How should an appraiser identify potentially distressed transactions in a data set?
Correct Answer
B) By examining terms, marketing and party circumstances
Why this is correct: Distressed transactions are identified by analyzing circumstances such as seller motivation (e.g., foreclosure), marketing time, and terms, not just price. Why the other choices are wrong: "By excluding every sale below the market median" is incorrect; low price alone does not indicate distress. "By relying on the automated valuation flag provided" may be unreliable; appraisers must verify. "By assuming any quick sale was made under duress" is an overgeneralization; quick sales can occur for many reasons. Exam tip: Look for signs like lender ownership, short marketing, or unusual terms to identify distress, not just price.
Why This Is the Correct Answer
Why this is correct: Distressed transactions are identified by analyzing circumstances such as seller motivation (e.g., foreclosure), marketing time, and terms, not just price. Why the other choices are wrong: "By excluding every sale below the market median" is incorrect; low price alone does not indicate distress. "By relying on the automated valuation flag provided" may be unreliable; appraisers must verify. "By assuming any quick sale was made under duress" is an overgeneralization; quick sales can occur for many reasons. Exam tip: Look for signs like lender ownership, short marketing, or unusual terms to identify distress, not just price.
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