sales in the county. Because buyers for such estates come from across the region and beyond, the appraiser researches sales of comparable estates in other areas and explains the expanded search in the report.
More Market Questions
In market area analysis, what characteristic distinguishes a district from a neighborhood?
Under USPAP Standards Rule 1-3(a), which item must an appraiser identify and analyze when necessary for credible results in a market value assignment?
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An appraiser is asked for a retrospective value opinion as of three years ago. When must the appraiser meet the Competency Rule?
Can mixed land uses in a residential neighborhood ever enhance home values, according to Fannie Mae?
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